Marketing Management Instructional Materials PDF

Republic of the Philippines POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Office of the Vice President for Academic Affairs College of Business Administration Marketing Management Instructional Materials MARK 30083 Marcial V. Mojica, DBA, LPT Special Lecturer...

Republic of the Philippines POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Office of the Vice President for Academic Affairs College of Business Administration Marketing Management Instructional Materials MARK 30083 Marcial V. Mojica, DBA, LPT Special Lecturer Marketing Department College of Business Administration Polytechnic University of the Philippines Sta. Mesa, Manila 1 Overview Marketing Management is the process which used to determine what products or services may as the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services in order to create, exchange and satisfy individual and organizational objectives (Grönroos, 1989). Course Outcomes After going through this Instructional Materials, student will be able to: ü Understand Marketing Management ü Concepts & Importance of Marketing Management ü Understand Nature & Importance of Service Marketing ü Understand Characteristics of Service Marketing Table of Contents 2 Topic 1 - Defining and Understanding Marketing ---------------------------------------- 6 Definitions of Marketing ------------------------------------------------------------------- 6 Core Marketing Concept-------------------------------------------------------------- 8 Difference of Marketing from Sales & Advertising------------------------------ 9 Marketing Mix---------------------------------------------------------------------------- 11 The 4P’s of Marketing----------------------------------------------------------------- 11 The Extended 7 P’s-------------------------------------------------------------------- 21 The 8th P of the Marketing Mix ------------------------------------------------------ 22 The Five Marketing Concept--------------------------------------------------------- 23 Importance of Marketing Management Orientation---------------------------- 24 Review Exercise------------------------------------------------------------------------ 25 Learning Activity------------------------------------------------------------------------ 27 Topic 2 – Customer Relationship: Customer Service----------------------------------- 28 Customer Relationship----------------------------------------------------------------- 28 Ripening Relationship: Customer: Customer Value and Satisfaction---------------------------------------- 29 Value Chain------------------------------------------------------------------------------- 30 Customer Satisfaction ----------------------------------------------------------------- 31 Customer Profitability------------------------------------------------------------------- 31 Strategies of Relationship Management------------------------------------------- 32 Customer Service Strategies--------------------------------------------------------- 34 Review Exercises------------------------------------------------------------------------ 37 Topic 3 – Market Opportunity and Consumer Behavior--------------------------------- 39 Strategic Marketing Process----------------------------------------------------------- 39 The Tactical Marketing Process------------------------------------------------------ 42 The Marketing Environment ----------------------------------------------------------- 43 The Macro Environment ---------------------------------------------------------------- 44 The Microeconomics -------------------------------------------------------------------- 44 The Internal Environment -------------------------------------------------------------- 46 Marketing Research---------------------------------------------------------------------- 46 Stages of Marketing Research-------------------------------------------------------- 46 Consumer and Business Markets ---------------------------------------------------- 50 The Consumer Buying Projects------------------------------------------------------- 50 Business Markets------------------------------------------------------------------------- 53 Type of Business Markets -------------------------------------------------------------- 53 Characteristics of Business Markets-------------------------------------------------- 54 Participant in the Business Buying Process---------------------------------------- 55 3  Marketing Segmentation, Market Targeting and Marketing Position(STP)-------------------------------- 56 Advantages and Benefit of Market Segmentation--------------------------------- 56 The Value of Market Segmentation -------------------------------------------------- 56 Market Segmentation Method for Consumer Markets--------------------------- 57 Market Targeting ------------------------------------------------------------------------- 58 Defining and determining the target Market---------------------------------------- 58 Market Positioning------------------------------------------------------------------------ 60 Differentiation Strategy ----------------------------------------------------------------- 61 Creating a Market Positioning Strategy---------------------------------------------- 61 Popular Styles of Brand Positioning ------------------------------------------------- 62 Communicating Brand Position------------------------------------------------------- 64 Learning Activity -------------------------------------------------------------------------- 66 Review Exercises ------------------------------------------------------------------------ 67 Topic 4 – Developing the Marketing Mix (4P’s) -------------------------------------------- 69 Product -------------------------------------------------------------------------------------- 69 The Four Stages of Product Life Cycle---------------------------------------------- 70 Extending Product Life Cycle --------------------------------------------------------- 71 Branding ------------------------------------------------------------------------------------ 71 Trademarks--------------------------------------------------------------------------------- 72 Packaging ---------------------------------------------------------------------------------- 72 Labeling------------------------------------------------------------------------------------- 72 Stages in the Adoption Process------------------------------------------------------ 74 Diffusion of Innovation ------------------------------------------------------------------ 75 Price ----------------------------------------------------------------------------------------- 76 Pricing Objectives ------------------------------------------------------------------------ 77 Special Price Tactics -------------------------------------------------------------------- 79 The Legality of Price Policies --------------------------------------------------------- 79 Promotion ---------------------------------------------------------------------------------- 80 The Major Categories of Communication ------------------------------------------ 80 The true Basic Tasks of Promotion -------------------------------------------------- 81 The Promotional Mix-------------------------------------------------------------------- 81 Advantages of Personal selling ------------------------------------------------------- 82 Place of Distribution---------------------------------------------------------------------- 83 Basic Functions of Intermediaries ---------------------------------------------------- 83 Factors Affecting Channel Choice ---------------------------------------------------- 83 Types of Wholesaling Intermediaries------------------------------------------------- 85 Merchant Wholesalers ------------------------------------------------------------------- 85 Categories of Merchant Wholesaler ------------------------------------------------- 85 Channels for Consumer Products ---------------------------------------------------- 86 Channels for Industrial Products ----------------------------------------------------- 87 4  Agents and Brokers --------------------------------------------------------------------- 87 Manufacturers Branches & Offices -------------------------------------------------- 87 Market Segmentation ------------------------------------------------------------------- 88 Bases for Segmenting Consumer Market------------------------------------------ 89 Criteria for Successful Segmentation ----------------------------------------------- 91 Review Exercises ------------------------------------------------------------------------ 92 Topic 5 – Managing the Market Effort --------------------------------------------------------- 95 The Marketing Process ----------------------------------------------------------------- 95 Analyzing Marketing Opportunities--------------------------------------------------- 96 Market Opportunity Analysis Steps -------------------------------------------------- 96 Selecting the Target Market ----------------------------------------------------------- 97 Marketing Plan ---------------------------------------------------------------------------- 98 Marketing Implementation ------------------------------------------------------------- 100 Marketing Control ------------------------------------------------------------------------ 100 Methods or Tools of Strategic Control ---------------------------------------------- 105 Exercise Caselet ------------------------------------------------------------------------- 108 Review Exercises ------------------------------------------------------------------------ 109 Topic 6 – Workshop and Preparation of Marketing Plan ------------------------------- 111 Outline of a Marketing Plan ----------------------------------------------------------- 111 Executive Summary --------------------------------------------------------------------- 113 Situation Analysis ------------------------------------------------------------------------ 113 Marketing Strategy ---------------------------------------------------------------------- 117 Financials ---------------------------------------------------------------------------------- 119 Controls ------------------------------------------------------------------------------------ 120 Difficulties and Risk --------------------------------------------------------------------- 122 Learning Activity ------------------------------------------------------------------------- 123 Mini-Marketing Plan Oral Defense -------------------------------------------------- 124 Grading System ------------------------------------------------------------------------------------ 125 References------------------------------------------------------------------------------------------- 126 TOPIC 1 Learning Outcomes 5  In this topic the following questions will be addressed; Ø Why is marketing important? Ø What is the scope of marketing? Ø What are some core marketing concepts? Ø How has marketing management changed in recent years? Ø What are the tasks necessary for successful marketing management? Course Materials Supplementary reading or exercises can be found at the end of the topic, and other textbooks references listed in the reference section. Defining and understanding Marketing DEFINITIONS OF MARKETING There are different approaches to the study of marketing point to multi- dimensional factors that affect marketing, making it difficult to give a complete concept of marketing in one definition. Some of the known definitions are stated below: Acknowledged as the father of modern marketing and a foremost expert on strategic marketing, Philip Kotler 1 defined marketing as “the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and desires. It defines measures and quantifies the size of the identified market and the profit potential. It pinpoints which segments the company is capable of serving best and it designs and promotes the appropriate products and services.” Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others. - Philip Kotler- Marketing is getting the right goods & services to the right people at the right time, at the right place at the right price with the right communications & promotions.” -American Marketing Association- According to the American Marketing Association (AMA) Board of Directors, “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” 6  Another very simple definition of marketing is “that it is delivery of customer satisfaction at a profit. Some marketing is critical to the success of every organization. Marketing is a social and managerial process by which individual and groups obtain what they want and need through creating and exchanging products and value with others.” Marketing is an ongoing communications exchange with customers in a way that educates, informs and builds a relationship over time. The overtime part is important because only over time can trust be created. With trust, a community builds organically around products and services and those customers become as excited about the products as you are — they become advocates, loyal evangelists, repeat customers and often, friends. Marketing is a really great way to identify what grabs people and gets them excited about your brand and give it to them, involve them in the process, and yeah, the best part, build great friendships in the process. ReneeBlodgett – Chief Executive Officer/Founder, Magic Sauce Media Marketing today is finally customer-focused. Social media made that happen. Markets are once again conversations. Marketing is about knowing the market, creating the right product, creating desire for that product and letting the right people know you have it. The old adage that says, “If you build a better mousetrap people will beat a path to your door” doesn’t hold true without marketing. You might indeed have a better mousetrap, but if people don’t know you have it, and they don’t know where your door is, there will be no path beating and no conversation going on. Sally Falkow – APR, PRESSfeed Marketing is about focusing efforts to develop deep insights into customer behavior and overall market conditions to drive sustainable profitable growth for the company. Humphry Rollest Today’s successful businesses at all levels have one thing in common. They are strongly dedicated into focusing more on the part of the consumers which lead them to commit more on the idea of marketing. To be successful, an organization should motivate everyone in the organization to produce superior value for their customers, leading to high level of customer satisfaction. 7  CORE MARKETING CONCEPTS Core Marketing Concepts Market Needs, wants, and Exchange, transactions, demands and relationships Products- goods, services, and experiences Value, satisfaction, and quality 1. Needs, wants, and demands 1.1 Human needs - It is a state of felt deprivation of some basic satisfaction. 1.2. Wants - These are desires for specific satisfiers of these deeper needs 1.3 Demands - These are wants for specific products that are backed by an ability & willingness to buy them. Marketers cannot create needs because needs pre-exists. But marketers can influence wants and this is done in combination with societal influencers. 2. Products- goods, service, and experiences 2.1 Products - These are anything that can be offered to satisfy a need or a want. 2.2 Goods - An inherently useful and relatively scarce tangible item produced from agricultural, construction, manufacturing, or mining activities. 2.3 Services - A service is an act of performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. 8  2.4 Experience - Adding value for customers buying products and services through customer participation and connection, by managing all aspects of the encounter 3. Value, satisfaction, and quality 3.1 Value – Products or services’ capacity to satisfy needs/ wants as per consumer’s perception or estimation. 3.2 Satisfaction - Person's feeling of pleasure or disappointment which resulted from comparing a product's perceived performance or outcome against his/ her expectations 3.3 Quality – refers to the perception of the degree to which the product or service meets the customer's expectations. 4. Exchange, transactions, and relationships 4.1 Exchange - The act/ process of obtaining a desired product from someone by offering something in return. 4.2 Transactions - These are basic unit of exchange. A transaction consists of a trade of values between two parties. 4.3 Relationships - A pattern of building long term satisfying relationship with customers, suppliers, distributors in order to retain their long term performances and business. 5. Market 5.1 Market - It consists of all potential consumers sharing a particular need or want who might be willing and able to engage in exchange to satisfy that need or want. In marketing terms: Sellers are called as “industry” while buyers are called “Market”. 1. Marketer - It means someone seeking a resource from someone else & willing to offer something of value in exchange. Marketer may be seller or buyer but most of time, marketer is seller. DIFFERENCE OF MARKETING FROM SALES AND ADVERTISING Many people think that marketing is personal selling. Others think marketing means advertising. Still others believe marketing has to do with making products available in stores, arranging displays, and maintaining inventories of products for future sales. In fact, marketing includes all these activities and more. 9  Advertising and selling are two marketing terms that are often used interchangeably by marketers. But they are different and they both have distinct definitions and uses. It is important to understand the role each plays in reaching today's ever more elusive consumer. In the given tables below, we can distinguish the difference of marketing from sales and advertising: Marketing Concept vs. Selling Concept Basis for Marketing Concept Selling Concept Comparison Marketing concept is a Selling concept is a business business orientation which notion, which states that if talks about accomplishing consumers and businesses Meaning organizational goals by remain unattended, then there will becoming better than others not be ample sale of in providing customer organization's product. satisfaction. Directing goods and services Convincing consumer's mind Associated with towards consumer's mind. towards goods and services. Starting point Target Market Factory Focuses on Customer needs Product Perspective Outside-in Inside-out Essence Transfer of title and possession Satisfaction of consumers Business Planning Long term Short term Orientation Customer-oriented Product oriented Means Integrated marketing Heavy selling and promotion Price Market determined Cost of Production Marketing Concept vs. Advertising Concept Basis for Marketing Concept Advertising Concept Comparison Advertising is a part of market The activity of understanding communication process which is Meaning the market conditions in done with the aim of seeking order to identify the customer attention of the public towards a needs and creating such a particular stuff. 10  product that it sells itself. Product, Price, Place, Aspect Promotion People, Promotion, Process. Term Long term Short term Radio, Television, Newspaper, Market Research, Promotion, Magazines, Hoardings, Social Advertisement, Distribution, Scope Media, Sponsorships, Posters. Sales, Public Relations, Customer Satisfaction. Importance More and more sales Creates Awareness Creating market for the new Grabbing the attention of the Focus on or existing product and general public. building brand image. MARKETING MIX According to Philip Kotler - "Marketing Mix is the combination of four elements, called the 4P's (product, Price, Promotion, and Place), that every company has the option of adding, subtracting, or modifying in order to create a desired marketing strategy" According to Principles of Marketing by Kotler and Armstrong, 2012 - "The Marketing Mix is the set of tactical marketing tools - Product, Price, Promotion, and Place - that the firm blends to produce the response it wants in the target market. The controllable variables in this context refer to the 4 ‘P’s [product, price, place (distribution) and promotion]. Each firm strives to build up such a composition of 4‘P’s, which can create highest level of consumer satisfaction and at the same time meet its organizational objectives. Thus, this mix is assembled keeping in mind the needs of target customers, and it varies from one organization to another depending upon its available resources and marketing objectives. The 4P’s of Marketing 11 1. Product Product refers to the goods and services offered by the organization. A pair of shoes, a plate of Dunkin Donuts, a lipstick, all are products. All these are purchased because they satisfy one or more of our needs. We are paying not for the tangible product but for the benefit it will provide. So, in simple words, product can be described as a bundle of benefits which a marketer offers to the consumer for a price. While buying a pair of shoes, we are actually buying comfort for our feet, while buying a lipstick we are actually paying for beauty because lipstick is likely to make us look good. Product can also take the form of a service like an air travel, telecommunication, etc. Thus, the term product refers to goods and services offered by the organization for sale. PRODUCT CLASSIFICATION Let us have a brief idea about the various categories and their exact nature under each head, noting at the same time that in marketing the terms ‘product’ and ‘goods’ are often used interchangeably. 1. Based on use, the product can be classified as: 1. Consumer Goods; and (2) Industrial Goods 1. Consumer Goods Goods meant for personal consumption by the households or ultimate consumers are called consumer goods. This includes items like toiletries, groceries, clothes etc. Based on consumers’ buying behavior the consumer goods can be further classified as: 1.1 Convenience Goods; 1.2 Shopping Goods; and 1.3 Specialty Goods. 1.1 Convenience Goods Do you remember, the last time when did you buy a packet of butter or a soft drink or a grocery item? Perhaps you don’t remember, or you will say last week or yesterday. Reason is, these goods belong to the categories of convenience goods which are bought frequently without much planning or shopping effort and are also consumed quickly. Buying decision in case of these goods does not involve much pre-planning. Such goods are usually sold at convenient retail outlets. 12  1.2 Shopping Goods These are goods which are purchased less frequently and are used very slowly like clothes, shoes, household appliances. In case of these goods, consumers make choice of a product considering its suitability, price, style, quality and products of competitors and substitutes, if any. In other words, the consumers usually spend a considerable amount of time and effort to finalize their purchase decision as they lack complete information prior to their shopping trip. It may be noted that shopping goods involve much more expenses than convenience goods. 1.3 Specialty Goods Because of some special characteristics of certain categories of goods people generally put special efforts to buy them. They are ready to buy these goods at prices at which they are offered and also put in extra time to locate the seller to make the purchase. The nearest car dealer may be ten kilometers away but the buyer will go there to inspect and purchase it. In fact, prior to making a trip to buy the product he/she will collect complete information about the various brands. Examples of specialty goods are cameras, TV sets, new automobiles etc. 2. Industrial Goods Goods meant for consumption or use as inputs in production of other products or provisions of some service are termed as ‘industrial goods’. These are meant for non-personal and commercial use and include: 2.1 raw materials 2.2 machinery, 2.3 components, and 2.4 operating supplies (such as lubricants, stationery etc.) The buyers of industrial goods are supposed to be knowledgeable, cost conscious and rational in their purchase and therefore, the marketers follow different pricing, distribution and promotional strategies for their sale. It may be noted that the same product may be classified as consumer goods as well as industrial goods depending upon its end use. Take for example the case of coconut oil. When it is used as hair oil or cooking oil, it is treated as consumer goods and when used for manufacturing bath soap it is termed as industrial goods. However, the way these products are marketed to these two groups are very different because purchase by industrial buyer is usually large in quantity and bought either directly from the manufacturer or the local distributor. 2. Based on Durability, the products can be classified as: 2.1 Durable Goods; and 13  2.2. Non-durable Goods. 2.1 Durable Goods Durable goods are products which are used for a long period i.e., for months or years together. Examples of such goods are refrigerator, car, washing machine etc. Such goods generally require more of personal selling efforts and have high profit margins. In case of these goods, seller’s reputation and presale and after-sale service are important determinants of purchase decision. 2.2 Non-durable Goods Non-durable goods are products that are normally consumed in one go or last for a few uses. Examples of such products are soap, salt, pickles, sauce etc. These items are consumed quickly and we purchase these goods more often. Such items are generally made available by the producer through large number of convenient retail outlets. Profit margins on such items are usually kept low and heavy advertising is done to attract people towards their trial and use. 3. Based on tangibility, the products can be classified as: 3.1 Tangible Goods; and 3.2 Intangible Goods. 3.1 Tangible Goods Most goods, whether these are consumer goods or industrial goods and whether these are durable or non-durable, fall in this category as they have a physical form that can be touched and seen. Thus, all items like groceries, cars, raw-materials, machinery etc. fall in the category of tangible goods. 3.2 Intangible Goods Intangible goods refer to services provided to the individual consumers or to the organizational buyers (industrial, commercial, institutional, government etc.). Services are essentially intangible activities which provide want or need satisfaction. Medical treatment, postal, banking and insurance services etc., all fall in this category 14 2. Price Price is the amount charged for a product or service. It is the second most important element in the marketing mix. Fixing the price of the product is a tricky job. Many factors like demand for a product, cost involved, consumer’s ability to pay, prices charged by competitors for similar products, government restrictions etc. have to be kept in mind while fixing the price. In fact, pricing is a very crucial decision area as it has its effect on demand for the product and also on the profitability of the firm. The Product should always be seen as representing good value for money. This does not necessarily mean it should be the cheapest available; one of the main tenets of the marketing concept is that customers are usually happy to pay a little more for something that works really well for them. PRICING AND FACTORS AFFECTING PRICING DECISIONS 1. Cost No business can survive unless it covers its cost of production and distribution. In large number of products, the retail prices are determined by adding a reasonable profit margin to the cost. Higher the cost, higher is likely to be the price, lower the cost lower the price. 2. Demand Demand also affects the price in a big way. When there is limited supply of a product and the demand is high, people buy even if high prices 15  are charged by the producer. But how high the price would be dependent upon prospective buyers’ capacity and willingness to pay and their preference for the product. In this context, price elasticity, i.e. responsiveness of demand to changes in price should also be kept in view. 3. Competition The price charged by the competitor for similar product is an important determinant of price. A marketer would not like to charge a price higher than the competitor for fear of losing customers. Also, he may avoid charging a price lower than the competitor. Because it may result in price war which we have recently seen in the case of soft drinks, washing powder, mobile phone etc. 4. Marketing Objectives A firm may have different marketing objectives such as maximization of profit, maximization of sales, bigger market share, survival in the market and so on. The prices have to be determined accordingly. For example, if the objective is to maximize sales or have a bigger market share, a low price will be fixed. Recently one brand of washing powder slashed its prices to half, to grab a bigger share of the market. 5. Government Regulation Prices of some essential products are regulated by the government under the Essential Commodities Act. For example, prior to liberalization of the economy, cement and steel prices were decided by the government. Hence, it is essential that the existing statutory limits, if any, are also kept in view while determining the prices of products by the producers. METHODS OF PRICE FIXATION 1. Cost Based Pricing Under this method, price of the product is fixed by adding the amount of desired profit margin to the cost of the product. If a particular soap costs the marketer Php8 and he desires a profit of 25%, the price of the soap is fixed at Php8 + (8x25/100) =Php10. While calculating the price in this way, all costs (variable as well as fixed) incurred in manufacturing the product are taken into consideration. 2. Competition Based Pricing In case of products where market is highly competitive and there is negligible difference in quality of competing brands, price is usually fixed closer to the price of the competing brands. It is called ‘young rate pricing’ and is a very convenient method because the marketers do not have to 16  worry much about demand and cost and effect the change as per the changes by the industry leaders. 3. Demand Based Pricing At times, prices are determined by the demand for the product. Under this method, without paying much attention to cost and competitor’s prices, the marketers try to ascertain the demand for the product. If the demand is high they decide to take advantage and fix a high price. If the demand is low, they fix low prices for their product. At times they resort to differential prices and charge different prices from different groups of customers depending upon their perceived values and capacity to pay. Take the case of cinema halls where the rates of tickets differ for the different sets of rows in the hall. 4. Objective Based Pricing This method is applicable to introduction of new (innovative) products. If, at the introductory stage of the products, the organization wishes to penetrate the market i.e., to capture large parts of the market and discourage the prospective competitors to enter into the fray, it fixes a low price. Alternatively, the organization may decide to skim the market i.e., to earn high profit by taking advantage of a group of customers who give more importance to their status or distinction and are willing to pay even a higher price for it. In such a situation they fix quite high price at the introductory stage of their product and market it to only those customers who can afford it. 3. Place Goods are produced to be sold to the consumers. They must be made available to the consumers at a place where they can conveniently make purchase. Woollens are manufactured on a large scale in Ludhiana and you purchase them at a store from the nearby market in your town. So, it is necessary that the product is available at shops in your town. This involves a chain of individuals and institutions like distributors, wholesalers and retailers who constitute firm’s distribution network (also called a channel of distribution). The organization has to decide whether to sell directly to the retailer or through the distributors/wholesaler etc. It can even plan to sell it directly to consumers. The product should be available from where your target consumer finds it easiest to shop. This may be in the Malls or department stores, Mail Order or the more current option via e-commerce or an online shop. 17 TYPES OF CHANNELS OF DISTRIBUTION 1. Zero stage channel of distribution Zero stage distribution channels exists where there is direct sale of goods by the producer to the consumer. This direct contact with the consumer can be made through door-to-door salesmen, own retail outlets or even through direct mail. Also in case of perishable products and certain technical household products, door-to-door sale is an easier way of convincing consumer to make a purchase. Eureka Forbes, for example, sells its water purifiers directly through their own sales staff. 2. One stage channel of distribution In this case, there is one middleman i.e., the retailer. The manufacturers sell their goods to retailers who in turn sell it to the consumers. This type of distribution channel is preferred by manufacturers of consumer durables like refrigerator, air conditioner, washing machine, etc. where individual purchase involves large amount. It is also used for distribution through large scale retailers such as departmental stores and super markets. 3. Two stage channel of distribution This is the most commonly used channel of distribution for the sale of consumer goods. In this case, there are two middlemen used, namely, wholesaler and retailer. This is applicable to products where markets are 18  spread over a large area, value of individual purchase is small and the frequency of purchase is high. 4. Three stage channel of distribution When the number of wholesalers used is large and they are scattered throughout the country, the manufacturers often use the services of mercantile agents who act as a link between the producer and the wholesaler. They are also known as distributors. FACTORS AFFECTING THE CHOICE OF DISTRIBUTION CHANNEL 1. Nature of Market There are many aspects of market which determine the choice of channel of distribution. Say for example, where the number of buyers is limited, they are concentrated at few locations and their individual purchases are large as is the case with industrial buyers, direct sale may be the most preferred choice. But in case where number of buyers is large with small individual purchase and they are scattered, then need may arise for use of middlemen. 2. Nature of Product Nature of the product considerably affects the choice of channel of distribution. In case the product is of technical nature involving a good amount of pre-sale and after sale services, the sale is generally done through retailers without involving the wholesalers. But in most of the consumer goods having small value, bought frequently in small quantities, a long channel involving agents, wholesalers and retailers is used as the goods need to be stored at convenient locations. Items like toiletries, groceries, etc. fall in this category. As against this in case of items like industrial machinery, having large value and involving specialized technical service and long negotiation period, direct sale is preferred. 3. Nature of the Company A firm having enough financial resources can afford to its own a distribution force and retail outlet, both. But most business firms prefer not to create their own distribution channel and concentrate on manufacturing. The firms who wish to control the distribution network prefer a shorter channel. 19  4. Middlemen Consideration If right kind of middlemen having the necessary experience, contacts, financial strength and integrity are available, their use is preferred as they can ensure success of newly introduced products. Cost factors also have to be kept in view as all middlemen add their own margin of profit to the price of the products. But from experience it is learnt that where the volume of sales is adequate, the use of middlemen is often found economical and less cumbersome as against direct sale. 4. Promotion If the product is manufactured keeping the consumer needs in mind, is rightly priced and made available at outlets convenient to them but the consumer is not made aware about its price, features, availability etc., its marketing effort may not be successful. Therefore, promotion is an important ingredient of marketing mix as it refers to a process of informing, persuading and influencing a consumer to make choice of the product to be bought. Promotion is done through means of personal selling, advertising, publicity and sales promotion. It is done mainly with a view to provide information to prospective consumers about the availability, characteristics and uses of a product. It arouses potential consumer’s interest in the product, compare it with competitors’ product and make his choice. The proliferation of print and electronic media has immensely helped the process of promotion. Advertising, Public Relations, Sales Promotion, Personal Selling and, in more recent times, Social Media are all key communication tools for an organization. These tools should be used to put across the organization’s message to the correct audiences in the manner they would most like to hear, whether it be informative or appealing to their emotions. Five elements of a promotion mix. Let us have a brief idea about these promotion tools. 1. Advertising Advertising is the most commonly used tool for informing the present and prospective consumers about the product, its quality, features, availability, etc. It is a paid form of non-personal communication through different media about a product, idea, a service or an organization by an identified sponsor. It can be done through print media like newspaper, magazines, billboards, electronic media like radio, television, etc. It is a very flexible and comparatively low cost tool of promotion. 2. Public Relations These activities promote a positive image, generate publicity and foster goodwill with the intent of increasing sales. Generating favorable 20  media coverage, hosting special events and sponsoring charitable campaigns are examples of public relations. 3. Personal selling You must have come across representatives of different companies knocking at your door and persuading you to buy their product. It is a direct presentation of the product to the consumers or prospective buyers. It refers to the use of salespersons to persuade the buyers to act favorably and buy the product. It is most effective promotional tool in case of industrial goods. 4. Sales promotion This refers to short-term and temporary incentives to purchase or induce trials of new goods. The tool includes contests, games, gifts, trade shows, discounts, etc. Sales promotional activities are often carried out at retail levels. 5. Direct Marketing A form of advertising aimed directly at target customers (usually in their homes or offices) that asks the receiver to take action, such as ordering a product, clipping a coupon, phoning a toll-free number or visiting a store. Catalogs, coupon mailers and letters are common forms of directing marketing. In the late 70’s it was widely acknowledged by Marketers that the Marketing Mix should be updated. This led to the creation of the Extended Marketing Mix in 1981 by Booms & Bitner which added 3 new elements to the 4 P’s Principle. This now allowed the extended Marketing Mix to include products that are services and not just physical things. The extended 7 P’s: 21 5. People All companies are reliant on the people who run them from front line Sales staff to the Managing Director. Having the right people is essential because they are as much a part of your business offering as the products/services you are offering. 6. Processes The delivery of your service is usually done with the customer present so how the service is delivered is once again part of what the consumer is paying for. 7. Physical Evidence Almost all services include some physical elements even if the bulk of what the consumer is paying for is intangible. For example, a hair salon would provide their client with a completed hairdo and an insurance company would give their customers some form of printed material. Even if the material is not physically printed (in the case of PDF’s) they are still receiving a “physical product” by this definition. Though in place since the 1980’s the 7 P’s are still widely taught due to their fundamental logic being sound in the marketing environment and marketer’s abilities to adapt the Marketing Mix to include changes in communications such as social media, updates in the places which you can sell a product/service or customers’ expectations in a constantly changing commercial environment. Is there an 8th P? In some spheres of thinking, there are 8 P’s in the Marketing Mix. The final P is Productivity and Quality. This came from the old Services Marketing Mix and is folded in to the Extended Marketing Mix by some marketers so what does it mean? The 8th P of the Marketing Mix: 8. Productivity & Quality This P asks “is what you’re offering your customer a good deal?” This is less about you as a business improving your own productivity for cost management, and more about how your company passes this onto its customers. MARKETING MANAGEMENT ORIENTATIONS 22  Marketing management orientations are different marketing concepts that focus on various techniques to create, produce and market products to customers. The management usually focuses on designing strategies that will build profitable relationships with target consumers. The Five Marketing Concepts – Marketing Management Orientations 1. The Production Concept This is one of the oldest concepts in business. The concept holds the belief that consumers desire, favors and prefer products at low prices which are affordable and available. The production management needs to create products focusing on achieving high production efficiency, low costs, and mass distribution as a marketing strategy. 2. The Product Concept The product concept proposes that consumers favor products offering the most quality performance, or innovative features. Implementation of the product concept focuses on producing superior products with innovative features that are normally improved over time to meet the customer expectation. 3. The Selling Concept The selling concept is based on the belief that consumers and businesses will not purchase products from companies or won’t buy enough of the organization’s products without aggressive selling and promotional efforts. The purpose of this concept is focusing on selling what the company creates rather than focusing on making what the consumer wants (what the market wants) during implementation. Managers usually focus on creating a comprehensive advertisement campaign to coax consumers into purchasing their products. 4. The Marketing Concept 23  The marketing concept emerged in the mid-1950s as a customer- centered, sense-and respond philosophy. The marketing concept holds that the key to achieving organizational goals is being more effective than competitors in creating, delivering, and communicating superior customer value to the target markets. The job is to find the right products for customers, thus the market strategy focuses on buyer’s needs and producing what a company can sell. The implementation of marketing concept focus on three main basic elements of marketing: customer orientation, company commitment and goal orientation. 5. The Societal Marketing Concept The societal marketing concept focuses on delivering value to customers in way of maintaining or improving consumers and society wellbeing. It looks on the interests and needs of the targeted consumer market. So there are three considerations underlying this concept which are Consumers satisfaction, society’s welfare and company’s profit. Importance of Marketing Management Orientations 1. To meet customer needs more effectively. 2. To avoid strategic mistakes. 3. To uncover opportunities before competitors. 4. To achieve higher customer satisfaction. 5. To implement emerging technologies in the concept of marketing orientation 24  REVIEW EXERCISES Name: ______________________________Date: __________________ 1. TRUE or FALSE Write True if the statement is correct, if False, supply with the correct answer. __________1. Satisfaction is the person's feeling of pleasure or disappointment which resulted from comparing a product's perceived performance or outcome against his/ her expectations. __________2. Sales promotion refers to short-term and temporary incentives to purchase or induce trials of new goods. __________3. In marketing terms: Sellers are called as “industry” while buyers are called “Market”. __________4. Three stage channel of distribution is the most commonly used channel of distribution for the sale of consumer goods. In this case, there are two middlemen used, namely, wholesaler and retailer. __________5. “Marketing today is finally customer-focused.” __________6. Marketers can influence wants and this is done in combination with societal influencers but cannot create needs because needs pre-exists. __________7. Marketing concept is associated with convincing consumer's mind towards goods and services. __________8. Publicity is a non-paid process of generating wide range of communication to contribute a favorable attitude towards the product and the organization. __________9. Marketer may be seller or buyer but most of time, marketer is seller. __________10. Demand also affects the price in a big way. When there is limited supply of a product and the demand is high, people buy even if high prices are charged by the producer. 25 __________11. The Product Concept is one of the oldest concepts in business. The concept holds the belief that consumers desire, favors and prefer products at low prices which are affordable and available. __________12. Convenience goods are goods which are purchased less frequently and are used very slowly like clothes, shoes, household appliances. __________13. Marketer may be seller or buyer but most of time, marketer is buyer. __________14. People, Processes, and Physical Evidence are considered as the extension of 7P’s. __________15. According to Philip Kotler, marketing is “the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and desires. It defines measures and quantifies the size of the identified market and the profit potential. It pinpoints which segments the company is capable of serving best and it designs and promotes the appropriate products and services.” 26  LEARNING ACTIVITY Visit a supermarket near your place but observe all the protocols under the new normal. Choose one consumer product you like. What can you say on Hitesh Bhasin, Concepts of Marketing, 2017? Retrieved from https://www.marketing91.com›. Marketing management articles how the store utilizes the core concepts of marketing in selling the product? Briefly discuss the importance of marketing management orientations. ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 27 Topic 2 Learning Outcomes In this topic the following questions will be addressed; Ø How customer service affect marketing? And how to create customer- driven marketing strategy? Ø Who is responsible for customer relationship management? Ø What is customer lifetime value and why is it important? Ø Explain successful customer relationship management strategies Course Materials Supplementary reading or exercises can be found at the end of the topic, and other textbooks references listed in the reference section. Customer Relationship: Customer Service Companies today face their toughest competition ever. This chapter spells out in more detail how companies can go about outperforming competitors in order to win and keep customers. To win in today’s marketplace, companies must become adept not just in building products, but in building customers. The answer lies in doing a better job than competitors do of delivering customer value and satisfaction. Once the customer trust is gained, the chances of switching to other company becomes relatively less, buys good in bulk, buys other supplementary goods and starts neglecting average price variation. This maintains the unit sales volume and increase in sales itself. The existing customers will be like a living advertisement. If the customer is satisfied with the product, will recommend it to friends and acquaintances. Customer Relation to make that happen the first thing to do is to address several important questions relating customer relationship marketing. What are the key building blocks for attracting, retaining and growing profitable customers? What are the customer value and satisfaction? How is customer satisfaction related to customer loyalty and retention? How can a company grow its “share of customer”? Who in the organization is responsible for building and maintaining customer relationship? What is 28 the role of total quality marketing? Next, is to examine competitive marketing strategies- how companies analyze their competitors and develop successful, value-based strategies for attracting, retaining and growing customers. Customer Relationship Traditional marketing theory and practice have focused in attracting new customers rather than retaining existing ones. Today, however, although attracting new customers remain an important marketing task, the emphasis has shifted toward relationship marketing—creating and maintaining, and enhancing strong relationship with customers and other stakeholders. Beyond designing strategies to attract new customers and create transactions with them, companies are all going out to retain current customers and build profitable, long-term relationships with them. The new view is that marketing is the science and art of finding, retaining, and growing profitable customers. To fully understand here’s a definition from Philip Kotler, “Relationship marketing is oriented more towards the long term. The goal is to deliver long-term value to customers and the measure of success is long-term customer satisfaction. It requires that all of the company’s departments work together with marketing as a team to serve the customer. It involves building relationships at many levels- economic, social, and technical and legal-resulting in high customer loyalty.” In addition, relationship marketing is applicable where the customers have many options in the market for the same product or service and the customer is entitled to make a selection decision. In such a kind of market, businesses try to maintain their client by providing comparatively better products and good service to meet their satisfaction. Ripening Relationship: Customer Value and Satisfaction The key to building lasting relationships is the creation of superior customer value and satisfaction. Satisfied customers are more likely to give a company a larger share of their business. More than 35 years ago, Peter Drucker observed that a company's first task is: to create customers'. Today’s customers face a vast selection of product and brand choices, prices and suppliers. The company must answer a key question: How do customers make their choices? The answer is that customers choose the marketing offer that gives them the most value. Customers are value-maximizers, within the bounds of search costs and limited knowledge, mobility and income. They form expectations of value and act upon them. Then they compare the actual value they receive in consuming the product to the value expected, and this affects their satisfaction and repurchase behavior. Customer Value Consumers buy from the firm that they believe offers the highest customer delivered value- the difference between total customer value and total customer cost. For example, suppose that a large construction firm wants to buy a dump truck. It will 29 buy the dump truck from either Caterpillar or to its close competitor, Mitsubishi. The salespeople for the two companies carefully describe their respective offers to the buyer. The construction firm evaluates the two competing dump truck offers to assess which one delivers the greatest value. It adds all the values from four sources—product, services, personnel, and image. First, it judges that Caterpillar’s dump truck provides higher reliability, durability, and performance. It also decides that Caterpillar has better accompanying services—delivery, training, and maintenance. The customer views Caterpillar personal as more knowledgeable and responsive. Finally, it places higher value on Caterpillar’s reputation. Thus, the customer decides that Caterpillar offers more total customer value than does Mitsubishi. Value Chain Michael Porter proposed the value chain as the main tool for identifying ways to create more customer value. Every firm consists of a collection of activities performed to design, produce, and market, deliver and support the firm's products. The value chain breaks the firm into nine value-creating activities in an effort to understand the behavior of costs in the specific business and the potential sources of competitive differentiation. The nine value-creating activities include five primary activities and four support activities. The primary activities involve the -sequence of bringing materials into the business (inbound logistics), operating on them (operations), sending them out (outbound logistics), marketing them (marketing and sales) and servicing them (service). For a long time, firms have focused on the product as the primary means of adding value, but customer satisfaction also depends upon the other stages of the value chain. The support activities occur within each of these primary activities. For example, procurement involves obtaining the various inputs for each primary activity - only a fraction of procurement is done by the purchasing department. Technology development and human resource management also occur in all departments. The firm's infrastructure covers the overhead of general management, planning, finance, accounting and legal and government affairs borne by all the primary and support activities. Under the value-chain concept, the firm should examine its costs and performance in each value-creating activity to look for improvements. It should also estimate its competitors' costs and performances as benchmarks. To the extent that the firm can perform certain activities better than its competitors, it can achieve a competitive advantage. The firm's success depends not only on how well each department performs its work, but also on how well the activities of various departments are coordinated. Too often, individual departments maximize their own interests rather than those of the whole company and the customer. For example, a credit department might attempt to reduce bad debts by taking a long time to check the credit of prospective customers: meanwhile, salespeople get frustrated and customers wait. A distribution department might decide to save money by shipping goods by rail; again the customer waits. In each case, individual departments have erected walls that impede the delivery of quality customer service. 30  To overcome this problem, companies should place more emphasis on the smooth management of core business processes, most of which involve inputs and co- operation from many functional departments. These core business processes include the following; Product development process. All the activities involved in identifying, researching and developing new products with speed, high quality and reasonable cost. Inventory management process. All the activities involved in developing and managing the right inventory levels of raw materials, semi-finished materials and finished goods, so that adequate supplies are available while the costs of high overstocks are avoided. Order-to-payment process. All the activities involved in receiving orders, approving them, shipping the goods on time and collecting payment. Customer service process. All the activities involved in making it easy for customers to reach the right parties within the company to obtain service, answers and resolutions of problems. Customer Satisfactio "Changes in companies’ customer satisfaction scores don’t happen overnight; they have to work their way through complex value chains that ultimately affect quarterly profits and stock prices (Harvard Business Review, 2007)." Consumers form judgements about the value of marketing offers and make their buying decisions based upon these judgements. Customer satisfaction with a purchase depends upon the product's performance relative to a buyer's expectations. A customer might experience various degrees of satisfaction. If the product's performance falls short of expectations, the customer is dissatisfied. If performance matches expectations, the customer is satisfied. If performance exceeds expectations, the customer is highly satisfied or delighted. But how do buyers form their expectations? Expectations are based on the customer's past buying experiences, the opinions of friends and associates, and marketer and competitor information and promises. Marketers must be careful to set the right level of expectations. If they set expectations too low, they may satisfy those who buy, but fail to attract enough buyers. In contrast, if they raise expectations too high, buyers are likely to be disappointed. Here are 7 Steps to Customers Satisfaction 1. Encourage face-to-face dealings (Observe new normal protocols) 2. Respond to messages promptly and keep your clients informed 3. Be friendly and approachable 4. Have a clearly-defined customer service policy 5. Attention to detail (also known as “the little niceties”) 6. Anticipate your client’s needs and go out of your way to help them out. 7. Honor your promises. 31 Customer Profitability Marketing is the art of attracting and keeping profitable customers. Yet, companies often discover that between 20 and 40 per cent of their customers are unprofitable. Further, many companies report that their most profitable customers are not their largest customers, but their mid-size customers. The largest customers demand greater service and receive the deepest discounts, thereby reducing the company's profit level. The smallest customers pay full price and receive less service, but the costs of transacting with small customers reduce their profitability. In many cases, mid-size customers that pay close to full price and receive good service are the most profitable. This helps to explain why many large firms that once targeted only large customers are now invading the middle market. “A company should not try to pursue and satisfy every customer.” What makes a customer profitable? We define a profitable customer as a person, household or company whose revenues over time exceed, by an acceptable amount, the company's costs of attracting, selling and servicing that customer. Note that the definition emphasizes lifetime revenues and costs, not profit from a single transaction. Here’s a dramatic illustrations of customer lifetime value Joselito Reyes, who operates a highly profitable single-store supermarket, says that he sees P2, 500,000 flying out of his store every time he sees a sulking customer. Why? Because his average customer spends about P5, 000 a week, shops 50 weeks a year and remains in the area for about 10 years. If this customer has an unhappy experience and switches to another supermarket, Joselito Reyes has lost P2, 500,000 in revenue. The loss can be much greater if the disappointed customer shares the bad experience with other customers and causes them to defect. Few companies actively measure individual customer value and profitability. For example, banks claim that this is hard to do because customers use different banking services and transactions are logged in different departments. However, banks that have managed to link customer transactions and measure customer profitability have been appalled by how many unprofitable customers they find. Some banks report losing money on over 45 per cent of their retail customers. It is not surprising that many banks now charge fees for services that they once supplied free. Strategies of Relationship Management With a company-wide understanding of clients’ needs and values, the firm can increase profitability, improve client satisfaction, and build loyalty. Just as critical to long term success is maintaining positive communication with business partners, vendors and employees. 1. Increase Efficiency and Organizational Intelligence Consolidate knowledge of prospects, clients and partners in a single location to drive revenue optimization initiatives across departments. Organizational Intelligence is the capacity of an organization to create knowledge and use it to strategically adapt to its environment or marketplace. 32  While organizations in the past have been viewed as compilation of tasks, products, employees, profit centers and process, today they are increasingly seen as intelligent systems designed to manage knowledge. Scholars have shown the organizations engage in learning processes using tacit forms of intuitive knowledge, hard data stored in computer networks and information gathered from the environment, all of which are used to make decisions. Because this complex process involves large numbers of people interacting with diverse information systems, organizational Intelligence is more than the aggregate intelligence of organizational members; it is the intelligence of the organization itself as a larger system. 2. Optimize individual Client Profitability To thrive, manufacturers must identify and respond to local market needs by designing, producing, marketing and selling the right producers at the optimal price everywhere they operate. Unfortunately, many organizations have no accurate information regarding the profitability of their customers, products and sales channels nor do they know true costs of their processes, systems and activities. Consequently, incorrect decisions are being made about production, allocations, pricing, packaging of services, marketing, customer acquirement and sales compensation plans. Revealing true customer profitability and the customer contribution to our shareholder value assumes a correct view on the ‘cost to serve’ of customer. 3. Improve Collaboration Facilitate communication among clients, partners and employees to drive profit, reduce recycle time, and manage issues. The primary goal of collaborative CRM is to maximize profitability, profit and customer satisfaction. The various technologies that support the business include gaining the attention of customers, storage and analysis of customer information. The most important part of collaborative CRM is combining software installation with customer-oriented strategies. And while technology is a powerful tool to support CRM initiatives, without the alliance to the customer, the tool is of little benefit to the service or to company. The aim of Collaborative CRM is to get various departments within a business to share useful information. This information gathered serves to collect information that helps improve the quality of customer service. For Collaborative CRM is a highly effective method of communication as it covers direct interaction with customers including feedback and issue reporting. Interaction can take place through web pages, email and Automated Voice Response. Overall, the primary purpose of Collaborative CRM is to improve the quality of customer service and to increase customer satisfaction. 4. Cultivate Successful Relationships Re the most valuable clients and pursue prospects with similar attributes. Establishing and then cultivating successful relationships with CPAs and other third party advisors can help build our own practice and credibility among businesses owners and high-net-worth clients. 33 It is a strategy worth pursuing, but it is also one that takes time, patience, persistence and constant communication. It is impossible to have an intimate relationship with someone who is always busy doing their own thing. It is equally hard to have a relationship with someone who is solely focus on work, success or individual goals. The key to a successful marketing is building relationships. Creating trust through honesty and transparency. Listening first and being responsive. Making an effort to learn more and to find commonality and working hard at meeting someone’s expectations. These are what build relationships either in business or in life. When to Use Relationship Marketing Marketing is not used to just boost the sales of a certain business/company. Relationship marketing is not effective in all situations. Transaction marketing, which focuses on one sales transaction at a time, is more appropriate than relationship marketing for customers that have short time horizons and can switch from one supplier to another with little effort or investment. This situation often occurs in 'commodity' markets, such as steel, where various suppliers offer largely undifferentiated products. A customer buying steel can buy from any of severe steel suppliers and choose the one offering the best terms on a purchase-by-purchase basis. The fact that one steel supplier works at developing a longer-term relationship with a buyer does not automatically earn it the next sale; its price and other terms still have to be competitive. In contrast, relationship marketing can pay off handsomely with customers that have long time horizons and high switching costs, such as buyers of office automation systems. Such major system buyers usually research competing suppliers carefully and choose one from whom they can expect state-of-the-art technology and good long-term service. Both the customer and the supplier invest a lot of money and time in building the relationship. The customer would find it costly and risky to switch to another supplier and the seller would find that losing this customer would be a considerable loss. Thus each seeks to develop a solid long-terra working relationship with the other. It is with such customers that relationship marketing has the greatest pay-off. Customer Service Strategies Successful businesses don't just communicate with prospects and customers for special sales. Here are seven relationship-building strategies that will help you transform your company into a valuable resource: 1. Communicate frequently. How often do you reach out to customers? Do the bulk of your communications focus on product offers and sales? For best results, it's important to communicate frequently and vary the types of messages you send. Instead of a constant barrage of promotions, sprinkle in helpful newsletters or softer-sell messages. It is critical to note that to maintain loyalty with your customers is not something you do once but it is a chain of events involving positive interactions with your customers; it should be handled 34 in a manner that they get used to expecting a great service quality from your enterprise proving that you maintain the value you provide. 2. Offer customer rewards. Customer loyalty or reward programs work well for many types of businesses, from retail to cruise and travel. The most effective programs offer graduated rewards, so the more customers spend, the more they earn. This rewards your best, most profitable clients or customers and cuts down on low-value price switchers-customers who switch from program to program to get entry-level rewards. Whenever possible, offer in-kind rewards that remind your customers of your company and its products or services. 3. Hold special events. Create any event that allows you and your staff to interact with your best customers is a good bet, whether it's a public concert, a summertime pool party or a school seminar. Just choose the venue most appropriate for your unique customers and business. This also helps widen the horizon of customers. 4. Build two-way communication. When it comes to customer relations, "listening" can be every bit as important as "telling." Use every tool and opportunity to create interaction, including asking for feedback through your Web site and social media accounts, sending customer surveys (online or offline) and providing online message boards or blogs. What better way to make someone feel valued than by asking for his or her opinion and advice? Business owners not only gain much insight from trusted clients but also establish that they respect and value those clients. By reaching out to customers, you give them a way to become involved and make their voices heard. They will feel that they are a part of the company, and you will get valuable feedback on what's working and what needs to be changed in your company's marketing strategies and business plan. Customers who know they're "heard" instantly feel a rapport and a relationship with your company. 5. Enhance your customer service. Do you have a dedicated staff or channel for resolving customer problems quickly and effectively? How about online customer assistance? One of the best ways to add value and stand out from the competition is to have superior customer service. Customers often make choices between parity products and services based on the perceived "customer experience." This is what they can expect to receive in the way of support from your company after a sale is closed. Top-flight customer service on all sales will help you build repeat business, create positive word-of-mouth and increase sales from new customers as a result. 35 6. Provide online customer support Marketing specialists are equipped to provide businesses the type of customer support that also builds customer relationships. Via blog posts, newsletters, Facebook, Twitter, and an all-encompassing social media marketplace blitz, marketers can provide information, insight, news, advice, and even technical assistance to customers. Those acts establish the company's interest in its customers, making them feel valued and needed by the company. 7. Launch multicultural programs. It may be time to add a multilingual component to your marketing program. For example, you might offer a Spanish-language translation of your Web site or use ethnic print and broadcast media to reach niche markets. Ethnic audiences will appreciate marketing communications in their own languages. Bilingual customer service will also go a long way toward helping your company build relationships with minority groups. 8. Visit the trenches. For many entrepreneurs, particularly those selling products and services to other businesses, it's important to go beyond standard sales calls and off-the-shelf marketing tools in order to build relationships with top customers or clients. When was the last time you spent hours, or even a full day, with a customer-not your sales staff, but you, the head of your company? There's no better way to really understand the challenges your customers face and the ways you can help meet them than to occasionally get out in the trenches. Try it. You'll find it can be a real eye-opener and a great way to cement lasting relationships. 36  REVIEW EXERCISES Name: ___________________________ Date: _______________ 1. How do you think can a marketer effectively influence customer satisfaction? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 2. What is customer profitability? Discuss Briefly. ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 3. Briefly discuss the strategies of relationship management. ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 37 4. When do you use relationship marketing? Discuss briefly. ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 5. Give at least 5 importance of customer service strategies. ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 38 Topic 3 Learning Outcomes In this topic the following questions will be addressed; Ø What are the differences between strategic marketing vs. tactical marketing? Ø What are the factors that affect marketing environment? Ø What is marketing research? Ø What is consumer and organizational markets? Ø What is segmentation, targeting, and positioning? Course Materials Supplementary reading or exercises can be found at the end of the topic, and other textbooks references listed in the reference section. Market Opportunity Analysis and Consumer Behavior 1. STRATEGIC MARKETING PROCESS versus TACTICAL MARKETING We have to first define what strategy and tactics are for a better understanding of the Strategic Marketing Process and Tactical Marketing. A strategy is a plan for reaching a specific goal, while a tactic is the means you use to reach the goal. In business, a strategy is a broad goal, such as increasing sales or market share of a firm. It can also be creating a particular image for your products or business in order to attract more customers. Tactics, on the other hand, are for creating an image or brand that might include using price to establish your product as affordable (by pricing it lower than competitor’s product) or high-end (by pricing it higher than your competitor’s product). This is why when you are creating a marketing plan, you should start with broad strategies and support them with specific tactics. 39 The Strategic Marketing Process Strategic marketing is a planning process that seeks to establish a clear direction and unified purpose for all marketing efforts of a business organization. Strategic marketing is all about taking time to understand your customer, what is important to the customer and why he purchases specific items or a particular product. Strategic marketing allows companies to provide a solution to what customers need. Strategic marketing consists of selling your product in such a way that you achieve a goal. Goals can include increasing sales, revenues, market share, segmenting the market or creating a new brand or position in the marketplace. There are five steps in the strategic marketing process. These are identifying a mission, analyzing the situation, setting objectives, developing a marketing strategy, and planning for evaluation. These are illustrated as follows: Identifying Analyzing the Setting the Mission situation Objectives Strategy Developing Evaluation A Marketing and Control Strategy The Five Steps in the Strategic Marketing Process Step 1: Identifying the Mission The first step in strategic marketing is to formulate the mission statement of the organization that articulates the reason why the organization exists, its primary consumers, the products and services it can provide and how it can benefit target consumers over the long term. The mission statement is intended to anticipate the future and describe the present and on-going role for the organization's products or services and expertise. For example, the mission statement of Jollibee Foods Corporation is “To serve great tasting food, bringing the joy of eating to everyone.” This is a one-line mission statement that clearly states what the mission of Jollibee is in the business world. Its mission statement gives the reason why it exists. On the other hand, the mission statement of Cebu Pacific says “"Why everyone flies. Cebu Pacific brings people together through safe, affordable, reliable, and fun-filled air travel. We are committed to innovation and excellence in everything we do. We are an employer of choice providing opportunities for professional and personal growth. We have a deep sense of family values throughout our airline. We enhance the quality of life of the communities we 40 serve and are an active partner in our nation's progress. We offer our shareholders a fair return on their investments.” This is a very long mission statement composed of even sentences. The reason behind this could be the desire of Cebu Pacific to be very clear enough on why it exists. Step 2: Analyzing the Situation In this step, organizations conduct a situation analysis. It is also known as a SWOT. This is in order to evaluate and prioritize the strengths, weaknesses, opportunities and threats of an organization. This strategic marketing process helps managers understand the resources they can build on and the challenges they face. Some examples of strengths of a business could include competitive advantages, quality, price, efficiency, the company’s financial resources, location, or customer service. Some examples of a business firm’s weaknesses could include limited financial resources, quality concerns on its products, production inefficiencies, or poor brand image. Some opportunities for a business could include new technology that could improve production, changes in government policy or regulations that could benefit the business, new markets due to changes in the lifestyles of people, improving consumptions due to better economy and others. Examples of threats are entry of more competition, changing lifestyles or tastes of consumers due to improved incomes, entry of more substitute products and services, or new taxes. Strengths and weaknesses are internal factors, while opportunities and threats arise from the external environment. Step 3: Setting Objectives The third step in strategic marketing is to set marketing objectives. These are clear, realistic and measurable goals that give decision makers a basis for making choices and assessing progress. Objectives are usually expressed in terms of one or more quantitative targets like revenue, profit, sales or market share. It is important that each objective must be achievable within a fixed period of time. Step 4: Developing a Marketing Strategy and Evaluation The fourth step in strategic marketing is strategy development. This is selecting a target market, a distinct group of consumers who are highly likely to buy the firm's product. Planners choose implementation tactics like effective ways to use the marketing mix tools of product, promotion, price and distribution to reach and influence prospective buyers. Step 5: Strategy Evaluation and Control 41  The fifth step is strategy evaluation and control. Strategy evaluation and control means specifying how, when and by whom these tactics are to be monitored and assessed over time. This is to maximize the return on a marketing plan, and the need for controls in place to monitor the plan's progress. As a marketing plan moves along, the controls are constantly analyzed to determine how the plan's actual performance compares to the projections. Any changes that need to be made are done based on the analysis of marketing controls. Understanding what the controls in a marketing plan are will help the manager develop effective performance measurement indicators. The tactical Marketing Process The term “tactical marketing” refers to the actions a company takes in order to market or sell a product. It is the process that complements strategic marketing. It involves the tactics you will implement to make things happen as per strategy. Once you have established business goals, including specific strategies for achieving the goals, you should find out how you will implement your strategies. If you want to increase your revenues or sales, for example, one tactic might be to raise your prices in relation with rebranding a product or service as upscale. If you want to increase market share among health-conscious consumers, you might start sponsoring sporting events or advertising in health and fitness magazines. Tactical marketing is not a onetime process. As it is an on-going process, you can always improve your tactics, depending on your results. But it is essential for your business not to jump directly on the tactical part before primarily considering and focusing on the strategies that will develop and sustain your business. You need to have the background plan ready before you start thinking on tactics to achieve the plan. Organizations or Firms adopt various tactical marketing processes depending on their needs. But the tactical marketing process generally starts with the development of your marketing strategies and can include the following basic processes: planning/objectives, marketing activities, the time line, activity budget, monitoring and control, and evaluation. Marketing Planning/ Marketing Strategies Objectives Activities Monitoring and Activity Budget Timeline Control Evaluation An example of the Marketing Process 42  After formulating its marketing strategies, a business usually adopts a short term or tactical marketing plan that will provide for the business a way to plan and capture the key requirements of the activity you have planned to support your chosen objectives. By creating a tactical marketing plan, you will be addressing several key areas of the performance your potential marketing campaign. But to be able to manage the marketing activity you need to know how long it will take you to get your promotion to market and you will need to allow for things like; extra stock being delivered on time, receiving marketing promotional materials on time, take into account holidays and events, all of these areas will start to help you think through how long it will take to manage and launch the promotions. Before you kick off your promotion and marketing activity you will need to know how much budget you have and how much you will portion to the different suppliers to make your event work. Then you also should have targets included as a measure as to how many new customers or sales you will need to make to break even and also forecast a potential uplift in sales so you have some idea as to how much increased revenue the activity may bring in for your business. You then have to monitor and control completion and implementation of your tactical marketing plan. You will then have to measure your performance, to know how successful the activity has been. You also need to review your data and investigate how many incremental sales your business achieved or the increase in revenue during the period. How or what you measure will be up to your business but the only way to improve is to have some key performance indicators that you can apply to this activity and future marketing promotions so you can improve your marketing effectiveness. 2. THE MARKETING ENVIRONMENT Marketing environment refers to external factors and forces that affect the company's ability to develop and maintain successful transactions and relationships with its target customers. It includes the internal factors (employees, customers, shareholders, retailers and distributors, etc.) and the External factors (political, legal, social, technological, economic) that surround the business and influence its marketing operations. Some of these factors are controllable while some are uncontrollable and require business operations to change accordingly. Business firms must be well aware of its marketing environment in which it is operating in order to overcome the negative effect or impact the environment factors are affecting or imposing on firm’s marketing activities. The marketing environment is broadly classified into three parts: the, Micro Environment, Internal Environment and Macro Environment. MACRO ENVIRONMENT 43  Micro Environment Internal Environment An illustration of the Marketing Environment that a business must take into account The Macro Environment Macro Environment refers to all forces that are part of the larger society and affect the micro-environment. These are the major external and uncontrollable factors that influence an organization's decision making, and affect its performance and strategies. These factors affecting organization in Macro Environment are known as PESTEL, that is: Political, Economic, Social, Technological, Environmental and Legal. MACRO ENVIRONMENT Political Legal Social Economic Technological The major factors that influence decision making and affect performance and strategies of an organization The following are the detailed description of the Macro factors as illustrated above: 1. The Political and Legal Factors – There wil