S - 1263873971.02 mkt00720 - SG - E06 - Enabled

g r a d u at e c o l l e g e o f m a n a g e m e n t
Marketing Management
MKT00720
Written by: Marjorie Askew and Carmen Cox
Study Guide
Sixth edition
2010 Southern Cross University Southern Cross University Military Road East Lismore NSW 2480 No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher. Copyright material indicated in this work has been copied under Part VB of the Copyright Act 1968.
Sixth edition 2010
Contents
Welcome ........................................................................................................................................ 5 About the writers............................................................................................................. 5 Using the study guide...................................................................................................... 6 Organisation of the unit................................................................................................... 7 Topic 1 The marketing concept............................................................................................. 9 Introduction..................................................................................................................... 9 Objectives........................................................................................................................ 9 What is marketing?. ......................................................................................................... 9 The evolution of marketing........................................................................................... 11 The development of a marketing orientation................................................................ 13 Marketings role in the organisation. ............................................................................. 17 Marketing management................................................................................................. 18 Summary....................................................................................................................... 21 Case study practice........................................................................................................ 22 Feedback to activities.................................................................................................... 23 Topic 2 Marketing planning................................................................................................... 25 Introduction................................................................................................................... 25 Objectives...................................................................................................................... 25 Why plan?..................................................................................................................... 25 Marketing and strategic planning.................................................................................. 26 The marketing planning process................................................................................... 30 Summary....................................................................................................................... 36 Case study practice........................................................................................................ 36 Feedback to activities.................................................................................................... 37 Topic 3 Information for marketing. .................................................................................... 39 Introduction................................................................................................................... 39 Objectives...................................................................................................................... 39 The marketing information system............................................................................... 39 Marketing intelligence. .................................................................................................. 40 Marketing research........................................................................................................ 43 Summary....................................................................................................................... 47 Case study practice........................................................................................................ 47 Feedback to activities.................................................................................................... 47
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MKT00720 Marketing Management
Topic 4 Creating value, satisfaction and loyalty.......................................................... 51 Introduction................................................................................................................... 51 Objectives...................................................................................................................... 51 Marketing and customer value...................................................................................... 51 Relationship marketing................................................................................................. 53 Customer databases and marketing............................................................................... 55 Summary....................................................................................................................... 56 Feedback to activities.................................................................................................... 57 Topic 5 Knowing your customer. ....................................................................................... 59 Introduction................................................................................................................... 59 Objectives...................................................................................................................... 59 Consumer buying behaviour......................................................................................... 59 The consumer buying decision-making process........................................................... 60 Business buying behaviour. ........................................................................................... 67 Summary....................................................................................................................... 71 Case study practice........................................................................................................ 71 Feedback to activities.................................................................................................... 71 Topic 6 Segmenting and targeting.................................................................................... 73 Introduction................................................................................................................... 73 Objectives...................................................................................................................... 73 STP marketing............................................................................................................ 73 Market segmentation..................................................................................................... 74 Target marketing. ........................................................................................................... 77 Summary....................................................................................................................... 78 Feedback to activities.................................................................................................... 80 Topic 7 Product strategy and new product development...................................... 81 Introduction................................................................................................................... 81 Objectives...................................................................................................................... 81 What is a product?......................................................................................................... 82 Services marketing........................................................................................................ 83 Product differentiation. .................................................................................................. 85 Product mixes................................................................................................................ 85 Packaging...................................................................................................................... 86 The new product challenge........................................................................................... 87 New product development decision process................................................................. 88 The consumer adoption process.................................................................................... 92 Summary....................................................................................................................... 92 Feedback to activities.................................................................................................... 94
MKT00720 Contents
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Topic 8 Creating brand equity............................................................................................. 95 Introduction................................................................................................................... 95 Objectives...................................................................................................................... 95 Branding........................................................................................................................ 95 Understanding brand equity.......................................................................................... 96 Building brand equity.................................................................................................... 97 Measuring brand equity. ................................................................................................ 97 Managing brand equity. ................................................................................................. 98 Developing a branding strategy. .................................................................................... 98 Summary....................................................................................................................... 99 Feedback to activities.................................................................................................. 100 Unit Evaluation by Students................................................................................................ 101 Topic 9 Positioning the brand............................................................................................ 105 Introduction................................................................................................................. 105 Objectives.................................................................................................................... 105 Positioning. .................................................................................................................. 105 Developing a positioning strategy............................................................................... 106 Choosing points of parity and differentiation. ............................................................. 107 Differentiation strategies............................................................................................. 108 Strategies through the product life cycle..................................................................... 108 Summary..................................................................................................................... 109 Feedback to activities.................................................................................................. 110 Topic 10 Price decisions........................................................................................................111 Introduction..................................................................................................................111 Objectives.....................................................................................................................111 Price determination......................................................................................................111 Summary..................................................................................................................... 117 Feedback to activities.................................................................................................. 118 Topic 11 Value networks and marketing channels.................................................... 119 Introduction................................................................................................................. 119 Objectives.................................................................................................................... 119 Marketing channels and value networks..................................................................... 119 Channel decisions. ....................................................................................................... 120 Physical distribution.................................................................................................... 122 E-Commerce. ............................................................................................................... 123 Distribution of services............................................................................................... 123 Summary..................................................................................................................... 124 Feedback to activities.................................................................................................. 125
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Topic 12 Integrated marketing communications....................................................... 127 Introduction................................................................................................................. 127 Objectives.................................................................................................................... 127 The communications process...................................................................................... 127 Developing effective marketing communications. ...................................................... 129 Advertising.................................................................................................................. 133 Sales promotion........................................................................................................... 134 Events and experiences............................................................................................... 135 Public relations and publicity...................................................................................... 135 Direct marketing. ......................................................................................................... 136 Interactive marketing. .................................................................................................. 137 Word-of-mouth............................................................................................................ 137 Personal selling........................................................................................................... 137 Summary..................................................................................................................... 138 Farewell to students. .................................................................................................... 138 Feedback to activities.................................................................................................. 140
Welcome
Welcome to MKT00720 Marketing Management. It is hoped that the concepts presented in this unit will enable you to view marketing as an exciting, dynamic and essential element of successful business today. Marketing has developed into a management discipline. It embraces the processes that seek to identify customer needs and to develop products and services that satisfy those needs, and at the same time achieve the organisations objectives. However marketing is more than a function within the organisation, it requires a customer focus throughout the organisation and so needs to be reflected in the culture of the organisation. Whether or not you are currently involved in marketing, the concepts and tools you encounter should help you to develop marketing skills that you can employ now and/or in the future.
About the writers

Marjorie Askew
Marjorie Askew joined Southern Cross University (when it was the University of New England, Northern Rivers) in 1990 following two years lecturing at Croydon Business School, London. During that time she was also involved in teaching marketing in the Open University program in the UK. Prior to entering academic life, Marjorie had 16 years experience in marketing and management in the UK. Her career has spanned industrial, consumer and service sectors, notably with Shell Chemicals, Sunbeam (electrical appliances) and managing a marketing and promotions agency. Within the Graduate College of Management, Marjorie has been involved with the MBA program since its introduction in 1991, lecturing in various marketing units and in international business and strategic management. Marjorie is director of the MBA and Masters programs. Marjories current research interests relate to her teaching disciplines marketing and international business; specifically sports sponsorship and its effectiveness, the globalisation debate in international marketing, and the creation and delivery of value. She also has a growing interest in research in transnational education.
Carmen Cox
Carmen Cox was a senior lecturer in Marketing in the Graduate College of Management until 2009. She had previously taught in, and managed, academic programs in tourism and hospitality at Auckland University of Technology and Griffith University. Carmen completed her PhD in tourism marketing in 2001 through Griffith University. Carmens industry experience has been in the hotel and tourism industry where she has worked as Marketing Manager and undertaken a number of marketing and management consultancy projects for clients during her employment with the Centre for Tourism and Hotel Management Research.
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Carmens research interests focus on marketing and consumer behaviour issues. She has completed and published research projects in a number of areas including guest loyalty in the hospitality industry; tourism marketing; tourism forecasting; travel itinerary planning behaviour and the social impacts of tourism. Her teaching areas include services marketing; retail marketing and management and the current unit, Marketing Management.
Using the study guide

Included in your package of materials are the Unit Information Guide, and the numbered topics collectively referred to as the Study Guide. The Unit Information Guide provides the Unit Statement, assignment details, contact details etc. while the Study Guide contains the print-based content and teaching aspects of the unit. It is important that you read both of these documents carefully. The study guide and associated online MySCU site are designed to be fully selfinstructional; that is, they take the place of traditional face-to-face lectures and tutorials. In most units the Study Guide is written around one or more textbooks the textbooks contain the content and the Study Guide and MySCU site do the teaching. Occasionally there is no textbook, so the Study Guide presents all the content as well. Either way, the Study Guide guides you through the subject matter of the unit in a systematic and structured way, using features such as hierarchical headings and bold type to highlight key concepts and terms. It directs you when to read your textbook or other supplied readings, when to use the MySCU site and when to undertake selfassessment activities to help you to see if youre handling the content that has been presented. So each topic is made up of three types of material: teaching (the lecturer/writer talking to you), directions to read something, and directions to do something. Active learning is really important, especially when youre studying independently, and the activities in each topic give you the opportunity to do something with what youve just read or what you are about to read. Activities within the topic are designed to help to check your understanding of individual concepts. All activities should be attempted as you come across them, and you should always try to answer the questions asked before looking at the feedback provided! All units are structured around a set of learning objectives. These are expressed in terms of what you should be able to do once youve studied the material. The objectives cover a wide range of skills: knowledge: recalling information (e.g. define, name, label) comprehension: interpreting information in your own words (e.g. classify, describe, discuss, explain, identify) application: applying knowledge to a new situation (e.g. apply, illustrate, interpret, solve) analysis: breaking down knowledge into parts and showing the relationship among the parts (e.g. analyse, calculate, compare, contrast, criticise, differentiate, examine) synthesis: bringing together parts of knowledge to form a whole and building relationships for new situations (e.g. construct, create, design, prepare) evaluation: making judgments on the basis of certain criteria (e.g. appraise, argue, attack, defend, evaluate, predict).
MKT00720 Welcome
It is important to realise that recalling knowledge is a very small part of what you are required to do in your learning for this unit. Rote learning is not appropriate at this level of study. You must acquire skills of analysis, interpretation etc. and by undertaking the unit activities and assignments you will gradually acquire these important skills.
Organisation of the unit

The unit is organised into twelve topics. In Topic 1 well explain the development of the marketing concept, explain some key terminology involved with marketing and youll see the importance of maintaining a customer focus at all times. Topic 2 will look at the need for marketing planning and how this relates to corporate and strategic planning. Then in Topic 3, we consider the need for marketing information to aid marketing decision making. This information is to be provided by a marketing information system, and youll explore techniques to gather this information, specifically through marketing research. Well also consider the marketing environment in this topic and youll see that marketing does not take place in a vacuum but in a complex, dynamic environment that poses opportunities and threats. Topic 4 will then explain how value is delivered to customers along with how companies can ensure that customer satisfaction and loyalty is achieved. In Topic 5 we focus specifically on the customer. We will seek to understand customers buying behaviour, which will give us valuable insights for developing effective marketing strategy. Having found out in Topic 5 that different customers have different needs we turn, in Topic 6, to dividing the market into segments based on these different needs. We then we go on to select which of those segments to target. Topic 7 addresses product (including service) decisions. It considers matching our product to the needs and wants of target customers and also looks at new product development; firstly why organisations need new products, followed by how they should go about developing these new products. Topics 8 and 9 focus on the important issue of brand development. Firstly, in Topic 8 we highlight the reasons why branding is so important and establish the values of brands to companies. We then turn to the role of brand positioning in Topic 9 and explore how products can be clearly differentiated in the marketplace from their competitors. In Topic 10 we turn to pricing. We will discuss the factors that need to be considered in determining price and explore the relationship between price and demand. Topic 11 addresses marketing channels and distribution specifically in terms of selecting distributors that will both reach and satisfy customers, and build relationships through the value chain. Lastly we consider how to develop effective communications, again to reach target markets, as well as relevant target publics. Topic 12 explores the development of integrated marketing communications and addresses effective management of the various components of the communications mix as well as exploring some current trends in media selection.
Topic 1
The marketing concept
Introduction
We are all probably very aware of Marketing its happening all around us. But just what is it all about? This topic aims to illuminate to explain the concept of marketing. Firstly well explore the importance and scope of marketing, and examine how customer satisfaction strategies lead to success. Next well investigate alternative business orientations that companies can operate under and then the changing role of marketing within the organisation. Finally well examine what is involved in marketing management. Our aim throughout the topic is to uncover the ingredients for successful marketing, which will then be the focus of the following topics.
Objectives
On completion of this topic, you should be able to: explain the evolution of marketing as a business philosophy explain the growing importance of marketing appreciate how the marketing concept applies universally to different types of organisations, entities and markets identify customer satisfaction strategies of organisations that have realised success distinguish between different types of business orientations adopted by organisations discuss the changing role of marketing in the organisation outline the tasks and challenges involved in successful marketing management.
What is marketing?
Lets start by thinking about what the term marketing means to you.
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Activity 1.1
What does the term marketing mean to you? Jot down your thoughts and think of some examples of marketing that you have come across today.
Your first textbook reading introduces you to the importance and scope of marketing.
Textbook
Turn to your textbook and read pages 37.
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Youre already beginning to see that marketing is much more than producing, selling and advertising. We aim to demonstrate that marketing is a business philosophy based on the concept of satisfying customer needs. Marketing became of age in the second half of the twentieth century. In the 1950s and 1960s marketing tended to be identified with consumer products and mass markets but by the turn of the century organisations were embracing the marketing concept virtually universally. Witness the use of marketing tools by business and service organisations, by non-profit organisations, as well as by politicians and governments. In your last reading your text suggested marketers are involved in marketing 10 types of entities:
goods services events experiences persons places properties organisations information ideas
Furthermore, some of you will be involved in internal marketing supplying products or services to other sections/departments within your organisation. As the unit unfolds youll see whatever the organisation and the product (i.e. in its broadest sense) being marketed, implementing the marketing concept means applying the same marketing principles, although the application may vary.
Marketing in practice
Having considered What is marketed your next text reading addresses Who markets explaining how marketers try to influence demand and then the diverse, and changing, marketplaces in which they operate.
Textbook
Now to How? How is marketing undertaken? Your next reading overviews this and then introduces you to some core marketing fundamentals and terminology, including: Needs, wants and demands Target markets Segmentation Brands Value and satisfaction The marketing environment.
Textbook
These of course will be explored further as the unit unfolds. We are surely also all aware that the marketplace today offers all sorts of opportunities and challenges. Your next reading gives you a brief overview of some of these trends and developments.
MKT00720 Topic 1 The marketing concept
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Textbook
The evolution of marketing

Lets trace how the definitions of marketing have evolved as marketing has developed as a management philosophy. In the 1950s the following two definitions were proposed:
Marketing is the process of determining consumer demand for a product or service, motivating its sale and distributing it into ultimate consumption at a profit
Source: Brech, 1954.
Marketing is not only much broader than selling; it is not a specialised activity at all. It encompasses the entire business. It is the whole business seen from the point of view of its final result, that is, from the customers point of view. Concern and responsibility for marketing must therefore permeate all areas of the enterprise
Source: Drucker, 1955, p.54.
Brechs definition focuses on a process to achieve profit and indicates marketers are responsible for managing demand. Druckers definition looks beyond a process to something more all-embracing i.e. permeating all areas of the enterprise. He was probably the first to suggest marketing as a business philosophy, as well as with a customer focus. Indeed Druckers more holistic view closely aligns with more contemporary views as you will see as the topic unfolds. Through the 1990s, Kotler, the author of your text, developed the social definition as quoted in your current text (p.5):
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.
(although earlier Kotler definitions commenced Marketing is a social and managerial process )
Kotlers definition emphasises the exchange process (reminding us of marketings humble beginnings in barter exchange) as well as suggesting both parties seek to benefit from the exchange. Building on this latter point, we particularly like the following definition:
Marketing is a matching between a companys capabilities and the wants of customers in order to achieve the objectives of both parties.
Source: McDonald, 1990, p.1.
This matching process is illustrated by Figure 1.1. The organisation offers goods (products/services) to satisfy customer needs; the customer offers payment and also feedback on their satisfaction by repeat orders and/or complaints. .
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Figure 1.1 Marketing is a matching process
Other definitions acknowledged the importance of relationships or the competition:

Activities that facilitate and expedite satisfying exchange relationships through the creation, distribution, promotion and pricing of products (goods, services and ideas).
Source: Marketing Association of Australia and New Zealand, 1999.
The achievement of corporate goals through meeting and exceeding customer needs better than the competition.
Source: Jobber, 1995.
So what about today? Your text (p.4/5) puts forward the American Marketing Associations definition:
Marketing is an organisational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organisation and its stakeholders.
Source: American Marketing Association, 2004.
Indeed from this definition relationships and value have become key words in implementing the marketing concept. Well examine these fully in Topic 4. This definition also implies a matching process benefiting customers, the organisation and its wider stakeholders. However your text also reconfirms Kotlers earlier definition suggesting this addresses marketings social (or societal) as opposed to managerial role.
Activity 1.2
1. Does your organisation have its own definition of marketing? If so compare it with the definitions discussed. 2. What about your definition of marketing? Can you build or improve on those suggested here?
Hopefully your organisations definition emphasised a customer orientation. Organisations have now moved beyond merely satisfying customers to delighting them, or even to surprise and delight. If performance matches expectations, the
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customer is satisfied. If performance exceeds expectations, the customer is highly satisfied or delighted. Avis Australias mission statement seeks to delight and surprise customers. Telstra students have told us their organisation seeks customer intimacy! As youve seen there is no single best definition of marketing. The definitions we have discussed here reflect the changing focus of marketing as a business philosophy. Whatever the choice of words there are some key elements throughout these definitions. A key emphasis is on satisfying customers. So lets consider how we can go about this and how this will contribute to success.
Customer-satisfaction strategies
So how and why do organisations seek to satisfy their customers? Lets first consider together an organisation were all familiar with McDonalds.
Activity 1.3
Consider McDonalds. List all the ways McDonalds seeks to satisfy its customers.
McDonalds has implemented a wide range of customer-satisfaction strategies. These various marketing activities will be explored as the unit unfolds. Suffice at this stage to demonstrate its total customer orientation, and hence, not surprisingly, a worldwide success story. We chose McDonalds as an example which we could readily discuss together. Remember, whether youre involved with products or services, with internal or external marketing, marketing to industrial/business customers or consumers, the same principles apply.
Activity 1.4
Think of two or three organisations that are targeting you as a customer. Are they successful in satisfying your needs and wants? How? And your organisation does it seek to satisfy its customers needs and wants? How?
In todays competitive marketplace, organisations must deliver value to satisfy (and delight) their customers. Customers make their choice based on their perception of value. In turn, value is assessed on a variety of factors such as quality, service, image together with, and perhaps offset against, cost. Essentially the customer undertakes a cost-benefit analysis. Marketers thus need to understand the determinants of these factors in seeking to deliver value and hence customer satisfaction. Well explore the concept of value more fully in Topic 4. Note too at this stage, that marketing is outward looking to customers and the marketplace, unlike other management activities which tend to focus inwardly within the organisation. Now lets explore more fully the development of this marketing (or customer) orientation.
The development of a marketing orientation

As youve already seen in this topic, marketing has evolved as a business philosophy over time. We can trace the evolution of this changing business philosophy as illustrated in Figure 1.2. In many cases, organisations have moved through these different orientations as marketplaces become more competitive, customers tastes become more sophisticated and supply exceeds demand.
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Figure 1.2 The development of the marketing concept
However, you will find that organisations and/or work areas within organisations can operate under these different business orientations, or perhaps even under a combination of orientations. The orientation will be reflected in the attitude of the organisation or work area, as shown in Figure 1.3, and in turn by the priorities and strategies of that organisation or work area.
Type of Orientation Production Orientation Product Orientation Associated Attitude The only way to increase profits is to reduce our production costs. If we can increase the quality of our products, they will sell by themselves and customers will always need our products. We have to go out and make customers buy our products. We make our profit by creating opportunities to more effectively satisfy our customers needs within the constraints of our resources and skill limitations. We make our profit by creating opportunities to more effectively satisfy the needs of target markets with products that preserve or enhance consumers and societys well-being.
Selling Orientation Marketing Orientation
Societal Marketing Orientation
Another orientation that is often not discussed in the literature but has nevertheless been quite prevalent is the: Marketing Specialist Orientation Appearing between the Marketing and Societal Orientation Marketing approaches, the associated attitude is: If we have a marketing problem, well refer it to our marketing specialist person or department.
Figure 1.3 Organisational orientations and attitudes
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Awareness of the marketing specialist orientation is important as it is clearly evident in some organisations though it runs counter to the philosophy of marketing being embraced by all people within the organisation. Whether directly involved in marketing, accounting, personnel, production, sales or administrative functions, all people are working to ultimately satisfy the needs of consumers. Customer (market) orientation is thus the concern of all well revisit this later in this topic. Your text discusses these orientations (which it calls concepts) in your next reading.
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Textbook
Activity 1.5
At this stage it is worth doing a stock-take of a business or organisation you are familiar with and evaluating how it conducts its marketing activities in terms of the organisations business orientation. Which of the six orientations discussed above best describes the organisations philosophy? Provide evidence for your answer. (This will be discussed in teleconferences/tutorials.)
Youre seeing how important a customer orientation, or customer focus, is, to implementing the marketing concept. Even if an organisation adopts another orientation, it is our contention that some customer orientation is needed for long term success (or survival!). Your next reading cites various organisations where shortsighted (myopic) management failed to adopt a customer/marketing orientation. Do not be put off by the year of the article (1960). It is a classic in marketing literature and you will be able to relate much of what is written in the article to todays marketplace the article was certainly ahead of its time and is recommended as essential reading.
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Reading 1.1
Turn to Reading 1.1 by Levitt.
Activity 1.6
List the unsuccessful organisations discussed by Levitt and the reasons for their failure.
Your text contends that today, we have now moved on again, from the societal marketing concept to the holistic marketing concept.
The holistic marketing concept

Your text suggests that we (again) need fresh thinking about how to operate and compete in todays marketing environment. Holistic marketing recognises that a broad and integrated approach is required as discussed in your next reading.
Textbook
Your last reading identifies four components of holistic marketing: 1. relationship marketing 2. integrated marketing
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3. internal marketing 4. performance marketing which in turn attempt to recognise the scope and complexities of marketing activities. Relationship marketing became a key theme for marketing through the 1990s. Organisations increasingly recognised the key to creating and building customer satisfaction was by building long term relationships with them. The goal was winning and keeping customers satisfying (and delighting) customers would lead to customer retention. A relationship focus has been prevalent in many organisations strategies for some years. Ask any salesperson about the importance of building relationships with customers. Business to business companies have long followed this dictum, consumer marketers perhaps only more recently appreciating the benefits. Well explore relationship marketing further in Topic 4. Now turn back to your text for an overview of the other three components of holistic marketing.
Textbook
Well return to the marketing task as integrated marketing later in this topic as part of managing the marketing.
Activity
Back to thinking about your organisations orientation (Activity 1.5). Is there also some evidence of the holistic marketing orientation? Again provide evidence for your answer.
As you have already seen marketing inherited a model of exchange from economics and more recent perspectives have focused on relationships and creation of value. More recently a new dominant logic has been suggested lets explore this now.
A new dominant logic for marketing?

Your next reading suggests that the new perspectives are converging to form a dominant logic for marketing where service provision, rather than goods provision, is fundamental to economic exchange. The earlier part of the reading discusses the various schools of thought regarding marketing theory and practice and so re-enforces some of our discussion thus far. The authors go on to discuss the evolving service dominant (S-D) logic. For now digest the concept of the S-D logic you may want to revisit later sections of the reading as the unit unfolds.
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Reading 1.2
Turn to Reading 1.2 by Vargo and Lusch.
Activity 1.7
From Reading 1.2 summarise what is meant by S-D logic for discussion in tutorials and/or teleconferences.
A shift in business orientations, together with changing perspectives of the dominant logic in marketing, are likely to be reflected by a changing role for marketing in the organisation. Lets turn to this now.
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Marketings role in the organisation

Typically we can suggest three roles for marketing within the organisation: 1. in strategic planning 2. with other business functions/departments 3. in managing the marketing. Youve already seen how organisations may succeed, or fail, on their ability to satisfy customer needs and consequently that marketing is a pre-requisite for longer-term success. Marketing must thus play a key role in the development of strategic plans. We will address this in Topic 2. Within an organisation, different functional areas or departments need to work together to achieve corporate objectives. In reality different functions/departments have different objectives and priorities. So maybe conflicts are inevitable? However as weve seen marketing needs to be an organisational orientation so do all functions/ departments need to be customer focused. Figure 1.4 suggests an evolving view of marketings role in the organisation.
Source: Kotler, 2003, p.25. Figure 1.4 Evolving views of marketings role
Earlier text readings also suggested marketing is a think customer approach and by all departments so not only by the marketing department. As we discussed when examining different business orientations earlier in the topic, work areas/departments can operate under different orientations. Look again at Table 1.1 (p.23) in your text.
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Textbook
Turn to page 23.
In adopting a holistic marketing orientation your text points out (p.22):

Marketing is not a department so much as a company orientation. Marketing thinking must be pervasive throughout the company.
Further emphasising this point Webster (1992) in a widely referenced article about the changing role of marketing points out (p.14):
Marketing can no longer be the sole responsibility of a few specialists. Rather, everyone in the firm must be charged with responsibility for understanding customers and contributing to developing and delivering value for them. It must be part of everyones job description and part of the organization culture.
Webster also identified three dimensions of marketing (p.10): marketing as culture marketing as strategy marketing as tactics.
These relate closely to the three marketing roles we identified earlier.
Activity 1.8
1. Which of the alternatives (a) to (e) in Figure 1.4 best illustrates the role of marketing in your organisation? 2. How do departments within your organisation compare with the statements in Table 1.1 (page 23 text).
To complete this topic well turn to the third of these earlier roles managing the marketing.
Marketing management
As per an earlier reading, your text (p.5) suggests marketing management is:
The art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer value.
You saw earlier in the topic that relationships became a key focus of marketing through the 1990s. Since the thrust has shifted to creating and delivering value some suggesting that marketing management is thus value management. Alternatively you have also seen how marketers seek to influence demand your text identifying eight demand states (p.7). So perhaps marketing management is demand management? Indeed your next reading, with a little tongue-in-cheek suggests this could raise the respect of the marketing department within the organisation!
Reading 1.3
Now read Reading 1.3 by Kiely.
In your last reading Kiely suggests that thinking of marketing as demand management gives greater objectivity and accountability to the marketing role rather than focusing on the puffery commonly associated with marketing.
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For you to think about

Note too that your last text reading raised another interesting debate do marketers create, or satisfy, needs?
Earlier in the topic we quoted an early definition of marketing from Peter Drucker. Interestingly Drucker denied that he was an expert on marketing although his customer - focused view of both management and marketing has, as your next reading points out, meant that he is generally acknowledged as the father of the modern marketing concept. Note the reading is called Marketing IS management. Drucker saw marketing as a core responsibility of management, not as a separate business function; that marketing was one (of two) basic business functions (the second being innovation).
Reading 1.4
Now read Reading 1.4 by Webster.
Whilst being a good summary of Druckers views on marketing, you will probably realise how insightful these were as this unit unfolds. As you say the reading also relates Druckers views to more recent marketing perspectives and paradigms.
Activity 1.9
Summarise key points form Reading 1.4 for discussion in tutorials and/or teleconferences.
Matching value
Your text (p.12) suggests organisations deliver value and satisfaction to target buyers. Customer satisfaction then depends on whether the value delivered lives up to the value expected. So we have another matching process. The buyer chooses between offerings based on perceptions of value. An offering is delivered to the marketplace as a mix of components or activities, which has been described by marketers as the marketing mix. This was introduced to you earlier in the topic when we discussed integrated marketing as a component of holistic marketing. A key task for marketers is to manage the marketing mix.
The marketing mix

The term marketing mix is probably the most well-known concept in marketing. It is attributed to Professor Neil Borden who coined the phrase over 40 years ago, after a colleague described a marketer as a mixer of ingredients, one who is constantly engaged in fashioning creatively a mix of marketing procedures and policies in his efforts to produce a profitable enterprise. These marketing tools at the firms disposal are generally regarded as controllable. McDonald (1990, p.330) defined the marketing mix as:
the tools or means available to an organisation to improve the match between benefits sought by customers and those offered by the organisation so as to obtain differential advantage.
Note this definition has some customer focus. Note too the highlighted words: benefits and differential advantage. Customers seek benefits and marketers need to differentiate their offerings in a competitive marketplace. We will discuss these in future topics.
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Borden identified 12 elements in his marketing mix. These were refined and regrouped into the almost universally accepted 4Ps, first suggested by McCarthy (1960): Product Price Place Promotion.
The marketing variables under each P are shown in Figure 1.5 of your text (p.21). If you are interested you may enjoy Bordens classic article which is your next reading.
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Reading 1.5
Turn to Reading 1.5 by Borden.
Activity 1.10
Combine Bordens 12 elements into the traditional 4Ps.
Some marketers have extended the marketing mix from 4Ps to include additional elements. Although as we saw in the last activity some of these extensions could be seen as sub-components of the 4Ps. The 4Ps concept was widely accepted through the 1960s and 70s when marketing tended to be applied mostly to tangible products. As the marketing focus shifted to include services with intangible elements, components such as service and people were suggested in developing an extended marketing mix. An example of an expanded marketing mix is shown in Figure 1.5.
Figure 1.5 An expanded marketing mix
However, as you saw in your last activity, perhaps people and service could be included under Product or Place. Remember the marketing mix is only a concept to help you consider your offering to the market. So its your choice as to the number of components and sub-components you choose to represent your offering.
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Activity 1.11
Select a product and a service that you are familiar with. For each identify the components (and sub-components) of the marketing mix.
As you looked at the marketing mix components in your last activity could you see some consistency? This is critical. An effective marketing mix must be coordinated and consistent or integrated. For example, high quality, high price products need high class distribution and quality promotion. To conclude our discussion on the marketing mix, critics of this approach suggest it is a product focused view. Lauterborn (1990) suggested the 4Cs was perhaps a more customer focused approach thus:
4Ps Product Price Place Promotion 4Cs Customer solution Customer cost Convenience Communication
Warning: As youve already seen, marketing, and hence marketing management, is much more than just the marketing mix. The marketing mix is perhaps the visible part of marketing strategy. When evaluating an organisations marketing strategy do not fall into the trap of only considering the marketing mix. Indeed, critics of the marketing mix concept have suggested it is out of date. Our contention is that it is a useful conceptual tool that can assist us in analysing our offering. The broader tasks involved in marketing management are outlined in your next reading. As you digest these recall the earlier reading about the challenges and opportunities of todays marketplace as the context for managing the marketing.
Textbook
Turn again to your textbook and read pages 2627.
The tasks addressed in your last reading are the scope for the rest of this unit and the recipe for successful marketing managment!
Summary
This topic introduced you to the marketing concept and hopefully endorsed the growing importance of marketing for business success. We examined the scope of marketing and outlined some marketing fundamentals, trends and jargon. We investigated the evolution of marketing as both a business philosophy (or orientation or way of thinking) that places the customer as the organisations prime focus, and as a management process concerned with satisfying customer needs. You saw how organisations may operate under different business orientations, but that some customer/marketing orientation was critical to ensure long-term success. We introduced the relatively new concept of holistic marketing. You saw how the four components of holistic marketing: relationship marketing, integrated marketing, internal marketing and social responsibility marketing, together attempt to reconcile the scope and complexities or marketing today.
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We looked at the role marketing plays within the organisation: in guiding strategic planning, in working with other functions, and specifically in managing the marketing. You saw how this changing role requires a total customer focus, and culture, throughout the organisation again in tandem with a more holistic approach. Finally we considered briefly what is involved in managing the marketing or marketing management, the title of this unit. We explained that marketers need to deliver value matched to their customers needs. The tasks involved in doing this are the focus for the following topics the ingredients for successful marketing and hence the challenges for this unit. Our first challenge and hence our next topic: marketing planning.
Case study practice

Youll have seen in the assignment pages that the first assignment requires you to conduct a marketing situation analysis based on the case of a business of your own choice. To help you further, we are going look at a business Dudley Dayshades that will allow you to practise this task. We will revisit this case at the end of each of the first few topics. Remember, as pointed out in the assessment guidelines, an assignment is a vehicle for you to demonstrate knowledge and understanding of course concepts. In the early topics of the unit we explore the concepts, tools, approaches and practice that together contribute to effective marketing strategy. These are thus the issues for you to explore in your market situation analysis for Assignment 1.
Reading 1.6
Turn now to the practice case, Dudley Dayshades, Reading 1.6 in your book of readings. Its a relatively short case. Read it through a couple of times.
To start this task based on Dudley Dayshades the specific question to be addressed is: (a) Evaluate Dudley Dayshades marketing strategy for the woven nylon matting by developing a SWOT analysis of their present strategy. Evaluate Dudley Dayshades marketing strategy against the issues explored in Topic 1. So, for example, pose the following questions: Are they seeking to deliver value and customer satisfaction? Are they matching their offering to the needs/wants of customers? Are they marketing/customer orientated? Is there evidence of other orientations? What about an holistic marketing orientation? Are they myopic? Is marketing guiding their strategic planning? Are all departments (and employees) customer focused? How good are they at managing the marketing? What about the marketing mix? integrated? customer focused?
Draw in evidence from the case study to substantiate your claims. Youre asked to evaluate so do not just re-describe (re-write) the case. You must comment on whether, in your opinion, what they are doing is good (or bad) marketing practice. When you feel confident with this case you can start tackling the first task on your chosen business for Assignment 1. Already youre on your way!
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Feedback to activities
Activity 1.1
Perhaps the words you first wrote down were advertising and/or selling. These are indeed the very visible elements of marketing advertisements on TV and radio or in newspapers and magazines, salespeople selling cars, real estate, in retail situations or direct selling via a website. Other words that you may have written down include publicity, public relations, direct mail or perhaps new products and market research. These too are all elements of marketing. Congratulate yourself if your list included the word customer and an extra pat on the back for customer satisfaction. Indeed: marketing is based on the concept of satisfying customer needs. Those of you who have perhaps studied marketing before may have come up with building relationships or delivering value concepts that will be explored later in the unit.
Activity 1.3
The customer needs/wants for quality, convenience food at the right price, with speedy service are matched by McDonalds offering: good quality tasty food competitively priced/value for money products a clean environment handy locations friendly staff speedy service easily identifiable outlets and brand special price packages seasonal specials a breakfast menu.
As evidence of its identification of changing customer needs/wants and a response to these, McDonalds has modified its offering to include: healthier foods salads etc. environmentally friendly packaging McCafe coffee new outlets in high traffic areas, e.g. railway stations, airports.
Furthermore, McDonalds advertises to communicate with customers. It is involved in various sponsorships (sporting activities, with schools), all creating a positive image not only with their customers, but more widely with the general public. Perhaps you identified other ways in which McDonalds aims to satisfy its customers.
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Activity 1.5
This will be discussed in teleconferences/tutorials. Hopefully you identified some customer/marketing orientation, or at least a shift towards this, in your organisation.
Activity 1.6
So hopefully the message is clear! Implementing the marketing concept is the recipe for success; failure to implement the marketing concept is a recipe for disaster.
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Activity 1.7
Reflecting on the role of marketing in universities, (a) may have been appropriate 5 to 10 years ago but with marketing as a lesser function! Now (d) may be the ideal. However universities, like many other organisations that have been traditionally supported by government, are still suspicious of the marketing concept and perhaps we still have that marketing specialist orientation. Alternatives (d) or (e) would seem more appropriate for an integrated marketing approach which requires that there be a customer focus throughout the organisation. Perhaps (d) better reflects this?
Activity 1.8 and 1.9

For discussion in tutorials and/or teleconferences.
Activity 1.10
Eleven of Bordens twelve elements could be condensed into the traditional 4Ps thus:
Product: Product Planning Branding Servicing Packaging Price: Place: Promotion: Pricing Channels of Distribution Physical Handling Personal Selling Advertising Promotions Packaging Display
His twelfth element Fact Finding and Analysis is not so readily accommodated. This could be seen as a controllable factor but relates more to marketing research which we will discuss in Topic 3. In fact we have heard marketing research described as Probing in an effort to attain P status! You will have noticed we categorised Packaging under Product and/or Promotion. Packaging may be viewed as an integral part of the product as offering protection, and/or as an advertising or display medium.
Activity 1.11
Did you utilise the traditional 4Ps or an expanded marketing mix? Was an expanded marketing mix more appropriate for the service or did the 4Ps still suffice? The differences between products and services is blurring; tangible products include intangible service elements and intangible services often try to include tangible product elements. So perhaps we can be flexible in our adaptation of the marketing mix. Remember its only a conceptual tool to aid analysis.
Topic 2
Marketing planning
Introduction
This topic explores how marketing planning gives direction to marketing management. Firstly well review some broad benefits of planning and then overview the strategic planning process. Next well consider in greater depth the marketing planning process with the aim of producing a documented marketing plan. Our aim throughout the topic is to provide guidance to effective marketing planning.
Objectives
On completion of this topic, you should be able to: list the benefits of planning outline the strategic planning process discuss the steps in the marketing planning process specify the components of a documented marketing plan evaluate marketing plans discuss the development of effective marketing plans prepare a marketing plan.
Why plan?
Before we specifically address the marketing planning process, lets first consider the benefits of planning.
Activity 2.1
List some benefits of planning. (You may like to consider whether you personally are a planner and why; think about planning your next holiday, your day, and/or tonights activities as well as planning within the organisation setting.)
All of these benefits of planning apply to marketing planning too. In essence planning seeks to address the following: Where are we now? Where do we want to be? How can we get there? Did we get there?
We shall see how all company planning processes should follow these steps, but firstly lets look briefly at the overall strategic planning process as the context for marketing planning.
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Marketing and strategic planning

In Topic 1, we outlined the importance of marketing in strategic planning. According to your text (p. 62):
Market-oriented strategic planning is the managerial process of developing and maintaining a viable fit between the organisations objectives, skills and resources and its changing market opportunities.
Thus we have another matching process as shown in Figure 2.1.
Organisation s objectives, skills and resources
Strategic Fit
Market opportunities
Figure 2.1 Achieving a strategic fit
Marketing plans are developed in the overall context of corporate plans and goals, sometimes called the big picture. So it is important to have an understanding of corporate and strategic planning. Your next reading introduces you to the central role of strategic planning and how marketing planning follows.
Textbook
Turn to your textbook and read pp. 3941.
Depending on the size of the company there will be a hierarchy of plans: corporate division business unit product. Furthermore all functional plans contribute to the achievement of corporate goals and objectives as shown in Figure 2.2.
Mission Corporate Objectives Corporate Plan
Human Resource Plan
Marketing Plan
Production Plan
Finance Plan
Figure 2.2 Corporate planning
MKT00720 Topic 2 Marketing planning
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Your text tends to adopt a large company approach to corporate and strategic planning with strategic business units (SBUs) within the company contributing to the overall plan. If you are working for a smaller company ignore the specific reference to SBUs as you work through this topic. Your next reading describes the corporate and strategic planning in greater depth. For this unit you need only a general appreciation of this bigger picture.
Textbook
Selecting strategic alternatives

Your last reading introduced you to Ansoffs matrix, sometimes called Ansoffs product/market expansion grid. This matrix (as shown in Figure 2.3) can be an invaluable tool in identifying strategic alternatives according to four basic options: 1. market penetration 2. market extension (or alternatively described as market development) 3. product development 4. diversification.
increasing technological newness PRODUCT Low MARKET New Existing Existing New
Market penetration
Product development
increasing market newness
Market extension
Diversification
High RISK
Figure 2.3 Ansoffs Matrix
So according to Ansoff, strategic alternatives can be considered simply as existing or new for both products and markets. We can thus review our alternatives by considering each quadrant in the matrix. Market penetration is usually the easiest and lowest risk strategy. In terms of risk we could (most likely) put the options in ascending order thus:
Risk Market penetration Market extension Product development Diversification High Low
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Youll find using Ansoffs matrix an extremely useful tool in helping you identify strategic alternatives both in case study analysis and in planning. A shortcoming of such a simplistic approach may be in how we interpret what is meant by new and existing but this need not detract from its usefulness. Organisations are invariably striving for growth and to ensure long-term success this growth needs to be profitable and sustainable. Your next reading reports on a recent study of corporate growth involving 1850 companies. A key finding is that most sustained profitable growth comes when a company pushes out the boundaries of its core business into an adjacent space. Six types of adjacencies were identified. 1. 2. 3. 4. 5. 6. expand along the value chain develop new products and services use new distribution channels enter new geographic markets address new customer segments move into white space with a new business built around a strong capability.
The research found that using these adjacencies, successful companies were able to outperform their competitors, as described in your next reading.
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Reading 2.1
Turn to Reading 2.1 by Zook and Allen.
Activity 2.2
Summarise the successful growth strategies of Nike and Olam from Reading 2.1. Try to identify how their growth strategies fit into Ansoffs matrix (i.e. which of the four growth strategies do their tactics fit into?).
Whilst this is a different approach to Ansoffs matrix, these adjacencies tend to address the market penetration, market extension and product development options. The study in Reading 2.1 excluded growth through diversification, as leading a company far away from its core business. Now lets look more closely at the steps in the strategic planning process. Your text identifies and describes seven steps in your next reading. As previously advised, what your text describes as a business unit may be more relevant to your (smaller) organisation. As you work through this reading, again gather an overall appreciation of the process, which will be mirrored when we discuss the marketing planning process later in the topic. (You will cover strategic planning in depth in the Strategic Management unit.)
Textbook
Lets have a closer look at two aspects of your last readings: the mission and the goals.
The mission
The mission seeks to define the organisations purpose. It may embrace: what business are we in? who are our customers? what is the value we are offering to our customers?
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When looking to the future, it may also define: what business should we be in? Recall from the Levitt article (Reading 1.1) that some organisations think of the business they are in from a product perspective for example: railways, or Hollywood defining itself as being in movies. A more outward-looking market perspective would have been: Transportation rather than Railways Entertainment rather than Movies.
Other favourite textbook examples include:

Company Shell Xerox Revlon Product focus oil company produce photocopiers manufacture cosmetics Market focus in energy improving office efficiency we sell hope
(No apologies for the last one!) For further examples, see Table 2.3 on page 43 of your textbook. Whilst advocating a market focused approach this should not mean a vague definition of the business or mission.
Goals or objectives?
Should we be setting goals or objectives? There is no consistency between authors. In planning we favour the use of objectives as: (i) the term is more specific; goals implies longer-term aims/ambitions (ii) it is in line with Management by Objectives (MBO) practice. Your text nevertheless points out the need for quantified, measurable goals (p. 53). Youll find the acronym SMART helpful for setting and evaluating objectives. Thus objectives should be SMART. Specific Measurable Accurate Realistic Time-based.
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Activity 2.3
Try to track down a statement of your organisations mission and objectives. Alternatively, look on the Internet for some organisations mission statements. Review these. Does the mission clearly define the business your organisation is in? Reflect on the different business orientations we discussed in Topic 1 is the mission customerorientated?
Reading 2.2
Some examples of mission statements are shown in Reading 2.2. Review these and compare with your findings. Note some include a vision statement as well as a mission statement.
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Now lets focus on marketing planning.
The marketing planning process

The marketing plan seeks to achieve marketing objectives through the planned application of marketing resources. We identify five key steps in the marketing planning process are shown in Figure 2.4.
A.
Mission
B. Corporate/Business Objectives
1. Marketing Audit/Situation Analysis
Where are we now?
2. Marketing Objectives
Where do we want to be?
3. Marketing Strategies How do we get there?
4. Marketing Tactics/Programs and Budgets
5. Controls for Evaluation
Did we get there?
Figure 2.4 The marketing planning process
Steps labelled A and B are not specifically part of the marketing planning process but are the critical starting point. We cannot begin to develop the marketing plan without sight of the mission and goals of the organisation. This is the context for setting marketing goals and objectives. These five steps closely mirror the steps in the strategic planning process discussed above.
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Lets consider each step in turn in the marketing planning process.
Marketing audit/situation analysis

The marketing audit, or situation analysis, seeks to analyse the current situation the where are we now? as the basis for future decision making. Note at this stage, that Assignment 1 effectively requires you to develop a market audit/situation analysis for a business of your choice, so understanding the issues covered in this section is integral to your first assessment task. The term audit (perhaps more usually associated with accounting!) implies a more formal analysis, probably with the assistance of external auditors. It may thus give a more objective and unbiased view. The audit/situation analysis usually includes: a market analysis an analysis of historical performance by product a competitor analysis a strengths, weaknesses, opportunities and threats analysis (SWOT).
How we gather information for the marketing audit will be explored in the next topic where we will also discuss the forces in the marketing environment which may pose opportunities and threats. As you will see these are external and essentially uncontrollable factors. Strengths and weaknesses, however, are internal and hence controllable. We need to identify strengths to build on and weaknesses to overcome in future strategy. As this is a marketing plan, we should focus on our marketing strengths and weaknesses; so including marketing mix strategies, our marketing research and MIS, our positioning and segmentation strategies, our marketing organisation and indeed our marketing planning procedures. However, we should also flag up wider organisation strengths and weaknesses that may constrain/affect marketing plans, e.g. financial or personnel resources. Your last text reading gave you some useful pointers for undertaking a SWOT. The SWOT analysis helps us to determine that strategic fit between the organisations strengths and weaknesses and the external opportunities and threats as shown in Figure 2.5 which is now a working extension of Figure 2.1.
Organisation strengths and weaknesses internal analysis
SW O T
external analysis Environmental opportunities and threats
Strategic fit
Figure 2.5 Using SWOT to determine strategic fit
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Marketing objectives
Were now ready to address where do we want to be? and set our marketing objectives. Marketing objectives usually match markets and products. Which markets? Which products? As presented earlier in this topic, Ansoffs matrix can be a very useful tool in considering alternative marketing objectives. If we are looking for growth, we can consider in turn the growth potential of each quadrant and hence develop objectives per quadrant. Remember too, our marketing objectives, like our corporate objectives, need to be SMART (Specific, Measurable, Accurate, Realistic and Time-based).
Marketing strategies
Marketing strategies are how the marketing objectives are to be achieved. We will need to deliver value through our marketing mix to match customer needs and value expectations. We will first need to identify specific target markets and consider our competitive positioning. Making decisions about our marketing strategies will be fully addressed in later topics.
Marketing tactics (or programs)

Marketing tactics turn the strategy into action programs, allocating responsibilities, specifying timing and including costings and budgets.
Controls for evaluation

Evaluation is a vital step in the planning process. Are we achieving our objectives? If not, why not? Can we modify our strategies? A main purpose of quantifying our objectives is so that we can measure if we are achieving them. We need to establish controls that measure performance. Usually this can be monthly or quarterly, so that we can be alerted to deviations from the plan and then hopefully implement corrective action. Controls are the tools/techniques we utilise to monitor and evaluate marketing activity and performance. In controlling a marketing plan, we need to evaluate: 1. whether we are achieving our marketing objectives 2. the effectiveness of our marketing mix strategies 3. customer satisfaction. For the first, we can evaluate ongoing performance sales, profits, other goals hence the need for quantified objectives. If we identify differences between expected and actual performance we can take corrective action. Often marketers will make contingency plans as part of the marketing plan. Evaluation of marketing mix strategies (e.g. promotion campaigns, price changes), through marketing research as appropriate, will provide valuable information for determining future marketing mix strategies. Information from evaluation is the best source of information for developing more effective marketing strategies for the future.
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So remember: Plan and Evaluate The end product of the marketing planning process should be the documented marketing plan lets discuss this now.
The marketing plan

The marketing plan commits to writing the marketing objectives, strategies and tactics; it serves as an invaluable communication. Our preferred structure for a marketing plan is shown below. It is important to realise here that your assignments in this unit effectively split the marketing plan into two parts. Assignment 1 essentially covers step 2 shown below (Situation Analysis) and asks you to recommend what the business should do next to achieve further growth. Assignment 2 will then build on this recommendation, requiring you to outline the marketing objectives and strategies for the remainder of the plan (i.e. steps 3 to7 below). By splitting the plan into two parts, this will enable us to give you feedback on your analysis of the current marketing situation and recommendation for the focus of the marketing plan (i.e. Assignment 1) before you tackle the remainder of the plan in Assignment 2. 1. 2. 3. 4. 5. 6. 7. Executive summary (and Table of Contents) Marketing audit/Situation analysis (concluding with a SWOT) Marketing objectives (SMART) Marketing strategies with rationale Action programs (sometimes called marketing tactics) Marketing budgets Controls.
We can visualise the active part of a marketing plan (i.e. excluding the executive summary and audit/situation analysis) as shown in Figure 2.6.
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Marketing objectives
Products
Markets
Marketing Strategies
Product
Price
Place
Promotion
Marketing Tactics/Programs
Marketing Budgets
Control and Evaluation

Figure 2.6 The active marketing plan
Your text suggests slightly different components in your next reading.
Textbook
Points to note from comparing our components with those in your text, and for you in preparing a marketing plan: 1. The Executive Summary must be a summary of the whole plan i.e. including a summary of the recommended objectives and strategies. Although it comes first it is written last. 2. Marketing strategy: 2.1. your text includes the marketing objectives within this section. In our recommended components the target markets can be identified in the objectives section the which markets
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2.2. marketing strategy recommendations need justifying i.e. the rationale. In a plan we only document the recommended course of action; alternative strategies having been reviewed and discounted. Hence the need to justify your recommendations i.e. sell the recommendations to senior management. 3. Action programs includes implementation. Your text seems to tag this at the end after controls. 4. Marketing budgets our focus is on marketing expenses against marketing revenue; clearly in a full-scale corporate marketing plan this may dovetail into a full profit and loss account. Your text has a sample marketing plan as your next reading, which should give you some useful guidance. Our major criticism with this plan is the lack or rationale supporting the marketing strategy recommendations as discussed above.
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Textbook
Activity 2.4
Try to access a recent marketing plan produced by your organisation. 1. Is the structure as described above? 2. Can you identify any gaps, or ways in which the marketing plan could be improved? 3. What controls were used to evaluate performance? If you are not able to locate a plan, what does this suggest about the marketing/ planning process within your organisation?
Reading 2.3
Some sample student marketing plans are included as Reading 2.3. Turn to this reading now to review these marketing plans.
Timescale for marketing plans

Was the marketing plan you reviewed an annual plan? Usually marketing plans are developed for one year periods although we can also have a specific marketing plan that supports the launch of a new product which may cover only a 26 month period specifically to support the launch of a new product/service. Some organisations (usually large ones) may distinguish strategic marketing plans and tactical marketing plans. The strategic marketing plan covers a 35 year period and consequently focuses on longer-term issues strategic options and environmental factors. The tactical marketing plan is then developed in line with the strategic marketing plan. This is a one-year operational plan and thus has considerably more detail on tactics and budgets. For Assignment 2, an annual plan will generally be a suitable timeframe to adopt, although you may choose to shorten this timeframe if your plan relates to a new product launch as noted above. To conclude this topic, the following reading gives some succinct hints and tips for marketing planning success.
Reading 2.4
Turn to Reading 2.4 by Kothe.
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Activity 2.5
As a review of this topic: 1. List some tips for developing an effective marketing plan. 2. What do you see as some barriers to effective marketing planning?
Hopefully youre now ready to start thinking about your marketing plan!
Summary
In this topic weve attempted to guide you to marketing planning success. Firstly, to set the scene, we discussed the broad benefits of planning. Such benefits will be realised when an organisation undertakes effective marketing oriented strategic planning. We then looked at strategic planning. We overviewed the (eight) steps in the strategic planning process and notably highlighted the Ansoff Matrix as a useful tool for exploring strategic alternatives. Next we examined the marketing planning process. We suggested five steps in the marketing planning process, essentially mirroring the strategic planning process, and so producing a marketing plan. You saw that a documented marketing plan seeks to communicate an analysis of the current situation, the objectives to be achieved, the strategies, tactics and budgets by which these objectives will be achieved and the controls against which the achievement will be evaluated. The marketing audit/situation analysis stage of the marketing planning process will entail the gathering of a wide range of information. How marketers go about gathering information will be the focus of your next topic.
Case study practice

Look again at the Dudley Dayshades case. As at end of Topic 1, evaluate what they are doing against what youve seen in Topic 2 contributes to good or effective marketing. So for example: is there evidence of planning corporate, strategic, marketing? what business are they in? i.e. Dudley Plastics and Dudley Dayshades? as per Ansoffs matrix, what sort of growth strategy is the Dayshades venture? are there SMART objectives? what about their marketing planning process?
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Activity 2.1
The benefits of planning for the organisation (and for you!) include: gives direction seeks to make better use of resources minimises waste establishes a coordinated effort sets goals/targets/objectives which in turn set performance standards for evaluation allocates responsibilities, tasks and timings seeks to reduce uncertainty and anticipate change allocates budget.
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Activity 2.2
Nike expanded into adjacent customer segments, introduced new products, developed new distribution channels and then moved into adjacent geographic markets. For Olam ... back to the reading.
Activity 2.3
Mission Is the mission too broad or too narrow? Is it customer or product orientated? Remember, organisations that define their business in terms of products are invariably operating under a product or production orientation. Is the mission motivating to employees and other shareholders? Nor should it be written purely for public relations purposes. Corporate objectives Do these reflect the organisations goals in light of the mission? Are the objectives SMART? Corporate objectives are often stated in terms of: maximising revenue or volume maximising profit or minimising costs maximising return on investment maximising shareholder value.
Was this the case for your organisation, or were the corporate objectives broader?
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Activity 2.4
The rigour of the marketing plan and the planning process will vary with the size and type of organisation. Within larger organisations the marketing planning process is fairly formalised and this would be reflected in the marketing plan you reviewed. Was the plan linked to the corporate goals and objectives and the mission? These provide the context for the marketing plan. Remember your department/section/work area may have its own distinct mission, which will guide the marketing plan.
Activity 2.5
1. Reading 2.4 gives some helpful tips as well as those youve picked up from your readings and activities in this topic. 2. The big barrier is probably the time and effort required but remember those benefits that we discussed at the beginning of the topic. Further discussion at tutorials/teleconferences.
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Topic 3
Information for marketing
Introduction
To effectively manage the marketing, marketers need information to aid their decision making. This is the subject of this topic. First well look at the development of a Marketing Information System (MIS) designed to meet the information needs of marketing decision makers. Youll see how information is provided through three components of the MIS: internal records, marketing intelligence, and marketing research. Next well examine the marketing intelligence component which seeks to gather information about the marketing environment. We will discuss the forces in the marketing environment which may pose opportunities and threats. Finally well consider the marketing research component. Well examine the marketing research process and discuss how to undertake effective marketing research.
Objectives
On completion of this topic, you should be able to: explain why marketers need information and how the marketing information system seeks to satisfy these information needs discuss how an organisation gathers marketing intelligence distinguish between the organisations microenvironment and macroenvironment analyse an organisations marketing environment, identifying opportunities and threats describe the steps in the marketing research process discuss pointers for undertaking more effective marketing research.
The marketing information system

Youve seen in previous topics how marketers need information; information about the marketing environment and information for the marketing audit/situation analysis section of the marketing plan. Marketers need information to carry out this analysis, planning, implementation and control responsibilities to manage the marketing. A marketing information system (MIS) is thus required to meet the information needs of marketing decision makers. The MIS should be designed to: 1. assess information needs 2. develop the information needed from three components: internal records marketing intelligence marketing research
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3. distribute the information. Terminology: You may find some authors use MIS to refer to a broader Management Information System of which the Marketing Information System is a major component and now abbreviated to MkIS. Your next reading defines MIS and discusses the internal records component.
Textbook
Internal records
In your last reading you saw how organisations gather useful information from internal sources such as: sales reports (by product/customer/month ) orders (by customer, month) inventory levels plus data on prices, costs, payments, margins etc.
Other sources of useful information include complaints letters, salespersons reports and feedback. The challenge for the organisation is to channel this information into the MIS. Your last reading also noted the importance of organising information into databases customer/product/salesperson so that marketing decision makers can make effective use of this information. Integration software assists in the mining and managing of these databases.
Activity 3.1
Investigate your organisations MIS. If possible try to speak to: i) someone who is actively involved in providing the information and ii) someone who needs the information for marketing decision making. 1. How does the MIS seek to satisfy the needs of marketing decision makers? 2. Does it appear that all three components are evident? 3. Are databases effectively managed within the MIS? 4. Is the system being continually improved and updated?
Now lets take a closer look at the marketing intelligence components of the MIS.
Marketing intelligence
The marketing intelligence system focuses on gathering information about the marketing environment. An organisation needs to establish appropriate systems and processes so that useful marketing intelligence data are channelled into the MIS, as discussed in your next reading.
Textbook
MKT00720 Topic 3 Information for marketing
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Opportunities, and threats, are identified by closely monitoring the marketing environment. Large organisations may thus allocate substantial resources (even specialised departments) to marketing intelligence. In small organisations the task may be one (of the many!) jobs of the owner/managing director. Nevertheless what should we be looking for in analysing the marketing environment?
Analysing the marketing environment

You were introduced to the marketing environment briefly in Topic 1 (see text p.13) and again in Topic 2 (see text p.50). Your text (p.13) distinguished a task environment and a broad environment, although reverted to our preferred approach of a microenvironment and macroenvironment on page 50. We will consider in turn.
The microenvironment
The microenvironment consists of the forces close to the organisation that affect its ability to serve its customers. These forces include: the organisation itself suppliers marketing intermediaries customers competitors publics.
Your next reading describes these forces as actors in the organisations microenvironment.
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Reading 3.1
Turn to Reading 3.1 by Kotler et al., and read pages 164168.
Activity 3.2
Identify the key actors in your organisations microenvironment.
Your last reading reiterated the need to build relationships with all these actors: upstream with suppliers, downstream with marketing intermediaries, customers and wider publics, as well as within the organisation (internal marketing). We will explore this further in Topic 4. Competitors need to be closely monitored so we can seek to differentiate our offering in the marketplace and so develop a competitive advantage. Now lets turn to the macroenvironment.
The macroenvironment
An organisation operates in a macroenvironment where forces pose opportunities and threats. An organisation needs to develop marketing strategies that will seize these opportunities and combat the threats. Marketers also find opportunities by identifying trends as discussed in your next text reading.
Textbook
Turn to your textbook and read pp.7476.
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Activity 3.3
What is the difference between a trend and a megatrend?
Typically over the years these forces in the macroenvironment have been called the PEST forces i.e. Political (including Legal) Economic (including Demographic) Social (and Cultural) Technological (and Natural). Others have added Environment because of the growing significance of environmental issues to make PESTE and Legal as a separate entity to achieve PESTLE. Whatever these are just helpful acronyms. Your text goes on to explore these forces in the macroenvironment. Firstly the demographic environment.
Textbook
Turn back to your textbook and read pages 7681.
Note from your last reading the opportunities (and threats) posed by changing demographics. Marketers may choose to focus on specific market segments such as Baby Boomers, Generation X, retirees, and develop products and services to meet their changing needs and wants. (We shall explore these further in Topic 7.) Now to other environments. As you read consider the various opportunities and threats posed to marketers by forces in these environments.
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Textbook
Read pages 8189.
Activity 3.4
You are the marketing manager of a childrens toy company. Identify forces in the macroenvironment that need to be considered in developing future marketing strategy.
Responding to the marketing environment

Youve seen how these forces in the marketing environment can pose opportunities and threats. Marketing management needs to monitor and analyse these environmental forces so that they can develop plans and strategies in response. These external forces in the marketing environment are sometimes described as the uncontrollable factors to which the organisation must adapt its marketing strategy. Organisations can sometimes seek to affect these forces through proactive campaigns such as lobbying, and/or through advertising and public relations campaigns, but essentially they may be viewed as uncontrollable. Perhaps though, the forces in the microenvironment may be seen as less uncontrollable than those in the macroenvironment. We can now update our simple marketing model from Topic 1 to include the marketing environment as shown in Figure 3.1. We now have a further matching to the opportunities and threats posed by the macroenvironment.
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MACROENVIRONMENT (P.E.S.T.)
MICROENVIRONMENT PUBLICS feedback payment ORGANISATION goods communication SUPPLIERS COMPETITORS MARKETING INTERMEDIARIES CUSTOMER
MACROENVIRONMENT (P.E.S.T.)
Figure 3.1 Marketing as a matching process
Note that an environmental change may be a threat to one organisation yet an opportunity to another. It depends on the matching to organisation resources and capabilities. For example, rapid technological change can provide a substantial opportunity to an organisation with the technological and marketing skills to exploit it, but a significant threat to the organisation lacking these resources.
Activity 3.5
Identify the macroenvironmental forces that may impact your organisation. Is each a threat or an opportunity?
You may not always have been able to decide whether a particular force posed an opportunity or a threat. It will depend on the response. So its okay to flag it up as both a potential opportunity and a potential threat (and so include it on both sides in a SWOT) then you can develop the appropriate marketing response. Now back to explore the third component of our MIS: marketing research.
Marketing research
The term marketing research conjures the picture of the clip-board interviewer waylaying you in the shopping mall (or over the telephone) to answer a survey. This, as you will see, is only one of the data gathering techniques of marketing research. Your text (p.94) defines marketing research as:
the systematic design, collection, analysis and reporting of data and findings relevant to a specific marketing situation facing the company.
Your text introduces you to this component of the MIS in your next reading.
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Textbook
Marketing research or market research is there a difference? By definition, marketing research covers all aspects of marketing, whereas market research relates specifically to research about markets. The layperson tends to use the term market research when really meaning marketing research. Hence today the two have become virtually synonymous and market research is generally interpreted as having the broader meaning. Marketers, however, prefer to be correct and thus favour marketing research. Who undertakes marketing research? Your last reading discussed briefly different types of marketing research companies. Marketing research may be undertaken by an in-house department or by external specialists. In practice, few organisations rely solely on an internal marketing research department. Larger companies, which may have their own marketing research departments, still tend to use external agencies for specific research projects. A marketing research agency provides marketers with specialist services, the same as any other agency or consulting group. These agencies range from full-line research providers to those specialising in a particular area (e.g. fieldwork).
The marketing research process

Marketing research involves a step-by-step process which seeks to assure objectivity and application of the principles of scientific method. Different authors portray this process as having from four to eight steps, by combining or separating similar activities. Your text suggests six steps as shown in Figure 4.1 on page 94 of your text: 1. 2. 3. 4. 5. 6. define the problem and research objectives develop the research plan collect the information analyse the information present the findings make the decision.
The following text readings go through this process. For the purpose of this unit you need to understand marketing research from the marketing management perspective and appreciate the challenges posed to marketing managers in undertaking effective marketing research.
Marketing research methods

Your last reading discussed various approaches and instruments for marketing research. Undertaking marketing research requires decisions to be made between alternative methods of data collection so that the research objectives are achieved. The alternative methods are summarised in the tree diagram of Figure 3.2.
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MARKETING RESEARCH
Secondary data
Primary data
Observation
Experiment
Survey
Personal
Mail
Phone
Individual Internal External
Group
Figure 3.2 Marketing research methods tree
Secondary data Data sources are either secondary or primary. Secondary data already exist, whereas primary data are collected for a specific problem and hence must be generated through original research. You can recall secondary data as second-hand data. Your next reading covers Step 1 and some of Step 2 in the marketing research process.
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Activity 3.6
What are the advantages and limitations of using secondary data?
The Internet has provided fast, easy access to a wealth of secondary data sources. However as with all secondary data beware! The researcher will need to consider the reliability and validity of data from different websites. Some more traditional Australian and New Zealand sources of secondary data are shown in your next reading.
Reading 3.2
Turn to the reading by Kotler et al.
Primary data
Once secondary data have been exhausted, primary data must be collected. Referring to our research methods tree, there are three key traditional approaches for collecting primary data: observation experiment survey.
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The choice of research method will depend on our information needs as per the research objectives. What will be the best way to collect the data? Are we seeking quantitative or qualitative data? What are our resource constraints cost, time, skills? Your last text reading also discussed focus groups and behavioural data as popular research approaches. These do not sit neatly under our three traditional approaches although we have included group interviews at the bottom of the survey branches in the tree diagram, Figure 3.2. The survey has traditionally been the popular choice for researchers. Lets address some issues that need to be considered in designing and undertaking effective survey research. Survey research Surveys are undertaken to gather qualitative and quantitative data, about peoples beliefs, opinions, attitude, preferences and levels of satisfaction. There are three basic communication methods for undertaking surveys (refer to Figure 3.2) as follows: mail (including fax, email) and including any self-administered survey (including online, CD) telephone personal interview (face-to-face).
Activity 3.7
Take a few minutes to reflect on some surveys that you have been asked to participate in as a respondent: 1. What sort of information did the research seek to collect? 2. What contact method was used? 3. Did you understand the questions? 4. Were you always able to answer the questions? 5. Did the questions follow a logical sequence? 6. How competent was the interviewer? 7. How/why were you selected to participate in the survey?
These are the issues to be considered in designing and undertaking effective marketing research: the choice of research method, the communication method, the design of the questionnaire, the training of interviewers and the sampling plan. Turn back to your text and read about primary data gathering.
Textbook
Our emphasis here is for you to have an understanding of how marketing research seeks to provide valid and reliable information to aid marketing decision making, as well as introducing you to some possible pitfalls and shortcomings that researchers strive to overcome through effective research design. Those of you who may have to undertake a survey will find the next reading helpful in designing an effective questionnaire. The challenge for questionnaire design is to maximise response and minimise error; to be objective and to avoid possible errors and bias through poor wording or ambiguous questions. The acid test once youve designed the questionnaire is to try and answer it as if you were the respondent again a think customer approach.
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Reading 3.3 Optional

Turn to Reading 3.3 by Boyd, Westfall and Stasch.
Now complete your reading about Steps 4, 5 and 6 of the marketing research process as well as further considering some characteristics of good marketing research and some barriers to be overcome to the use of marketing research.
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Activity 3.8
Summarise the pointers from your last reading.
Youve already begun to see the wide scope of marketing research. Marketing managers need a wealth of information to aid their decision making. They need information for day-to-day decisions, to help in developing marketing plans, and just as importantly to help assess the efficiency and effectiveness of marketing activities.
Summary
This topic explored the provision of useful and reliable information to marketing decision makers. You saw how such information is provided to marketers through the three components of a MIS: internal records, marketing intelligence and marketing research. We looked at the marketing intelligence component as providing information about the marketing environment. You saw how the marketing environment comprises a microenvironment and macroenvironment and the need to monitor trends and developments in these that can pose opportunities and threats to marketers. We explored the steps in the marketing research process. We discussed alternative methods of gathering marketing research and especially pointed out possible pitfalls in trying to gather valid and reliable information all pointers for you to appreciate for undertaking effective marketing research.
Case study practice

Back to Dudley Dayshades. Are they gathering and then using information to aid decision making? Do they have a MIS? Have they analysed their marketing environment, identifying opportunities and threats? Are they undertaking effective marketing research? What else should they be doing? These are some of the issues from Topic 3. Remember we will be discussing the Dudley Dayshades case in the first round of teleconferences (and in tutorials where these are offered).
Activity 3.1
The aim of the MIS is to provide marketing managers with useful information to aid decision making. Computers have clearly had a massive impact on the MIS in terms of the volume of data that can be processed and then manipulated to provide
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useful information. Today larger organisations have highly developed, sophisticated marketing information systems; yet there is always an ongoing challenge to provide better information.
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Activity 3.3
See Reading.
Activity 3.4
The forces you identified may have included: Demographic: A declining birth rate could mean a decrease in demand although this may also be affected by economic factors (below); changing geographical population shifts may affect the location of retail outlets and selection of distributors. Economic: Economic trends affect consumer purchasing power and spending patterns and will thus impact demand. Natural: Environmental concerns may impact manufacture and in turn on production cost. Technological: Accelerating technological change may be reflected in innovation, production and marketing of toys. After all, computers are a widely accepted toy even to very young children today. Increased regulation of technological change could also have an impact. Political: Political intervention for example through tax changes (in Australia the introduction of GST in July 2000) has affected prices and hence demand; the Trade Practices Act can protect consumers against unsafe or potentially hazardous products. Cultural: Changing values and lifestyles could mean some traditional toys lose their popularity, whilst new toys may be adopted. The growth of a global market may demand global products.
Activity 3.5
Take Telstra for example. Some of the microenvironmental and macroenvironmental forces are shown in Figure 3.3.
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Political deregulation
government policy legislation (Austel) pricing
Company structure culture workforce skills unions cost structures
(& demographic) E conomic recession or recovery? rising costs small population growth ethnic groups
Suppliers Australian or overseas changing relationships
TELSTRA
Marketing Intermediaries changing distribution patterns growth resellers changing relationships
& Cultural S ocial lifestyle trends ethnic differences
Competition Optus and others small specialist resellers satellites Australian/overseas globalisation of industry
Technological high speed data transfer

microprocessing convergent technology
Figure 3.3 Forces affecting Telstra in a changing marketing environment
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Activity 3.6
Secondary data provide a good starting point for research. The data can usually be obtained quickly and at relatively low cost. Furthermore secondary sources may be the only way of accessing some information for example what organisation would wish to undertake a census. The limitations of secondary data stem from its second-hand nature. Firstly can we find information that fits our needs? If so, what about its recency (the when?) and relevance (the what? and where?) its validity and reliability (the how? and by whom?).
Activity 3.7
For discussion in teleconferences/tutorials.
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Topic 4
Creating value, satisfaction and loyalty
Introduction
In this topic, we begin by considering what it is about goods and services that make customers who buy them actually value them. In doing so we introduce the concept of the Value Delivery Process. While customer satisfaction is ultimately an objective of every company, it is only the first step towards developing a successful business. Ultimately, in todays competitive commercial world, most companies are looking beyond simply achieving customer satisfaction, to actually converting satisfied buyers to become loyal customers. In this topic we will first consider how customer value is created and defined by the consumer themselves. Next, we will consider how companies measure and gauge customer satisfaction. The concept of customer lifetime value is also considered, along with a range of techniques commonly known as relationship marketing which are aimed at cultivating ongoing relationships with highly valued consumers.
Objectives
On completion of this topic, you should be able to: define customer value, satisfaction, and loyalty explain how companies can deliver value to customers evaluate the lifetime value of customers distinguish relationship marketing from transaction marketing develop strategies for companies to retain customers and build loyalty assess the role of database marketing in developing loyalty.
Marketing and customer value

Before we can look at ways that companies develop value in what they produce for customers, we need to understand what value involves. Rather than produce a product and then decide what value it provides to the customer, smart companies recognise the need to first understand value from the customers perspective. Essentially, the approach should be reversed with an understanding of what customers value in a certain product or service category being the starting point from which firms can decide what they should deliver in terms of value. The first section of Chapter 2 in your text introduces the concept of the Value Delivery Process. You should review the following reading first before we move onto ways of developing customer value.
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Developing customer value

The development of customer satisfaction and ultimately customer loyalty cannot occur in business unless companies know what it is about their products and services that the customer actually values. Your next text reading further discusses the concept of customer value and discusses what creates value. If you think about what lead you to enrol in a SCU MBA program, when you had many others to choose from, ultimately you made the decision based on the features that provided value to you. As well as delivering the educational content that you needed, other aspects of the program such as its flexibility; its trimester system; the external study-mode options etc. were ultimately considered in response to what we know our customers value in our programs. As your text reading notes, a customers ultimate aim is to maximise the value available to them through their purchases.
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Activity 4.1 (for discussion in class or in teletutorials)

Identify a product or service perhaps one from the business you have chosen for your Assignment 1. Now develop a list of things that customers value about this product/service.
Delivering customer satisfaction

Once a company knows what its customers value in relation to the types of products or services it sells, they must ensure that they are, at the very least, meeting the customers minimum expectations or more importantly exceeding their expectations so that customer satisfaction is maintained. The following text reading highlights the need to understand what customers expect of a product or service. It then moves on to discussing how companies attempt to measure customer satisfaction. The additional reading by Cherry then highlights the fact that achieving customer satisfaction is not enough for most businesses to thrive.
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Reading 4.1
Turn to Reading 4.1.
Activity 4.2
Think about a product or service that you were satisfied with overall, but which you do not consider yourself to be loyal to. What are the reasons that explain why you are not loyal even though you are satisfied?
As you are beginning to see, having highly satisfied customers while essential for any business is not enough to aspire to! We will now move onto ways that firms can build the lifetime value of customers by creating loyalty.
MKT00720 Topic 4 Creating value, satisfaction and loyalty
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Maximising customer lifetime value

Not all customers are equally profitable for firms. As yout text points out, a profitable customer is one that delivers more revenue over a period of time than it costs the company to attract and maintain them (p.138). Methods for calculating the lifetime value of a customer are discussed in your next text reading. Once companies know what their customers are worth to them, they can then go about developing strategies to maintain them a common marketing and management system known as Customer Relationship Management.
Textbook
You might like to review Reading 4.2 here. It gives you 10 simple tips on how to turn customer satisfaction into customer loyalty. Once you have read this, turn to Activity 4.3.
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Reading 4.2
Turn to Reading 4.2.
Activity 4.3 (for discussion in tutorials/teletutorials)

Turn to: i) the marketing insight on page 134 of your text ii) the marketing memo on page 139 of your text. How useful are these approaches?
Relationship marketing
Relationship marketing was put forward as a paradigm for marketing from the 1990s. Organisations increasingly recognised the key to creating and building customer satisfaction was by building long-term relationships with them. The goal was winning and keeping customers satisfying (and delighting) customers would lead to customer retention. Relationship marketing was advocated in contrast to a more traditional approach of transactional marketing. Christopher, Payne and Ballantyne (1991) compared relationship marketing to transaction marketing thus:
Relationship Marketing focus on customer retention orientation on customer benefits long time scale high customer service emphasis high customer commitment quality is the concern of all Transaction Marketing focus on single sale orientation on customer benefits short time scale little emphasis on customer service limited customer commitment quality is primarily a concern of production
A relationship focus has been prevalent in many organisations strategies for some years. Ask any salesperson about the importance of building relationships with customers. Business to business companies have long followed this dictum, consumer marketers perhaps only more recently appreciating the benefits.
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Your next reading explores whether relationship marketing has replaced transactional marketing in the real world.
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Reading 4.3
Turn to Reading 4.3 by Zineldin and Philipson.
Activity 4.4
What are the findings as per Reading 4.3? Are you surprised?
Note too from your last reading the authors suggest: Kotlerism and the 4Ps are not dead! Recognising the importance of relationships, organisations seek to develop strategies that cultivate customer relationships, which in turn leads to customer relationship management.
Customer relationship management

Customer relationship management, commonly referred to as CRM, has become a popular term in marketing and management. As the name suggests, it goes beyond just marketing to attract new customers and retain them, but also involves maintaining ongoing contact with clients and ensuring that the company continues to understand and adapt to their changing needs. Your text outlines the key stages of developing a CRM approach to marketing in your next reading. Note what is meant by: customer touch points how a framework for one-to-one marketing can be adapted to CRM marketing.
Textbook
Now lets turn to another reading where advisors to the Credit Union industry recommend that companies should be trying to measure customer loyalty instead of constantly assessing customer satisfaction levels as so many businesses currently do.
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Reading 4.4
Turn to Reading 4.4 by Seibert.
Activity 4.5 (for discussion in class or in teletutorials)

Collect a selection of customer surveys used by companies to get feedback from their clients. What are these companies trying to measure do you think? How effective would these surveys be in helping to develop better CRM strategies?
Building loyalty
Now that we understand why companies are often committed to trying to create loyal customers through the use of CRM, we need to consider how customer loyalty is actually developed. We need to note here, if it is not already clear from your previous readings, that loyalty does not just mean repurchasing the same products from one company over and over again. While these are behavioural aspects which might suggest a customer is loyal, true loyalty involves much more than just repeat
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purchase. A truly loyal customer will also demonstrate attitudinal loyalty they will spread positive word of mouth about your company and its products. They might even refuse to purchase your competitors products even though they might try to tease them with discounted prices. With an understanding of what real customer loyalty implies, your next text reading highlights the ways to develop this type of relationship by: offering financial benefits in return for loyalty adding social benefits developing structural ties.
Textbook
It is probably already obvious to you by now that an effective relationship management program cannot function well unless companies have the tools to collect, store and retrieve important information about their customers and their buying behaviour. We now turn to the issue of customer database marketing and management in the final section of this topic.
Customer databases and marketing

Have you ever wondered how all those companies that distribute marketing material to you by post, phone and email obtain your details? Generally speaking, they have recorded your information from a previous occasion when you dealt with them. They have usually stored this information in some kind of database system and are now initiating ongoing customer contact with you by using the details in this database to maintain communication with you. The following text reading introduces you to customer databases and database marketing. It notes that databases can be used to: identify prospects identify customers who should receive special offers develop customer loyalty reactivate customer purchases avoid serious mistakes when dealing with clients.
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As you can imagine, a good database can create a wealth of information for companies about their customers. Storing this information is just one part of the relationship management process. Using the information effectively and appropriately is the real challenge. As your final reading for this topic points out, along with the associated text material, there are several pitfalls that can occur through database marketing and CRM (e.g. the junk mail effect felt by many consumers nowadays).
Textbook
Reading 4.5
Turn to Reading 4.5 by Moore.
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Summary
The importance of developing loyalty through a relationship marketing and management approach has been demonstrated in this topic. Finally we realised the importance of ensuring that real value is continuously provided to our existing customers to keep them interested in buying what we have available. Next we discovered the need to ensure the delivery of ongoing customer satisfaction and how too to avoid customer dissatisfaction. The importance of treating customers as a lifetime asset rather than as sporadic sources of profit was also highlighted. We explored the differences between relationship marketing and transaction marketing as well as what may be happening in practice. In the latter sections of the topic we saw how companies attempt to develop mutually beneficial, long term relationships with their highly valued customers in efforts to build real customer loyalty and commitment. The integral role of customer databases and the use of database marketing techniques were finally considered. Your next topic continues a customer focus by turning to customer buying behaviour.
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Activity 4.1
To be discussed in tutorials and/or teleconferences.
Activity 4.2
You may have listed a number of reasons here which will very much depend on your own tendency to be loyal to particular companies or not. Some of the reasons why a satisfied customer will not necessarily become a loyal customer include: They bought something from a company located in a region that they might never return to again (locational convenience). They tend to always buy the cheapest product available at the time they need it, so switch brands based on pricing decisions. They like to try new brands of products each time (i.e. they are variety seekers). They buy out of habit rather than out of any real sense of loyalty to a company.
Activities 4.3, 4.4 and 4.5

To be discussed in tutorials and/or teleconferences.
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Topic 5
Knowing your customer
Introduction
As youve already seen, a marketing orientation requires a customer focus throughout the organisation. Marketing is a think customer approach. If we are to satisfy customer needs we first need to know our customer. Identifying and understanding our customers is critical. Only then can we seek to develop effective marketing strategies that satisfy these needs. This is the focus of this topic. We will first analyse consumer buying behaviour, seeking to understand how consumers make buying decisions. Next we will address the why why different buyers make different buying decisions and specifically what are the influences that affect their decision making. We will then turn to business buying behaviour and again consider the how, who and why, identifying similarities and differences to consumer buying behaviour. Throughout this topic we shall discuss the implications to marketers of knowing your customer.
Objectives
On completion of this topic, you should be able to: analyse the buying decision-making process for different consumer purchases explain the five stages in the consumer buying decision-making process identify the different roles of those involved in a buying decision identify possible factors that may influence buying behaviour differentiate between different business buying situations discuss business buying behaviour and compare with consumer buying behaviour discuss the implications to marketers of knowing your customer.
Consumer buying behaviour

First lets analyse our own buying behaviour when we are the customer, which will help us to understand how consumers make buying decisions. For the purpose of the exercise well focus on products were all familiar with and will probably have purchased. Firstly a more major purchase a car and then a more routine/regular purchase a tube of toothpaste.
Activity 5.1
1. Recall your last purchase of a car. (a) Analyse your buying decision-making process as a step-by-step process. List these steps. (b) Who was involved in making, or helping to make, the decision to buy?
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2. Now repeat the exercise for your last purchase of a tube of toothpaste. (a) Again analyse your buying decision-making process as a step-by-step process. List these steps. (b) Who was involved in making, or helping to make, the decision to buy? Compare your answers for buying these different products.
You probably identified more steps in the buying decision for a car than for the toothpaste; also there were probably more participants in the decision making for the car. Well discuss this activity further in the following discussion of consumer buying behaviour. Firstly lets examine the buying decision-making process.
The consumer buying decision-making process

Typically, we can identify five stages in the decision-making process (sometimes referred to as the DMP) as shown in Figure 5.1.
1.
Problem Recognition
2.
Information Search
3.
Evaluation of Alternatives
4.
Purchase Decision
5.
Post-purchase Behaviour
Figure 5.1 The consumer buying decision-making process
How do these stages relate to the steps you identified for the car and for the toothpaste purchases? Lets discuss each stage further.
1. Problem recognition
When/how do we recognise we have a need or a want? With a car, this could perhaps be because your existing car has been written off, or is too expensive to repair, or perhaps youve seen an advertisement for a new car, or perhaps a friend has recommended their model of car. With the toothpaste, perhaps your existing tube is nearly finished, you have seen an advertisement for a new improved toothpaste, your spouse/partner/child has suggested a different brand, or in the supermarket you notice a special price deal on your favourite brand.
MKT00720 Topic 5 Knowing your customer
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Now what are the implications to marketers or how should the marketer respond? For the marketer the challenge here is to identify the trigger or problem recognition and develop marketing strategies and programs that address these.
2. Information search
The buyer needs to gather information to make a more informed decision. For the car, this may involve collecting brochures, reading advertisements, consulting with salespeople, discussion with family and friends. For the toothpaste, this may be a much shorter stage and a less formalised search for information. It may just involve recalling information from memory or gathering information from packaging or displays at point of sale. The marketer needs to identify these information sources and their relative importance. Then they can seek to develop effective communications targeted to potential customers.
3. Evaluation of alternatives
On what criteria does the buyer assess the alternatives? The buyer will identify a short list of important attributes and compare the alternatives on these attributes. It is likely the attributes will be weighted in some way (if only as a rough mental calculation) the more important having the greatest sway. What attributes may be important for a car? Perhaps safety, speed, price, fuel economy and/or even image. And for toothpaste? Brand, price, taste and/or again even image. Different factors will be important to different consumers. Furthermore different consumers will undertake different evaluation procedures. The marketer needs to seek to understand how buyers evaluate alternatives. Then they can not only produce the right offering but also seek to influence buyers decisions.
4. Purchase decision
A purchase intention has been made but other factors may now influence this intention, causing the buyer to modify, postpone or even avoid the purchase decision. Purchase intention could be influenced by changing situational factors. For the car, you/your partner/your spouse may have lost your/their job and hence decide to postpone the purchase; or, on the brighter side, you may have come into an inheritance and can now afford a more expensive model. For the toothpaste, a new better product may have just been launched and advertised. Another factor is the attitude of others. Although you may well have consulted family and friends in the information search and evaluation stages, their negative attitude may cause you to have second thoughts, particularly over the car decision, if not the toothpaste. Further anxiety may arise over perceived risk of the purchase, particularly again with major purchases such as the car. Buyers need reassurance, which may come from personal recommendations or endorsements, or from selecting established brands and /or products with guarantees or warranties. Again we see marketers can develop strategies and programs that seek to influence potential buyers at this stage in the buying process, to ensure the purchase.
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5. Post-purchase behaviour
The buying process goes on after purchase. Did you identify the post-purchase stage in your analysis? Post-purchase behaviour is an important stage in the buying process. Post-purchase, the buyer will experience a level of satisfaction or dissatisfaction. Satisfied customers are likely to buy the product again and recommend it to others. Dissatisfied customers may stop buying the product, steer their friends away from it or even sue the manufacturer. Car manufacturers are experts in this field. They site poster advertisements outside car showrooms so that when you drive out in your brand new vehicle youre reassured about your purchase; they send out letters congratulating you on your selection of such a fine vehicle; they supply instruction booklets, extended warranties and dealer networks, all to reduce possible dissonance. Some dissonance arises after almost every purchase decision. Dissonance with the toothpaste purchase is likely to appear less severe because of the relatively minor nature and value of the purchase, but nevertheless could still result in a lost customer. Again, as we have seen, marketers can seek to develop strategies and programs to minimise the post-purchase dissonance customers may feel. Weve now discussed the five main stages in the consumer buying decision-making process. Not all the five stages will be clearly identifiable or important for purchases of different products or services. For routine purchases like your tube of toothpaste you may have gone very quickly from problem recognition to purchase decision, with perhaps only token (or even nil) reference to information search or evaluation of alternatives. Consider some other consumer purchases are all five stages in the decision-making process evident? Buying or purchasing? Before we go further, you may be wondering is there a difference between buying and purchasing? Referring to the Macquarie Dictionary we see: buy: purchase: obtain in exchange for money, serve to procure buy, acquire
Youll notice your text seems to favour buying for the total process and purchasing more narrowly for the decision stage. Our view is we can interchange these words at random (other authors you may find favour procuring also an acceptable option). So far weve looked at the how of consumer buying, and to some extent the what and when. Now lets turn to who is involved in the buying decision making.
The consumer buying decision-making unit

The marketer needs to know who is involved in the decision making so that marketing efforts can be directed at all members of this decision-making unit (sometimes referred to as the DMU). Looking back at our car buying decision:
is it a joint decision? is advice sought? and from whom? (perhaps between spouse/ partner or the whole family)
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and at the tube of toothpaste:

who first suggests purchase? is it a joint decision? who is the ultimate decision maker? (any member of the family) (between family members) (the family purchaser)
who is the end user? (the whole family)
Thus we can identify different roles of members of the decision-making unit. Here we utilise another of my acronyms this time SPADE.
Member of DMU Suggester Purchaser Adviser Decider End user Role first suggests purchase makes the actual purchase whose opinion/advise is sought ultimate decision maker the consumer Equivalent roles as per your text * Initiator Buyer Influencer Decider User
* Note the current edition of your text appears to omit discussion of the DMU in consumer buying although it is addressed for business buying which we will address later in the topic. We think it is also useful in analysing consumer buying. So far in this section we have sought to understand and analyse the consumer decisionmaking process and decision-making unit. Weve adopted the perspective of being the customer. Youll often find it useful to look at marketing problems and decisions from the customers viewpoint (think as your customer!). Now lets return to your text to endorse our findings thus far on consumer buying behaviour. Youll find some further discussion of cars and toothpaste as well as many other products and some analytical models that may assist. As you read, also consider the marketers potential response (as we did in our discussion on the decision-making process).
Textbook
As youve already seen, consumer buying behaviour varies for different buying decisions. Marketers have sought to distinguish between different types of buying behaviour.
Types of consumer buying behaviour

Marketing authors have typically identified three types of buying decision behaviour depending on the complexity of the buying situation for that product/service.
Buying Decision Behaviour 1. routine response behaviour 2. limited problem solving 3. extensive problem solving Examples toothpaste, soap powder, petrol, bus ticket, beer, dry cleaning tennis racket, car tyres, bank loan, insurance, carpet cleaning house, car, CD system, around-the-world holiday
The examples given here only serve to illustrate. Specific products/services may not fit clearly in one category or another. For example, a bank loan may be categorised as limited problem solving by some consumers, or extensive problem solving by other
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consumers, depending on such factors as the dollar value of the loan, the frequency of purchase of that product for different consumers and/or prior knowledge of products and competitors products. Assael (in Kotler 2003, pp. 201202) distinguished four types of consumer buying behaviour, based on the degree of buyer involvement and the degree of differences among brands: 1. 2. 3. 4. complex buying behaviour dissonance-reducing buying behaviour habitual buying behaviour variety-seeking buying behaviour.
Such categorisations are only useful if they help us to better understand the customers behaviour, which, in turn, will help us to develop more effective marketing strategies and programs. Your text discusses further consumer involvement theories in your next reading, as well as discussing rational and heuristic behaviour.
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Activity 5.2
Consider two consumer purchases (preferably in different types of buying situations) that you have made in the last week. 1. How appropriate are the five stages in the consumer buying decision-making process to these buying decisions? 2. Identify the members and roles of those in the buying decision-making unit. 3. Can you apply some of the models discussed in the text to your buying behaviour? 4. What do you see as the implications to marketers of these products from seeking to understand your buying behaviour? (We will discuss this further in teleconferences/tutorials.)
Implications to marketers
As youre beginning to see knowing our customer in terms of analysing and understanding buying behaviour should help us to develop more effective marketing strategies and programs. Firstly, how do we glean this knowledge? Your text (p. 186) suggests marketers can: think about how they themselves would act (introspective method) interview recent purchasers about how they purchased (retrospective method) locate potential customers and ask them about a potential purchase process (prospective method) ask consumers about the ideal way to buy a product (prescriptive method).
Then armed with this knowledge/understanding, the challenge for marketers is to develop marketing strategies and programs that seek to advise, inform and persuade potential buyers and need to be addressed to all members of the decision-making unit. Your next reading shows how an understanding of consumer behaviour notably where they shop and how they shop has led to an innovative marketing approach.
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Reading 5.1
Turn to and read Reading 5.1 by Moullakis.
Activity 5.3
From your last reading do you think Save Finances plans for selling home loans will be successful why/why not? (And especially from a consumer behaviour standpoint.)
Weve focused so far on buying decision making the how, what, when and who. The why of consumer buying behaviour is perhaps not so easy. We need to try and understand human behaviour not an easy task!
Influences on consumer buying behaviour

So what factors influence consumer behaviour?
Activity 5.4
Refer back to the products youve purchased as per your last activity. Suggest some factors that influenced your buying behaviour and decision making.
Your text identifies four factors which influence buyer behaviour: cultural culture, sub-culture, social class social reference groups, family, roles and statuses personal age and life-cycle, occupation, economic circumstances, lifestyle, personality psychological motivation, perception, learning, beliefs and attitudes.
Your next reading discusses cultural, social and personal influences.
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As you saw in your last reading, consumer buying behaviour is the result of the complex interplay of these cultural, social, and personal factors. These factors cannot be controlled by marketers but provide valuable clues as to how to reach and satisfy buyers more effectively. We can examine core values of a culture, or sub-culture to give clues about consumer behaviour and hence to the marketers response. Your next reading identifies ten core Australian values.
Reading 5.2
Read Reading 5.2 by Shiffman et al.
Understanding these values will help marketers develop their marketing strategies and tactics. For example, Figure 11.8 in your last reading shows an advertisement that features core values. Analysis of values can also assist in segmenting the market as we will see in the next topic. International marketers wanting to target the Australian market will need to understand Australian culture and values so they adapt their marketing accordingly this will be examined in our International Marketing unit MKT00724.
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Now to psychological processes that affect consumer behaviour. In your next reading your text discusses four key psychological influences: motivation, perception, learning and memory that may influence consumer behaviour.
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In addition to these factors there are external influences. Environmental factors and marketing activities may both impact consumer behaviour. We discussed environmental factors in Topic 3. Your next reading discusses how todays macro factors impact consumer behaviour and consumer spending.
Reading 5.3
Turn to and read Reading 5.3 by Shoebridge.
Interestingly from your last reading we can again see the implications to marketers. The article suggests the first reaction is to cut advertising spend whereas it should perhaps be increased? All these factors so far discussed are uncontrollable. Our own marketing programs are of course controllable but those of our competitors are not although they may be reactive. These various factors influencing consumer behaviour are illustrated in Figure 5.2.
Reproduced from Kotler, P., Brown, L., Adam, S. & Armstrong, G. (2004). Marketing, 6th edn, Frenchs Forest p. 245. Figure 5.2 Factors influencing consumer behaviour
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Business buying behaviour

Lets now turn our attention to business (or organisational) buying, again with the aim of seeking to understand our customers buying behaviour. Firstly, just contemplate the vast range of products and services purchased by businesses and hence to be marketed by other businesses. In fact statistics show that business-to-business purchases typically account for more than twice the dollar value of consumer purchases. Businesses buy products and services for their own use or to use in the production of other products and services that are sold, rented or supplied to others. We will focus on business organisations. The current trend for marketers is to view these as business-to-business (B2B) markets. Previously marketers tended to differentiate consumer and industrial markets, but the term industrial markets conjures a narrow picture of industrial companies, whereas business markets includes business organisations in manufacturing, transportation, banking, finance, communication, construction, services, to name just a few. So back to business buying behaviour, and again we will address: 1. How do buyers make buying decisions? 2. Who participates in the buying decision? 3. What are the major influences on buying behaviour? We will be able to identify some similarities with consumer buying and of course some differences, so dont be afraid to adapt the concepts weve encountered thus far in this topic.
Types of business buying situation

The complexity of the buying decision making will depend on the type of buying situation. We can identify three major types of buying situation:
Business Buying Situation 1. 2. 3. straight rebuy i.e. a routine purchase modified rebuy i.e. revised/updated specifications first task buying i.e. first time purchase Examples office supplies, raw materials new vehicles, consulting services computer software, new premises
Note, these are not unlike the three types of consumer buying situations we discussed earlier in this topic. Your text addresses these buying situations as well as comparing the business market versus the consumer market in your next reading.
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Activity 5.5
Identify a product/service that your organisation may purchase under each type of buying situation a straight rebuy, a modified rebuy, a new task buy. Then for each product/service: 1. list the steps in the buying decision-making process 2. identify who participates in making the buying decision.
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Again we need to think as our customer. Probably you identified more steps in the case of the new task buy and a more complex decision-making unit. Now return to your text and then well discuss the business buying decision-making process and decision-making unit further.
Textbook
The business buying decision-making process

A typical buying decision-making process for a new task buy is shown in Figure 5.3, with the 5-stage model of the consumer buying decision process alongside for comparison. Are they significantly different? After all they are only generalised frameworks. You can probably think of some consumer purchases that involve seeking alternative quotations (for airfares or carpet cleaning perhaps) or others that require a written contract, confirming the price and terms of supply. Furthermore, the consumer process may well include an evaluation of satisfaction or dissatisfaction with the product and/or the vendor. Note: This business decision-making process is similar to the eight stages (or buyphases) model discussed on pages 205211 of the textbook and summarised in Table 7.1 (p. 205). Remember these step-by-step models are only frameworks to assist and guide us. We can build on these basic frameworks and identify the steps/stages in the buying decision-making process relevant to a specific product or service.
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Consumer
Problem (or Need) recognition
Business
Problem (or Need) recognition
Product specification
Information search Supplier search
Proposal solicitation
Evaluation of alternatives Supplier selection
Purchase decision
Purchace decision
Issue contract/order
Goods inspection
Post purchase behaviour Vendor performance evaluation
Figure 5.3 Buying decision-making process
The business buying decision-making unit

The business DMU typically called the buying centre comprises all those individuals who are involved in the buying decision for a particular product or service. The critical task for the marketer is to identify the members of the DMU and to determine the specific roles and relative buying influence of each member. Note the DMU/buying centre is not defined by an organisation chart. The DMU for business buying is typically more complex and invariably comprises participants from different functional areas, each with different purchasing motives and objectives, a recipe for potential conflict. These members of the DMU will be unequal in terms of their dominance over different stages of the decision-making
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process. For instance, engineering participants may dominate Step 2 (product specification) whereas purchasing participants may dominate Step 4 (proposal solicitation).
Influences on organisational buying behaviour

Your text briefly discussed influences on the buying centre (pp. 201/2) suggesting that business buying decisions are both rational and emotional as they serve both the organisations and the individuals needs. More broadly, we suggest the following factors may influence business buying: 1. 2. 3. 4. environmental organisational personal marketing.
Business buyers will respond to rational factors but remember they are also human beings and hence will also be influenced by personal (and emotional) factors as investigated under consumer buying behaviour. External factors in the marketing environment as well as inter-organisational factors may also influence behaviour.
Implications to marketers
So how can marketers ensure their marketing influences are fruitful? Again, understanding and analysing our customers buying behaviour is the key to developing effective marketing strategies and programs. This may require considerable time and effort. We need to: understand the steps in the buying decision-making process identify those involved in the buying decision, their roles and levels of influence monitor all forces that may influence buyers and determine their likely effect.
The recent growing trend to team selling is a good illustration of marketers adapting their strategy to their customers buying behaviour. Where DMUs are large and diverse the marketer develops a sales team incorporating specialists to match those specialists in the DMU, e.g. engineers to engineers, finance experts to finance experts; the salesperson then acts in a coordinating role. This further builds the relationship. Systems selling, another successful selling strategy today, is discussed on page 200 of your text. Again you can see how important relationships are right through the decisionmaking process at the early stages to prompt need recognition or influence product specification to the latter stages to ensure repeat business and customer referrals. For students interested in reading about managing B2B relationships, complete your reading of Chapter 7 in your text, which also looks briefly at institutional and government markets. B2B relationships will of course be explored in depth in our Business to Business Marketing unit (MKT00726).
Textbook (optional)
Read textbook pages 211217.
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Summary
In this topic we have sought to understand customer buying behaviour. You learnt by doing by seeking to analyse your own buying behaviour as a consumer. We first examined the decision making process and compared this to a generic 5-step process. We analysed the buying decision making unit in terms of identifying different roles for those involved and then looked at different types of consumer buying situations. We then examined factors that influence consumer behaviour. You saw that consumer buying behaviour is a complex interplay of cultural, social, personal and psychological factors. Next we turned to business buying behaviour identifying similarities and differences with consumer buying. We suggested an extended 8-step decision making process, more participants in the decision making unit and a combination of rational and emotional decision making, influenced by environmental, organisational, personal and marketing influences. Throughout the topic we have tried to consider the implications to marketers of knowing your customer. From their analysis and understanding of buying behaviour, marketers should be better equipped to develop more effective marketing strategies and programs. As youve seen in this topic, different customers have different needs. This leads us to market segmentation and in turn target marketing, the issues for our next topic.
Case study practice

The key question from this topic for the Dudley Dayshades case is: Do they know their customers? What evidence from the case supports your view? What should they understand about buying behaviour for different products?
Most of the activities in this topic are related to different products and situations and hence lend themselves to discussion at teleconferences/tutorials.
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Topic 6
Segmenting and targeting
Introduction
In the last topic we saw how different groups of customers had different needs. This brings us to the concepts of market segmentation and target marketing which are the focus of this topic. First well describe the steps involved in implementing a target marketing approach. Then well examine the first step in this approach market segmentation. Well explain what is meant by market segmentation and explore how to segment a market. Next well consider the second step target marketing. Well examine how to select the segments to target.
Objectives
On completion of this topic, you should be able to: describe the steps involved in implementing a target marketing approach explain market segmentation discuss alternative ways of segmenting markets discuss how to select target market segments.
STP marketing
Answering the question who is our market is a fundamental marketing decision. One response may be: Anyone or everyone I dont care who it is as long as they buy my product.
Activity 6.1
What, if any, potential flaws do you see in this approach?
In fact, except in a few special circumstances, organisations have realised they cannot treat the marketplace as a homogeneous mass of potential purchases. Instead they should identify the most attractive sections of the market (in marketing jargon called market segments) that they can effectively serve. Targeting these segments seeks to make more efficient use of the organisations resources (remember the matching process) and to achieve corporate objectives. Todays organisations are increasingly embracing target marketing, so that they can focus their marketing efforts on selected target market segments a rifle approach rather than a shotgun approach.
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According to an earlier edition of the parent Kotler text (Kotler, 1994, p.264):
the heart of modern strategic marketing can be described as STP marketing segmenting, targeting and positioning.
The steps involved in implementing target marketing are shown in Figure 6.1.
Market Segmentation
Target Market Selection
Positioning Strategy
Marketing Mix Strategy

Figure 6.1 STP marketing
In this topic well look in turn at the first two steps in Figure 6.1. Positioning and marketing mix strategies will be discussed in later topics.
Market segmentation
Market segmentation may be a modern marketing concept but even in bygone times producers distinguished different products for different customers, even if only very broadly, such as for the rich or for the poor. Perhaps this was accidental market segmentation. In the last topic you saw how different buyers had different needs. This is the starting point for market segmentation. So what do we mean by market segmentation? According to your text (p.224):
A market segment consists of a group of customers who share a similar set of needs and wants.
The purpose of market segmentation is to identify these distinct groups to ascertain whether they require different products and different marketing mixes. Looking around us today we can see lots of examples of segmented markets for both products and services.
Activity 6.2
Lets go back to cars. Looking at the car market, list all the market segments that you can identify.
So how do we segment markets? What variables should we use? The car market example in your last activity could be segmented by demographics and lifestyle characteristics. The travel market is another example where demographic and lifestyle characteristics could be applied. What about the toothpaste market? Different customers seek different benefits (whiter teeth, prevent decay, economy ).
MKT00720 Topic 6 Segmenting and targeting
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Bases for segmenting consumer markets

Your text identifies four major segmentation variables for consumer markets: geographic demographic psychographic behavioural.
These are explored with examples in your next reading.
Textbook
Sometimes these variables are combined together. Lets look at some more examples. Generation segments (page 233234) have been a popular choice for marketers. The Baby Boomers segment (those born between 1946 and 1964) has probably been the most well-known. Then we have Generation X (born between 1965 and 1977) and Generation Y (born between 1978 and 1994). Others have suggested the T-generation or technotots (born after 1984). Or the Digital generation is suggested for those born after 1997. The T-generation and Digital generation will of course be far more receptive to new technologies, posing a wealth of new opportunities to marketers. The S-Generation in China developed in the late 1990s from Chinas single-child policy. This segment may thus be unique to China or perhaps may apply to other spoiltchild segments. As the S-Generation has grown up and moved into the workforce this has created massive demand growth for products (e.g. mobile phones, high fashion clothes) and services (from domestic health to adult education) and hence growing opportunities for marketers. As you saw in your last reading, combining psychographic variables of values and lifestyles has produced the VALS framework developed by SRI International, a Californian consultancy. The first version of VALS was developed in the late 1970s and is now continually updated with new data. The major Australian (and New Zealand) equivalent to VALS is the values segmentation developed by the Roy Morgan Research Centre Pty Ltd, which identifies 10 segments:
Segment Basic Needs Fairer Deal Traditional Family Life Conventional Family Life Look-at-Me Something Better Real Conservative Young Optimism Visible Achievement Socially Aware % Australian Population 3 6 20 9 12 8 4 8 16 14
These segments are described in your next reading.
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Reading 6.1
Turn to Reading 6.1 by Schiffman et al., and read pp.384385.
Research companies in other countries develop similar approaches. In Malaysia A.C. Nielsen has identified lifestyle segments within the three main cultural groups Malays, Chinese and Indians. Now international marketers are looking to identify global segments global segmentation will be explored fully in the unit MKT00724 International Marketing.
Activity 6.3
Unless youre an Australian, can you find a VALS-type segmentation for your country probably from an Internet search? Which segment do you fit in? Or, go to the SRIC-BIs website (http://www.sric-bi.com), as suggested in your last textbook reading (page 236), and complete the questionnaire to find out which VALS type you are.
So how can this help marketers? Your last reading goes on to analyse the readership of various magazines by value segment. Here the implications to marketers are two-fold: 1. for the magazine publishers: a better understanding of their readers, who they are targeting, if they are correctly positioned, if they are providing the right content 2. for marketers allocating advertising budgets: which magazines will reach target markets.
Reading 6.1
Turn back to Reading 6.1 by Schiffman et al., and read pp.385387.
Now to segmenting organisational or business markets.
Bases for segmenting business markets

Business markets can be segmented along similar lines to consumer markets in terms of geographical, demographic and behavioural variables. Bonoma and Shapiro (1983) extended this to what they called a nested approach moving from outer-nest macro variables to inner-nest micro variables identifying five segmentation variables: demographic operating variables purchasing approaches situational factors personal characteristics.
These are discussed in your next text reading. For those of you working in business marketing this nested approach will be explored more fully in the unit MKT00726 Business to Business Marketing.
Textbook
Implementing market segmentation

So far weve discussed the theory of market segmentation. However, implementation often poses considerable challenges. For large companies this can require considerable time and resources with assistance from research companies. Smaller companies may
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rely more on gut feel and experience of their customers and markets. However, to be useful, an identified segment must rate favourably on five characteristics (p.242 of your text): measurable substantial accessible differentiable actionable.
Having segmented the market, the next step is to select which segments to target.
Target marketing
Before addressing specifically which segments to target, your text acknowledges markets can be targeted at four levels: segments, niches, local areas and individuals. Weve already considered dividing the market into segments. A niche is a narrowly defined group of customers/buyers with distinct needs. Local marketing means restricting the scope of your marketing to a local area and hence tailoring the offering to the need and wants of local customers. These are described in your next text reading.
Textbook
Many today would say mass marketing is no longer an effective or viable option. Your next reading discusses this.
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Reading 6.2
Now read Reading 6.2 by Shoebridge and Burbury.
Activity 6.4
Summarise the reasons for niche marketing as against mass marketing as discussed in your last reading.
Customisation could be seen as the ultimate level of segmentation one-on-one marketing. Previously it was felt individuals as segments would not meet our segmentation criteria especially in terms of being substantial or actionable but as you will see in your next reading, technology has made mass customisation possible.
Reading 6.3
Now read One-to-one marketing: Your every command.
Now back to selecting which segments to target. Deciding which segments is a matching process between an organisations skills, capabilities and resources, and market demand/customer needs, to determine which segment(s) present the best opportunity. Remember the prime purpose of market segmentation is to identify groups of customers who have like needs, distinct from other groups and hence will warrant different marketing mixes. Today an undifferentiated marketing strategy (one marketing mix for all) is rare, marketers instead choosing: differentiated marketing different marketing mixes for different target market segments, or concentrated marketing a concentrated marketing mix that may serve a single segment, or specialisation by product or market.
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Your text covers some of the factors to consider in selecting target markets in your next reading.
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Your next two readings look at marketers targeting the kids market. Your last reading concluded with a discussion about the ethics of targeting potentially vulnerable segments such as children. The first reading looks at the relatively small, but growing, market for designer clothes for children.
Reading 6.4.
Read Reading 6.4 by Boland.
Clearly from your last reading, designer childrenswear is targeted at both the children and parents members of the DMU as discussed in Topic 5. The marketers need to understand the motives of the parents (makes them look good!) and the children who may want to look good for different reasons. Your next reading targets the tween girl market and also looks at the childrens motivations.
Reading 6.5
Read reading 6.5 by Crockett and Kharif.
These last two readings demonstrate how segmenting and targeting links closely to understanding consumer behaviour.
Activity 6.5
1. Considering your organisation, or an organisation of your choice, can you identify which market segments are being targeted? Are they adopting an undifferentiated, differentiated, concentrated, or specialist approach? 2. Identify some companies that are targeting children. Do you think their marketing to children is ethical?
Summary
This topic looked at segmenting a market and then selecting which segments to target as the first two steps in an STP approach. First we explained the concept and purpose of market segmentation before addressing the how-to? You then saw how four segmentation variables: geographic, demographic, psychographic and behavioural, are utilised in segmenting the consumer market, whereas a nested approach of macro-micro variables is the more usual approach for business markets. We also discussed some examples of more popular consumer segments. Next we turned to deciding which market segments to target. We explained the need to match segment opportunities to the organisations skills, capabilities and resources in selecting which, or how many, segments to target. You saw how this resulted in a differentiated, concentrated or specialised approach. We discussed briefly some examples and you saw how marketers should implement their targeting in an ethical/ socially responsible way. Having made our decision on which markets to target, the next decision in our STP process (refer back to Figure 6.1) is positioning. This will be addressed in Topic 9.
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This topic concludes the first half of this unit that is you have completed six, of twelve topics. These topics have sought to explain to you what marketing entails and essentially some of the activities and decision making before we can determine our marketing mix. Indeed all we have discussed thus far is an integral part of marketing strategy. The next 6 topics focus on marketing strategy decisions across the marketing mix or more specifically in terms of our total offering to the market. The better we are prepared, as per the first six topics, the easier these decisions will be. We will start with product decisions.
Case study practice

We can now complete our evaluation of the Dudley Dayshades marketing strategy. Quite simply from this topic we should ask: Have they adopted an STP approach?
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Activity 6.1
This response illustrates a product orientation rather than a marketing orientation. It implies no clear knowledge that there is sufficient demand for the product or service; if there isnt, the product or service will undoubtedly fail. Nor has a customer need been identified and a product offered to specifically satisfy that need.
Activity 6.2
Some examples of segments of the car market: the family market (parents plus two kids) prestige buyers economy conscious buyers the yuppie market the safety conscious driver the female driver (including sub-segments by age).
Essentially we see a mix of demographic, lifestyle and benefits-sought type variables. Car manufacturers will need to identify these segments, then decide which of these segments they wish to serve, develop an appropriate model (product) and supporting marketing mix. Contrast Ford and BMW. Which market segments have they selected? Which models serve which segment?
Activity 6.5
1. It is unlikely you found an undifferentiated approach. Concentrated marketing is appealing when resources are limited; similarly small companies have been targeting niche markets. A total differentiated strategy is only likely for large organisations with considerable resources. 2. A topical ethical debate is the marketing of fast food to children and the concerns this is raising about obesity. A good topic for discussion in teleconferences/ tutorials!
Topic 7
Product strategy and new product development
Introduction
This topic will provide you with the understanding of product development, which may be particularly important if you are developing a marketing plan to launch a new product for your second assignment. Even if you are not planning on launching a new product, the topic will still provide essential information which will help you to articulate what your product strategy will be, even for an existing product. It looks at the Product P where product is to be considered in its broadest sense as our offering to the market. It thus includes physical goods and all types of service deliveries. First well look at a technique for analysing our product from the customers viewpoint offering satisfaction in a series of levels. Well go on and consider the distinct characteristics of services and how these pose specific challenges for marketing. Next well address specific product decisions; the product attributes that will meet the needs of target market segments; branding strategies; packaging as both a protection and promotion vehicle; and product support services that will help achieve product differentiation. Finally, we turn to the development of new products. Here we consider why organisations need to develop new products and then explore reasons for the failure and success of new products. Next we examine the stages to be undertaken in following an objective new product development decision process. The topic concludes by considering the consumer adoption process for new products and the implications for marketers.
Objectives
On completion of this topic, you should be able to: define what a product is based on the levels of a product explain the unique characteristics of services discuss how products can be differentiated through design, service offerings and packaging explain why organisations need to develop new products discuss factors that may contribute to a successful new product explain the eight stages in the new product development decision process identify potential sources of new product ideas discuss the consumer adoption process and the implications for marketers.
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What is a product?
Consider a recent purchase of a product. What were you really buying? Customers are seeking a bundle of satisfactions. Your text provides a useful approach to analysing a product in terms of five levels: 1. 2. 3. 4. 5. Core product the fundamental benefit or service or solution to the problem. Basic product the essential components of the core product. Expected product the attributes that customers would normally expect. Augmented product additional benefits to exceed customer expectations. Potential product all the future changes to the product that may occur in the future.
These five levels are illustrated in Figure 7.1.
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Q u i c k T i m e a n d Q u i c k T i m e a n d d e c o m p r e s s o r d e c o m p r e s s o r n e e d e d t o n e e d e d t o
a a s e e s e e t h i s t h i s p i c t u r e . p i c t u r e .
Source: Kotler, Keller & Burton, 2009, p.342. Figure 7.1 Five levels of product
These levels are explained in your next reading and illustrated in relation to what guests receive when staying in a hotel.
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Activity 7.1
Think about one or two recent purchases. Break down what you purchased utilising these levels of a product.
These product levels indicate some of the product decisions to be made as we seek to match our product to customer needs. This levels of a product concept is a useful tool in planning our offering to the market (and hence useful for your second assignment). The outer rings and specifically the augmented level is where we may seek to differentiate our offering. So far in this topic, youve probably been thinking of product as physical goods. In fact when marketers talk of products they invariably mean offering. As you saw in your last reading, we may define a product thus: A product is anything that can
MKT00720 Topic 7 Product strategy and new product development
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be offered to a market to satisfy a want or need. Your text goes on to clarify that product thus includes physical goods, services, experiences, events, persons, places, properties, organisations, information and ideas. So you should be able to apply the product levels concept to all these product forms. Goods are invariably supplied with some service elements (e.g. after sales service, installation, help-lines) and similarly services try to tangibilise part of their offering (e.g. the towels and shampoo in your hotel room). There are various types of goods/services available to consumers today. In the next section we will identify the key types of products available.
Product classifications
You will notice that one of the key differentiators between many products and services is the extent to which they are tangible or not. In general, products are more tangible than services, as they can be seen, touched and sometimes even experienced (e.g. test driving a car) prior to purchase. Services, on the other hand, such as the MBA program which you are currently studying, are generally intangible offerings that the consumer cannot experience before they actually pay for it. We will turn to the issues of marketing services later in this topic. Your text identifies the following different types of products available to the consumer: 1. non-durable goods (e.g. tea or coffee) 2. durable goods (e.g. refrigerator, DVD player) 3. services (e.g. education, legal advice, insurance). And then goes on to explain the difference between consumer goods (the types of things you buy for your own personal use) and industrial goods (products purchased by companies as part of their production processes such as building materials, equipment and maintenance services for a housing development business). Each of these types of products is discussed in your next reading.
Textbook
It is worth noting at this point, that the marketing of services may require special consideration. So lets consider some of the issues related to Services Marketing.
Services marketing
The intangibility of services was seen by service marketers as the first obstacle in their criticism of the applicability of marketing concepts to services. It is important to note that there is a continuum of products versus services, with many products also involving a service component and vice versa. Your text distinguishes five categories of offerings: 1. pure tangible goods e.g. salt, toothpaste 2. 3. 4. 5. tangible goods with accompanying services e.g. cars and computers hybrids e.g. restaurants major service with accompanying minor goods and services e.g. an airline trip pure service e.g. baby-sitting.
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Textbook
Characteristics of services
Services have four major characteristics which differentiate them from physical goods: intangibility cannot be seen, tasted, felt, heard or smelled before purchase inseparability are produced and consumed simultaneously variability can vary greatly even when produced by the same individual perishability cannot be stored.
These characteristics pose challenges to marketers in terms of developing marketing strategies. This is discussed in your next reading.
Textbook
As you saw in your last reading, service marketers need to develop strategies that: tangibilise their offering increase productivity increase and standardise the quality of the service provided match supply and demand (during peak and non-peak times).
Some of these tasks may seem to be outside the marketing domain and perhaps more in the HRM area. This emphasises the importance of internal marketing in service industries to motivate employees and ensure their customer focus. Marketers have discussed and debated whether we need to distinguish services marketing from goods marketing. Your next reading addresses this by first dispelling the four service marketing myths (i.e. the four service characteristics we listed above) and then going on to recommend a more service dominant view of all exchange which can be developed for all of marketing. This reading is from the authors of Reading 1.2 which you may recall espoused this S-D logic.
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Reading 7.1
Turn to Reading 7.1. by Vargo and Lusch. You may also like to look back at Reading 1.2.
Activity 7.2
Do you agree/disagree with the arguments in Reading 7.1 in terms of: i) dispelling the myths? ii) that an S-D logic of exchange can apply to all marketing?
Whilst understanding the nature of your product or service offering is important for marketers, a greater challenge is usually how can we differentiate what we offer from our competitors?. In the next section, we will consider how we can differentiate what we offer to our customers so that we gain preference in their minds.
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Product differentiation
Your text suggests that there are essentially three key ways in which a company can differentiate what it offers to its customers through product differentiation; design; and services offered. We know, for examples, that car manufacturers are continually trying to improve the vehicles they produce by incorporating new features, design models and after sales service benefits such as extended warrantees. They do this to try and stand out in the crowd or differentiate their product offerings. Your next text reading discusses the various ways that differentiation may occur firstly for products and then more specifically for services. As you will see the main product differentiators are: form, features, customisation, perfprmance quality, conformance quality, durability, reliability, repairability, style, and lastly design. Whereas the main service differentiators are: ordering ease, delivery, installation, customer training, customer consulting, and maintenance and repair.
Textbook
Product mixes
A company will not usually produce just one product doing so is in fact very rare (and risky) because if demand for that product declines the company may well be out of business! If you think about a company such as Coca-Cola, they have a range of product offerings from the traditional Coke; Vanilla Coke; Powerade (an energy sports drink); and even a tea called NesTea. Most companies make various decisions about the product mix they will offer; the width and depth of that product mix and how they will manage this mix to expand their business. Your next reading discusses the product mix decisions to be made.
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Activity 7.3 (for discussion in tutorials and/or teleconferences)

Read the Breakthrough Marketing feature about Toyota on p.348 of your textbook: 1. What are Toyotas product differentiators? 2. What are the strengths and weaknesses of Toyotas product (and service) strategy? 3. What are the broader key success factors for Toyota? 4. Where is Toyota vulnerable? What should it watch out for?
Next to another product decision packaging.
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Packaging
As we discussed previously, packaging may be seen as part of the product and as part of the promotion of that product. Packaging provides a container which in turn will both protect the product and offer a potential communications vehicle. Here we will focus on the product aspects. Packaging is also used to portray image, value and, especially if innovative, to create product differentiation and competitive advantage. Packaging considerations are discussed in your next reading, which also touches on labelling as well as warranties and guarantees.
Textbook
Sometimes, a company may change its core product very little, but it will alter the packaging on an ongoing basis to add new appeal and differentiation to its offerings. The following extract from Coca Colas corporate website illustrates this nicely for the now infamous Coke:
Packaging Until the mid-1950s, the world of Coca-Cola was defined by a 6 12-ounce hobble-skirt bottle or bell-shaped fountain glass. But as consumers demanded a wider variety of choices, the Company responded with innovative packaging, new technology and new products. In 1955, the Company introduced the 10-, 12- and 26-ounce king-size and family-size bottles, which were immediately successful. Metal cans, first developed for armed forces overseas, were available on U.S. market shelves by 1960. Then, following years of research into plastic soft-drink bottles, the Company introduced PET (Polyethylene Terephthalate) packaging in 1977 in the 2-liter size.
Source: Coca Cola Pty Ltd (2005).
http://www2.coca-cola.com/heritage/chronicle_moving_times.html
Accessed 9 September.
For some examples of packaging innovations used by the beverage industry, turn to your first additional reading.
Reading 7.2
Turn to Reading 7.2. by Theodore.
Packaging tends to be more closely associated with physical goods, but can also be applied to services.
Activity 7.4
Discuss the application of branding and packaging to the following service businesses: (i) a fashion clothing store (ii) a credit union.
Now that we have identified the key components of a product and how they can be differentiated, we move onto the issue of how companies develop new product offerings for the marketplace.
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The new product challenge

Why do organisations need to develop new products? A simple answer is that customers want new products. Furthermore, as we will see in Topic 8, according to the product life cycle model, products have a limited life. Indeed with technological advancements, these life cycles are becoming shorter. So companies need to develop new products to replace those well-advanced in their life cycle and thus to ensure long-term survival. New products are not confined to new-to-the-world innovations but rather newto-your-company innovations. In fact most (over 90 per cent) of new products are the latter. They include modifications to existing products, product line additions and copying competitors products. Booz, Allen & Hamilton (1982) identified six categories of new products thus: 1. 2. 3. 4. 5. 6. new-to-the-world products new product lines additions to existing product lines improvements and revisions of existing products repositionings cost reductions.
These are discussed in your next reading. The major drawbacks of new product development are the high risk and cost. New products, especially in consumer markets, continue to fail at a disturbing rate.
Why do new products fail?

Interestingly research into new product failures has tended to highlight marketing reasons rather than design or technological ones. For example, over-estimated demand, an ineffective marketing mix, or under-estimation of the competition. Your text discusses possible reasons for new product failures and other factors that hinder new product development are discussed in your next reading.
Textbook
The good news about a new product failure is that we should learn from our mistakes. As quoted in your last reading (page 618): It is not just OK to fail, its imperative to fail. Now lets be more optimistic and try to identify a recipe for success.
Factors leading to successful new products

In your last reading your text suggests that continuous innovation is a necessity. The text also explores some success factors for developing new products, many of these derived from research studies. These include: a unique, superior product a well-defined product concept prior to development a deep understanding of customer needs technological and marketing synergy quality execution in all stages of the new product development process market attractiveness
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as well as careful assessment of the target market, product requirements and benefits before proceeding and organisational culture, processes and teamwork.
These research findings emphasise the need for a combination of knowing the customer, market attractiveness, an objective process for developing new products, and the right organisational climate and culture to foster this development. Effective organisational arrangements are explored further in your next reading.
Textbook
The development of new products also needs to match corporate objectives and resources. If a company seeks growth, as per Ansoff Matrix (Topic 2) one option is new product development. If a company seeks consolidation, new product development may be a low priority in the short term, for this years corporate plan, although as weve already pointed out new products are necessary for all organisations to ensure long-term survival. Not all organisations will have the resources to support their own new product research and development facilities, especially for new-to-theworld products; others will be content to copy competitors products once demand has been established (a me-too strategy); further alternatives include joint venture new product developments or acquisitions.
New product development decision process

Your last reading suggested an eight stage new product development decision process with a go/no-go gate between each stage, as shown in Figure 20.4 on page 621 of your text, thus: 1. 2. 3. 4. 5. 6. 7. 8. idea generation idea screening concept development and testing marketing strategy development business analysis product development market testing commercialisation.
Well look at each stage in turn.
1. Idea generation
Where do new product ideas come from?
Activity 7.5
1. Have a mini brainstorm. List some possible sources of new product ideas. 2. Now come up with 3/4 new product (or service) idea, recording where these ideas came from.
Clearly, applying the marketing concept means starting with customer needs and wants. Your text discusses possible sources in your next reading.
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Textbook
Note in this reading the Marketing Memo box on page 622 Ten ways to find great new product ideas as well as the other hints and tips in the other Marketing Memos. Now youve got lots of good ideas the next stage is to screen these.
2. Idea screening
The purpose of idea screening is to drop poor ideas. To do this, we need to develop some objective criteria to assess the various ideas. This is explained in your next reading.
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Textbook
Activity 7.6
Following the procedure suggested in your last reading, develop criteria for screening your ideas (from Activity 7.5) and then apply a weighted index calculation to determine the good idea(s).
Attractive ideas need to be refined into testable product concepts stage 3.
3. Concept development and testing

One of the success factors we identified above was a well-defined product concept prior to development. As per your text: a product concept is an elaborated version of the idea expressed in consumer terms. You should recall from other topics that customers seek benefits. A product concept seeks to express the benefit. Your text presents a very good example of concept development in your next reading.
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Textbook
Turn to your textbook and read page 628629.
Activity 7.7
Develop alternative product concepts for your new product idea (from Activity 7.5) along the same lines as explained in your last reading. Can you utilise a product positioning map and a brand positioning map?
Concept testing requires customer research. We need to present potential customers with the concept, either physically or symbolically, and elicit their reactions to a list of questions about the concept. We need to ascertain the need level and purchase intent. It may also be possible to measure customer preferences for alternative product concepts using conjoint analysis. Your text illustrates concept testing in your next reading.
Textbook
Turn to your textboook and read pages 629631.
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Your next reading suggests that to develop truly original and powerful new products (and reduce the failure rate) we need a renewed emphasis on the concept building phase.
Reading 7.3
Turn to Reading 7.3 by Hudson.
After testing we need to look at the marketing strategy and then the business feasibility of the new product, stages 4 and 5.
4. Marketing strategy development

At this stage we are only looking at a preliminary marketing strategy/plan to determine the marketing feasibility. We need to consider the target market and its size, and an outline only of the marketing mix and marketing budget, so that we can estimate likely profits from market share and sales estimates. We can then move to the next stage, a broader business analysis.
5. Business analysis
Here we need to determine sales, cost and profit projections to see whether they satisfy corporate objectives. This stage, and the previous one, is explained in your next reading.
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Textbook
Activity 7.8
Are you ready to develop an outline marketing strategy and undertake the business analysis for your new product (ex Activity 7.7)?
If the new product meets corporate requirements, we move to the product development stage.
6. Product development
This stage, developing a product concept into an actual marketable product (which may be a physical good or a service) can be a lengthy process. Products need to be reviewed and refined during the process. Your text discusses some interesting examples of product testing in your next reading and explains this stage.
Textbook
Testing will continue on to the next stage market testing.
7. Market testing
Not all new products will undergo market testing. Some companies will not feel the step is necessary; others may not want to spend time on a test market which may allow competitors to copy their product and enter the market before their full-scale launch. Some products, for example large, big dollar, industrial equipment, or tailor made products, do not lend themselves to a market test.
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The purpose of market testing is to: (i) reduce risk i.e. a test market failure can be withdrawn saving dollars on a full launch and with less damage to image/reputation (ii) to test all components of the marketing mix. Your text explores some methods for market testing in your next reading.
Textbook
As you saw, a full-blown test market is seen as the ideal way to test new consumer products. In choosing a test market site, we need to select an area that is representative of the target market. In Australia the cities of Wollongong and Newcastle are popular choices for consumer goods test markets because their populations are fairly typical of the Australian population.
Activity 7.9
Is market testing appropriate for your new product? Why/why not? If yes, which methods?
If the new product passes the market testing, we are now ready to go ahead with commercialisation, the final stage in our new product development decision process.
8. Commercialisation
We will need to develop a marketing plan to support the launch of the new product. A launch marketing plan will be of similar format to the annual marketing plan we discussed in Topic 2, but will just relate to one product. The time horizon of a launch plan may be shorter, say three or six months or even seasonal. Your text addresses some of the decisions to be considered in developing a launch marketing plan in your next reading.
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Textbook
Lets see how a New Zealand company, Olivado, successfully launched a new product.
Reading 7.4
Turn to Reading 7.3 by Jayne.
Activity 7.10
List the factors that have contributed to success for Olivado ex Reading 7.4. What about the future? (Note: This case study will be discussed in tutorials and teleconferences.)
Having explored the eight stages in the new product development decision process, well complete this topic by considering how customers respond to new products.
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The consumer adoption process

The consumer adoption process is the process by which customers learn about new products, try them, and then adopt, or reject, them. Today, with an increased emphasis on target marketing, new product marketers are aiming at consumers who are described as early adopters; that is consumers differ in their interest for new products. The early adopters respond more positively to new products. Furthermore they share traits that differentiate them from late adopters and thus they can become the prime target market. The theory of innovation diffusion put forward by Everett Rogers (1962) added to our understanding of the adoption process. Rogers defines the innovation diffusion process as the spread of a new idea from its source of invention or creation to its ultimate users or adopters. Rogers classified people into five adopter categories: innovators early adopters early majority late majority laggards.
These categories are illustrated in Figure 20.10 on page 641 of your text. Rogers suggested these five adopter groups differ in their value orientations and companies should research the demographic, psychographic and media characteristics of innovators and early adopters and target them. The consumer adoption process is discussed in your next reading. As you read note how marketers respond to their knowledge and understanding of this adoption process.
Textbook
Summary
In this topic youve explored product decision making. Firstly we looked at the levels of a product concept and you saw how this tool can help us to analyse our offering from the customers viewpoint. Next we addressed some specific product decisions. You saw how product attributes offered benefits that needed to be matched to the needs of target markets. You also saw how packaging and product support services could help to differentiate your product in the market. This topic has also explored the development of new products. First we looked at why organisations need new products, and then at reasons why new products fail, or succeed. You saw how successful new product development was likely to be due to a combination of understanding customer needs, market attractiveness and organisational support, together with an objective new product development decision process. Next we considered the new product development decision process as an eight stage process; idea generation, idea screening, concept development and testing, marketing strategy development, business analysis, product development, market testing and commercialisation. You saw what was involved at each stage, before proceeding to the next stage, and hopefully gained some useful insights into the process of product development.
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The topic concluded by considering how customers respond to new products. You saw how an understanding of the consumer adoption process provided new product marketers with the opportunity to target early adopters.
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Activity 7.1
The table below shows the five levels for a car, and more specifically a model by Daimler-Chrysler Smart ForTwo (SmartCar) sold in many countries, which was initially developed to allow two cars to park in one spot i.e. a space saving vehicle! (see http://www.smart.com for more information)
Level Core benefit Basic product Expected product Augmented product Potential product Benefits purchased Transportation Smooth, efficient engine; clean interior and appealing interior fabrics; 5-speed gear box; tyres etc. Air bags; central locking; electric windows etc. Softip sequential 6-speed transmission; parking convenience; funloving image; after sales service Smart ForFour; new shaped models etc.
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Activities 7.2 and 7.3

To be discussed in tutorials and teleconferences.
Activity 7.4
(i) Branding considerations for a fashion clothing store would be its own brand/name and which and how many clothes brands to stock. Packaging may include their carrier bags, maybe gift wrapping, and perhaps store decor could come under this heading. (ii) The credit union will have normal branding considerations. Packaging here may include presentation materials, store decor, corporate colours and uniforms. Could hours of operation be seen as packaging? Note: Activities 7.5 to 7.9 relate to the development of your new product applying the concepts in the text and hence there are no model answers. Activity 7.10 will be discussed in tutorials and teleconferences.
Topic 8
Creating brand equity
Introduction
We live in a world full of brands. From Coca Cola to Nike, and now even to branded tourism destinations, marketers across the globe have long recognised the importance of creating and maintaining a successful brand strategy for their products or services. In this topic, we introduce the concept of Brand Equity as a way of understanding why so many companies put so much emphasis on developing a successful brand name and image. Once we have established an understanding of what the value of branding is to firms, we then look at ways that successful brands are developed, maintained and managed.
Objectives
On completion of this topic, you should be able to: examine branding decisions explain the meaning of brand equity develop strategies to build, measure and manage brand equity discuss the important issues when developing a branding strategy.
Branding
Branding is a key consideration in product strategy. In essence a brand seeks to identify the product with the seller and to differentiate it from its competitors. It can be a name, trademark, logo or other symbol. Your next reading discusses What is a brand?, and goes on to explore the scope of branding.
Textbook
Advantages of branding
The key advantages of having a strong brand include (see p.258 of the text for a full list of advantages): improved perception of product performance greater loyalty less vulnerability to competitor actions and market crises larger margins additional brand extension opportunities.
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Furthermore, your next reading suggests that the answer to retaining customers lies in branding.
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Reading 8.1
Turn to this reading by Norris and Hall and note the suggested two routes to success.
So what makes a successful and enduring brand?
Activity 8.1
Brainstorm a list of some successful and enduring brands. What do you see as the reasons for their success?
Your next reading suggests that to endure, brands need a soul!
Reading 8.2
Read The soul of a brand by Kiely.
Interestingly Kiely suggests Nike is a bad brand. Compare this to the brand positioning for competitors Reebok a nice brand? or perhaps a more feminine brand and Adidas a precision/quality brand, stemming from its German heritage. However, over recent years Nike has softened; playing down the tagline Just Do It; toning down the use of the swoosh in an effort to appeal to new segments.
Understanding brand equity

The American Marketing Association, as your text notes on p.252, defines a brand as:
a name, term, sign, symbol or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors
Companies worldwide have worked long and hard to establish a strong brand image in the marketplace for a number of reasons which are outlined in your first text reading. The value placed on well known brands for the companies that own them is enormous. In your first additional reading, the results of the Interbrand global brand survey shows that the brand value of Coca Cola is over $US67,525 million! Microsofts brand value is $US59,941 million. The results of Interbrands Australian brand survey estimates Billabongs brand value to be $A1,100 million. These figures are commonly referred to as the brand equity provided to companies by the value of their brands. In the following text reading, you will be introduced to the role of brands in marketing and the meaning of brand equity. Readings 8.3 and 8.4 will further highlight the value of brands to companies, both worldwide and in the Australian context more specifically.
Textbook
Each year Interbrand produces a listing of the best global brands. They list the Top 100 brands in terms of brand equity with some discussion of why. You can also compare the rankings from previous years.
MKT00720 Topic 8 Creating brand equity
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Activity 8.2
Visit the Interbrand website: http://www.interbrand.com/best_global_brands.aspx. Which are the current Top brands and are there any surprises compared to recent years rankings? Also what reasons can you find out for their success?
Your next reading gives an Australian perspective and how some Australian brands are faring.
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Reading 8.3
Turn to Brand Values Surge.
Activity 8.3
Summarise the key points from Activity 8.2 and Reading 8.3 to explain what makes a brand successful.
Building brand equity

Now that you have an understanding of the value of brands, it is important to consider how a successful brand is built. As you will see in your next reading, the development of a successful brand involves: choosing the most appropriate brand elements designing holistic marketing activities to communicate the brand elements leveraging secondary associations.
Note in the reading the various examples including how Avis have gone about building their brand.
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Textbook
Activity 8.4 (for discussion in tutorials or in teletutorials)

Choose a well-known brand of a product which you buy on a regular basis. List the key reasons why you believe that brand has become so well established.
In the next section, now that we know what makes a brand successful, we look briefly at how companies place a value on their brands or how to measure brand equity.
Measuring brand equity

You have already seen how Interbrand has estimated the brand value of the worlds leading brand-name companies. Your text discusses two methods of estimating brand equity the indirect versus the direct methods. It also illustrates how companies can estimate the values of their brand equity through: brand audits brand tracking brand valuation.
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Textbook
Managing brand equity

Developing equity in a brand clearly requires a long-term commitment by companies. If you think about the brand icons, such as Coca Cola, there have been ongoing developments in the way that their company has marketed its products over time. Coca Cola, for example, has fine-tuned its product branding by changing its slogan over the years. It has also attempted to extend the brand to new products and variants such as Vanilla Coke, Lime Coke etc. Your text highlights how firms manage their brands through brand reinforcement, revitalisation and also how they handle branding in times of crisis. This is followed by a reading on Brand Asset Management which also provides some insight on how successful brands should be managed.
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Textbook
Reading 8.4
Turn to the article by Scott Davis on Brand Asset Management.
Activity 8.5
Summarise the key points from Reading 8.4.
Developing a branding strategy

You are no doubt aware that many companies contain more than one branded product. For instance, the Starwood Hotels & Resorts group contains several sub-branded hotel chains (e.g. Sheraton, Westin, St. Regis and The Luxury Collection), each of which serves a specific market niche. As such, many companies manage not just one brand, but also a series of sub-brands; brand extensions and entire brand portfolios. The following text reading explains how a range of brands can be managed, and provides a number of advantages and disadvantages for firms planning on introducing brand extensions.
Textbook
MKT00720 Topic 8 Creating brand equity
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Summary
The importance of creating a consistent, clear and differentiated brand was first discussed in this topic. Ways in which companies go about developing a successful brand and creating brand equity as a result, has also been addressed. For a brand to be successful, a company must create not just a readily identifiable logo, slogan etc. but it must also deliver a sense of the firms personality through its branding initiatives. The values of brands to key global and Australian companies was also discussed in this topic. Here we saw why the well known brands we are familiar with have invested so heavily in developing and maintaining a good brand image amongst consumers. We have also considered how firms often extend their original brand name to other sub-brands contained within their business portfolio. Each sub-brand will hold a distinctive position in the marketplace a subject which we will expand on further in your next topic!
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Activity 8.1
(for discussion in tutorials or in teletutorials)
Activity 8.2
The key points raised include: a good brand adds value to a company customer loyalty is higher for branded products/services launching new products is easier when customers already have a brand association in mind for a particular company (i.e. it gives customers a sense of confidence in the brand) a good brand must have clear points of difference that can be sustained in the long term a company that has a real brand asset instils the values of that brand and its personality to both staff and customers.
MKT00720 Unit Evaluation by Students 101
GCM

graduate college of management
Unit Evaluation by Students

To ensure that the units offered in our graduate management programs are of the highest standard, we ask for a few minutes of your time to complete the brief evaluation questionnaires. Please note that there are two evaluation forms associated with this unit. You will have an opportunity to comment on matters relating to teaching/ learning and unit content via an electronic evaluation form. This form will become available on the MySCU site for this unit late in the trimester. You are strongly encouraged to provide comment via the MySCU site. In addition, the below evaluation form provides an opportunity for you to comment on administrative matters associated with the unit. Please complete this form and return it in the reply-paid envelope provided. Your feedback is important to our review process. Thank you.
Feedback Regarding Administrative Matters

COVERING NOTE
If you wish to add written comments please do so in the spaces provided. Please return your evaluation to the Graduate College of Management, SCU, PO Box 157, Lismore NSW 2480 Australia. Thanks for your participation. Unit name and code: MKT00720 Marketing Management Name of teaching staff: What country are you studying in? Tri. offered:
UNIT EVALUATION
For Items 113, please indicate the extent to which you agree or disagree with the statements about the unit by using the following scale. 1 2 3 4 Strongly Agree Neutral Disagree Agree 5 Strongly Disagree
In response to each statement please circle the number which most accurately reflects your opinion.
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1. 2. 3. 4. 5. The unit print materials were delivered on time to meet my learning needs. 1 The unit print materials were suitably formatted and presented. The unit MySCU site was available on time to meet my learning needs. I was able to readily access the MySCU site. Material provided on the MySCU site was of suitable format and size. 1 1 1 1 2 2 2 2 2 3 3 3 3 3 4 4 4 4 4 5 5 5 5 5
Assessment
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MKT00720 Unit Evaluation by Students 103
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You may have participated in one or more of the following activities in this unit teletutorials, workshops, online discussion forums or received audiotapes. If so, please answer the appropriate question(s). 8. 9. 10. 11. 12. 13. The teletutorials for this unit were beneficial to my learning. The workshop for this unit was beneficial to my learning. Online resources were beneficial to my learning. The online discussion forums were beneficial to my learning. The audiotapes for this unit were beneficial to my learning. The digital recordings for this unit were beneficial to my learning. 1 1 1 1 1 1 2 2 2 2 2 2 3 3 3 3 3 3 4 4 4 4 4 4 5 5 5 5 5 5
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Comments on Items 1419
Administrative Support for the Unit Overall

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Topic 9
Positioning the brand
Introduction
In Topic 6 you saw that the third step in STP marketing is to develop a positioning strategy. Well explain the concept of positioning in this topic and then explore how to differentiate our offering to the market by choosing the right positioning strategy. A good brand can usually create a clearly differentiated position for a company and its products in the marketplace. As such, also leading on from Topic 8, this topic introduces you to the importance of creating a clear positioning strategy along with how to ensure a product is clearly differentiated from the masses. We then consider how the position of products and the strategies used to market them often change as a product moves through the various stages of the Product Life Cycle.
Objectives
On completion of this topic, you should be able to: explain the concept of positioning discuss how to differentiate our market offering evaluate the effectiveness of a brands positioning in the marketplace determine how successful brands are differentiated determine appropriate marketing strategies at each stage of the product life cycle.
Positioning
Marketers seek to position their products to create a differential image in the minds of target customers. The word positioning was popularised by two advertising executives, Al Ries and Jack Trout. They define positioning thus:
Positioning starts with a product But positioning is not what you do to a product. Positioning is what you do in the mind of the prospect. That is you position the product in the mind of the prospect.
Source: Ries & Trout, 1991.
Positioning is thus closely linked to perception. The result of a successful positioning strategy is that a customer-focused value proposition is created. This is discussed in the next textbook reading.
Textbook
Turn to the textbook and read pages 287288.
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Note your last reading, the Breakthrough Marketing Memo on p.289, which describes how Woolworths in Australia has successfully differentiated itself from rival Coles by its Fresh Food positioning. Deciding on a positioning strategy involves: identifying possible ways to differentiate our offering from that of competitors selecting the right differences to promote.
Lets look at these in turn.
Differentiating an offering
In a competitive marketplace, we seek to differentiate an offering and so achieve competitive advantage. According to your text a market offering can be differentiated along four key dimensions: product personnel channel image. This will be explored later in the topic.
Selecting the right differences to promote

To do this we need a think customer approach. We need to understand how the target market makes choices among vendors. How can we offer competitive advantage that will match the needs/wants of target customers? Should we promote only one product benefit thus creating a unique selling proposition? Perhaps the idea of a unique selling proposition reflects a customer focus. Your next reading suggests determining your Consumer Purchasing Benefit (CPB) reflecting a greater customer focus.
Reading 9.1
Now read Differentiate or die by Pritchard.
Once a position has been chosen, the marketer utilises the total marketing mix to fully support this positioning strategy.
Developing a positioning strategy

We must recognise here that even the best branded product in the world cannot sustain growth and competitive advantage if it is not clearly differentiated from its competitors and appropriately positioned in the marketplace. An example of what can go wrong when a product or service is not clearly positioned in the market, nor is the positioning reflected by the brand and marketing mix, is given on p.288 of your text with respect to Rosemount wine. One of the major criticisms of many companies attempts at positioning in the marketplace is that they fail to set themselves apart from the competition. That is, they position themselves exactly where a competitor has already situated themselves in the customers mind. The following additional reading highlights 10 rules of product positioning. Although it is focused specifically on the positioning of pharmaceutical products, its key messages are equally relevant to your own company!
MKT00720 Topic 9 Positioning the brand 107
Reading 9.2
Read the article Ten Rules of Product Positioning.
As Robertson has noted in Reading 9.2, companies who have mastered the art of product positioning have usually created such a clear position in the marketplace that consumers can sum up their positioning strategy in one or two words Volvo for example has worked hard to position itself as the safe car manufacturer. Coca Cola as we all know has leveraged the real thing as its positioning statement.
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Activity 9.1
Choose three brands that are well known to you. What key words come to your mind to describe how they have positioned themselves in the marketplace?
Your next text reading suggests that a clear positioning strategy can be developed by determining: category membership points of parity points of difference. Firstly lets consider category membership.
Textbook
Choosing points of parity and differentiation

While points of parity must exist in the minds of all consumers for a particular product in order for it to be competitive, points of differentiation can be carefully selected by firms in order to stand out from the competition. If you think of Volvo and its brand image its point of differentiation is obviously aimed at safety features. Your next text reading suggests that marketers should consider three key, desirable criteria and three deliverability criteria when selecting points of differentiation as follows: Relevance (does it have personal meaning to the consumer?) Distinctiveness (does it stand out from what competitors are offering?) Believability (does your firm have the credibility to deliver on the promise?) Feasibility (can you actually deliver the points of difference promised?) Communicability (can you communicate what is different to the consumer?) Sustainability (can you maintain the point of difference against competitors in the long run?)
Once you have read the following text reading, turn to Activity 9.2 which will help you to clarify the points of difference (and parity) that you can use in developing the product strategy for your marketing plan for the second assignment.
Textbook
Activity 9.2
Considering a product/service related to your marketing plan assignment, develop a list of points of difference and points of parity. From this, how should this product/ service be positioned in the marketplace?
Differentiation strategies
Closely linked to successful positioning, is the need for any business to know how its products or services can be differentiated from those of its competitors. Differentiation, as your text notes, can generally occur from one or more of the following: Product differentiation Personnel differentiation Channel differentiation Image differentiation.
Textbook
Finally, as a conclusion to this topic, we look briefly at how firms must change their positioning and differentiation strategies as they progress through the Product Life Cycle.
Strategies through the product life cycle

In Topic 7, we looked at the specific case of new products that were introduced to the market for the first time. This introduction phase is the first step of the product life cycle (PLC) which implies that all products tend to pass through a life cycle comprising four distinct phases: 1. 2. 3. 4. Introduction Growth Maturity Decline.
Typically this product life cycle follows an S-shaped curve as described in your next text reading.
Textbook
As you saw in your last reading: (i) the PLC concept can be used to analyse a product category, a product form, a product or a brand (TVs are a good example here: product category all TVs, product forms black and white/colour/digital , products individual models, brands Phillips/Sharp/Sony ) (ii) the profit curve lags behind the sales curve; it takes time to recoup product development costs (iii) not all products exhibit an S-shape (or bell-shaped) curve.
Activity 9.3
Try to identify products that are in different stages of the PLC.
MKT00720 Topic 9 Positioning the brand 109
So what are the implications of this PLC concept? Firstly if we accept the hypothesis, all products have a finite lifetime and hence new products are needed to ensure longerterm sales, and survival. Most importantly, we need to adjust our marketing strategies for each stage of the PLC.
Adjusting marketing strategy through the PLC

Your next reading discusses marketing strategies at each stage of the PLC. It also notes that three special types of product life cycle (styles, fashions and fads) exist. As you read compare the strategy suggestions to your thoughts in your last activity.
Textbook
Table 10.5 on page 307 of your text summarises the characteristics, marketing objectives and marketing mix strategies of the four stages of the PLC.
Activity 9.4
Identify brands which are in the decline stage of their life cycle.
As a brand moves into the latter stages of the life cycle it may urgently need repositioning to meet changing customer needs, values and preferences before it is too late. So brands too need to be managed through their life cycle to achieve maximum return on the investment in building the brand. As a company and its products move through the product life cycle, it must adapt its positioning and differentiation strategies accordingly. In the final reading for this topic, the case of Nike is considered. We all know that Nike has carefully differentiated itself from other athletic footwear and clothing manufacturers through its image, logo and Just Do It marketing slogan. The following reading shows how Nike has had to adjust its marketing strategies as the company and its products moved into the mature phase of the product life cycle.
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Reading 9.3
Turn to the article Playing with a New Attitude.
Activity 9.5
Summarise the key strategies used by Nike to differentiate its brand and position itself in the marketplace.
Summary
At the start of this topic, we addressed how to determine a positioning strategy. We considered how to differentiate an offering and so develop a competitive advantage. Ways in which companies attempt to differentiate their product and service offerings has been considered in this topic. Finally, we turned to the product life cycle as a tool to consider when planning for ongoing change and repositioning of products as they move through the various stages of the life cycle. Here we learnt that strategies and positioning of products need to change as they move through the product life cycle in order to avoid slipping into the decline phase prematurely.
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Activity 9.1
No doubt there are some common answers here in terms of what brands you chose from Coca Cola, Nike, IBM, McDonalds or various others that were ranked in the brand value readings from Topic 8. Whichever you chose, you should think carefully about how unique the words are that you chose for each brand. For example, if you said Coca Cola was sweet does this really stand out as being any different from Pepsi or other cola brands? The answer is generally no. So the key words that companies try to associate with their products in order to carefully position themselves in the customers minds must have some point of uniqueness hence Coke introduced The Real Thing concept. Similarly Nike has positioned itself as a goahead Just do It company.
Activity 9.2
Your responses to this task will vary depending on the product or service you are focussed on for Assignment 2. You should use the four main types of differentiation strategies presented on pp.318321 of the text as well as the material on pp.315 317 to guide the development of your list of points of difference.
Activity 9.3
You may have identified a lot more products in the mature stage. Indeed the majority of product categories today are in the mature stage. However you may well have identified individual products in earlier stages of their PLC. In discussing this with fellow students you may enter into some debate about the specific stage, especially where products may be close to the next stage. Remember the PLC is only a concept to assist our analysis and decision making.
Activity 9.4
(this will be discussed in tutorials or in teletutorials)
Activity 9.5
(this will be discussed in tutorials or in teletutorials)
Topic 10
Price decisions
Introduction
This topic turns to pricing. Whilst pricing may not be considered the most exciting P, it is worth pointing out that it is the only P that generates income. All the other Ps are a drain on our resources! Pricing decisions require a combination of objectivity and subjectivity. The critical considerations are the 3Cs: Customer demand, Cost and Competition. We will see how these and other factors impact on pricing decisions. Well examine the steps to be undertaken in setting a final price. In doing this well touch on some economics and accounting terms in exploring how to estimate demand and in examining both cost-based and market-based pricing methods. Indeed marketers will look for help and guidance from their accounting sections in determining a price. Having determined a final price, we will then consider why and how marketers need to adapt this price to varying market conditions.
Objectives
On completion of this topic, you should be able to: discuss the critical considerations in determining price describe a step-by-step procedure for setting price discuss how marketers estimate demand discuss how to analyse competitors costs and prices distinguish between cost-based and market-based pricing methods explain why and how marketers need to adapt their price to reflect varying market conditions.
Price determination
Setting the price clearly needs to be another matching process between what the company needs to charge and what the customer is willing to pay in the context of the marketplace i.e. the marketing environment including competition. Indeed as the marketplace has become more competitive, price setting is no longer simply looking at costs, looking at the competitors prices and determining a price, there are more complex ways of offering price to the customer. Turn to your next reading for a tongue-in-cheek discussion of how an airlines pricing strategy can appear both complex, and confusing, to the customer.
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Reading 10.1
Turn to and read Reading 10.1.
Activity 10.1
Compare and critique (from a customer perspective) the pricing strategies of 2/3 companies competing in the same market. Repeat for 2/3 markets.
As you saw in your last reading (and previous activity) it would seem that pricing strategies are sometimes very confusing. It makes it difficult to compare competitors offerings. What about mobile phones can anyone work their way through all the various packages on offer? How can the customer compare value? We may indeed wonder if this is good marketing strategy. Your next reading gives further background of some of the issues involved in understanding pricing.
Textbook
The critical considerations in determining price can be best summarised as the 3 Cs: customer demand cost competition.
Reflecting on the earlier topics you should see other factors that need to be considered. In Topic 1, when we introduced the marketing mix, we pointed out the need for consistency across the marketing mix components, so price needs to reflect these other components. This was reaffirmed in Topic 9 when we discussed positioning, so clearly our price needs to reflect our chosen positioning. In Topic 3 we examined the macroenvironment; economic fluctuations will clearly impact on demand and thus on the price we can charge; governments can intervene too, for example through price controls or legislation regulating prices. So price determination will be a complex task, combining objectivity and some subjectivity. In terms of an objective approach your text develops a six-step procedure for setting the price thus: 1. 2. 3. 4. 5. 6. selecting the pricing objective determining demand estimating costs analysing competitors costs, prices and offers selecting a pricing method selecting the final price.
Lets look at each of these in turn.
1. Selecting the pricing objective

Pricing objectives need to reflect corporate and marketing objectives. For instance are we seeking growth, maximum market share, increased profitability or just survival? These corporate goals will be reflected in our pricing objectives. Your textbook discusses how pricing objectives reflect corporate objectives, with some good examples, in your next reading.
MKT00720 Topic 10 Price decisions 113
Textbook
Note the five major objectives suggested by your textbook in your last reading (survival, maximum current profit, maximum market share, maximum market skimming, product-quality leadership) seem more like corporate objectives. Pricing objectives can closely reflect these but also need to give more specific direction to pricing strategy. Remember, as we discussed in Topic 2 when considering marketing objectives, objectives need to be quantified and measurable (SMART) so too with pricing objectives. This is relatively easy in terms of a target return on investment, profit margin or market share, but harder if we are trying to convey a particular image or quality/value position. Some examples of pricing objectives are: achieve X per cent market share achieve X per cent ROI maximise long-term profit (+ quantify) maximise short-term profit (+ quantify) X per cent sales growth convey a particular image discourage entry by new competitors.
Note the earlier examples in the above list are more easily measurable than the later ones. Pricing objectives can relate to the whole organisation or to a specific product line or product but must be in the context of overall corporate strategy. Pricing objectives (the what do we want to achieve) are then transmitted into pricing strategy (the how to achieve).
Activity 10.2
Considering the companies you considered in Activity 10.1 what do you think are their pricing objectives?
Today, many markets are very price competitive. In the last activity you may have considered telecommunications. Other examples are air travel, computers, oil and petrol. Prices stabilise at the bottom of the range. The challenge for marketers is to differentiate their offering utilising all components of their marketing mix. We will look at responding to competitors price changes later in this topic. Now to step 2 in our price setting determining demand.
2. Determining demand
We discussed in Topic 1 how marketing management could perhaps be described as demand management. Then in Topic 6, in seeking to understand our customer we thought about what our customers are willing to pay and what constitutes value. Marketers need to forecast demand and to understand how price changes may impact this demand.
Forecasting demand
Organisations need to estimate future demand not only in determining pricing strategy but also in evaluating different market opportunities. We need to look first at the whole market and then at segments within that market. We seek to estimate total
market demand, market potential and then company demand; the latter being the organisations estimated share or market demand. These are discussed in your next reading which then goes on to explore practical methods for estimating current and future demand. To estimate current demand, companies attempt to determine: total market potential area market potential industry sales market share. survey of buyers intentions composite of sales force opinions expert opinion past sales analysis market testing.
To estimate future demand, organisations can utilise a combination of the following:
The methods used and the level of sophistication applied (mathematical models, statistical analysis, computer simulations) will of course vary with the size and resources of the organisation.
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Textbook
Activity 10.3
How does your organisation seek to estimate demand? Try to talk to someone within the organisation involved in this area. Are objective methods employed or more seat of the pants guestimates based on historical sales analysis?
Elasticity of demand
Now to see how price variations may impact demand. You may already be familiar with demand curves and price elasticity, especially if you have studied economics. A demand curve seeks to show the relationship between price and resulting demand. If demand changes considerably we say the demand is elastic, if demand only changes a little or not at all we say the demand is inelastic. These concepts are discussed in your next reading.
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Textbook
We all know we buy some products specifically on price (short airline trips, shares via the Internet) whereas will pay considerably more for other products, for example branded products and designer labels. Your next two readings illustrate examples of the latter.
Readings 10.2 and 10.3

Turn to, and read Reading 10.2 by Murphy and 10.3 by Tucker-Evans.
Activity 10.4
Why are customers prepared to pay the high prices discussed in Readings 10.2? And 10.3?
Customer demand was our first C to consider in determining price, now to the second Cost and Step 3 in our price setting procedure.
3. Estimating costs
We need to determine the total cost of delivering our offering to the market, i.e. production costs, distribution costs plus marketing costs. Furthermore we need to calculate fixed and variable costs. In practice, except in very small organisations we would expect the accounts department to supply most of these figures and allocate fixed costs but the marketer needs to understand the basics, as discussed briefly in your next reading. Costs should set the floor for the price but before we do that we need to address the third C Competition.
4. Analysing competitors costs, prices and offers

Clearly we need to closely monitor the competition. Marketing intelligence and marketing research can keep us abreast of what our competitors are charging and any price offers they are making. Finding out about competitors costs may be a bigger challenge.
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Textbook
Activity 10.5
How might you find out about your competitors costs?
Weve examined the 3Cs, were now ready to select a pricing method that will utilise one or more of these three considerations.
5. Selecting a pricing method

An organisation may utilise a combination of cost-based and market-based pricing methods to determine the price that should be charged. The simplest cost-based approach is mark-up pricing where a company seeks to earn a certain percentage mark-up on sales (this calculation is usually as a percentage of sales price although some companies may calculate a mark-up on cost). Another cost-based approach target return pricing sets out to achieve a target return on investment. Market-based methods focus on the other Cs customer demand and the competition. More customer oriented approaches are based on value. Market research is needed here to understand the customers perception of value, and in turn how this may impact on customer demand. A pricing method that focuses solely on the competition is going-rate pricing, where all competitors charge virtually the same price. This is common in an oligopoly (limited competition between a few suppliers) situation. Explore these various pricing methods in your next reading.
Textbook
The homework is now done, now is the time to set the final price.
6. Selecting the final price

Determining the final price will be a combination of objectivity from our earlier deliberations and subjectivity based on previous experience, our own judgment and perceptions. Your next reading includes some final considerations.
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Textbook
Activity 10.6
As before, you may like to investigate your own organisation. What pricing methods are utilised and how is the final price determined? Perhaps talk to somebody in the accounting section and then to somebody in the marketing team.
Although weve now determined the final price, this isnt the end of the story. As we will see in the last section of this topic, organisations then need to adapt this price to varying market conditions.
Adapting the price

Marketers may adapt the price to reflect varying market conditions as per the following examples: geographical pricing to reflect variations in geographical demand and costs price discounts and allowances to stimulate sales and reward specific customers promotional pricing to stimulate sales differentiated pricing selling at different prices to different market segments where the price difference does not reflect a proportional difference in costs.
Your text explains these in your next reading.
Textbook
Furthermore specific situations may call for price adjustments. Your next reading suggests price cuts may be as a result of: excess plant capacity or a drive to dominate the market through lower costs. cost inflation, or over demand.
Whereas price increases may be as a result of:
Such price adjustments need to be considered carefully, especially as it is difficult to anticipate how competitors, as well as customers, distributors and suppliers, may respond. Furthermore companies often face situations where they need to initiate or respond to price changes.
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Textbook
Another situation calling for pricing adjustments may be within a product mix. Here the objective is to maximise profits across the total product mix. As discussed in your next reading this may be a complex task because the various products have demand and cost interrelationships and are subject to different degrees of competition.
Textbook
Turn again to your textbook and read pages 359361.
Today, as youve already seen in this topic, especially in the examples weve discussed, adapting the price and responding to the marketplace are key considerations in price setting. As youve seen price setting is a complex task. So what if we are marketing commodity products how can we get a good price? Your next reading makes some suggestions.
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Reading 10.4
Turn to and read Reading 10.4 by Kenny.
Activity 10.7
Summarise the key recommendations from your Reading 10.4.
Summary
This topic has addressed pricing decisions. You saw that the critical considerations are the 3Cs: customer demand, cost and competition. We addressed a six-step procedure for price setting. First, determining the pricing objectives in the context of corporate and marketing objectives; second, the need to estimate demand and to understand elasticity of that demand; third, we looked at analysing our competitors costs and prices. The fourth and fifth steps incorporated accounting basics, in determining total costs and then utilising various cost-based and market-based pricing methods. Finally, we addressed the sixth step, combining our earlier deliberations and setting the price. However youve also seen that organisations may need to adapt their price to specific situations and varying market conditions, as well as across a product mix. All these factors add to the complexity of pricing deliberations and determinations. So now we have the right product and the right price, next we need to reach our customers which means the right distribution decisions or in terms of our P terminology Place.
Activities 10.1 and 10.2

The airline and telecommunications industries give good scope. In countries where the telecommunications market has been deregulated, the domestic market has typically become very price competitive. In Australia, the first new entrant Optus, sought to grab market share through a more aggressive (cheaper) pricing strategy. By all accounts they certainly werent seeking profits at least in the short term. Telstra had to respond and then both companies then sought to implement pricing strategies (in line with broader marketing strategies) to keep customers loyal. Reducing churn became a key pricing objective i.e. reducing the number of customers shifting to the competitor. With more new entrants, and a product that is not readily differentiable, the price war has continued. Whilst the customer wins, companies try to look for other ways to differentiate their offering to maintain profitability and longer-term survival. Students from Optus, Telstra and other telecommunications companies may be able to add to this discussion. The mobile phone market is even more competitive! Price again seems to be a key factor but arent we all totally confused in trying to compare competitors offerings? And their attempts to keep us locked in? Of course the airline industry landscape has changed dramatically with the introduction of low-cost and low-price players.
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Activity 10.4
Reflect back on consumer buying behaviour Topic 5.
Activity 10.5
This may be a case for some industrial espionage! However we can make some assessment of competitors costs by for example: comparing their production capacities and in turn estimating their likely economies of scale and experience curves identifying any cost advantages they may have, e.g. off-shore low-cost production estimating and comparing distribution costs comparing marketing costs e.g. advertising spend, sales force costs.
Activity 10.7
Differentiation is the key! Further discussion in tutorials and in teletutorials.
Topic 11
Value networks and marketing channels
Introduction
In this topic well look at channels of distribution and the selection of intermediaries to make a product available to end users. Well consider alternative marketing channels and how to select the right channel(s) and then effective channel management. Then, recognising that channel intermediaries themselves face their own marketing challenges well look briefly at some of their marketing decisions. Next well address physical distribution and the need for an effective market logistics plan to ensure ongoing customer satisfaction. Whilst most of the issues in this topic will be more relevant to the distribution of physical goods, we shall conclude the topic with discussion on the distribution of services.
Objectives
On completion of this topic, you should be able to: explain what marketing channel systems and value networks are suggest alternative marketing channels to reach target customers discuss the matching of channels (supply chains) to products discuss the decisions that companies face in managing their channels explain how companies integrate channels and manage channel conflict evaluate the future for e-commerce.
Marketing channels and value networks

As weve seen with a growing emphasis on relationships, both upstream and downstream, organisations are tending to think of their distribution systems as value networks. The terminology supply chain which is often used when discussing distribution systems can be criticised as being product/production focused rather than customer focused. The following reading explains the meaning of a value networks and marketing channels.
Textbook
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As discussed in last text reading, the basic function of a marketing channel is to make the product available to end-users. To facilitate this, intermediaries (wholesalers and retailers) are used. Intermediaries gain economies of scale and specialisation in their field, so allowing the manufacturer to specialise in their own production. We can also pose the question What business are we in? in deciding whether to use intermediaries. Manufacturers need to determine the best channels to reach target markets and deliver customer satisfaction. Your textbook discusses the role of intermediaries and marketing channels in your next reading.
Textbook
Channel decisions
There are two reasons for the careful channel selection: 1. The channel chosen is an important factor in the success or failure of a product. The channel must reflect the desired image and be consistent with other elements of the marketing mix. 2. Changing a marketing channel is time-consuming, disruptive and expensive. Your text discusses the following key issues that need to be considered by the marketer when choosing suitable marketing channels: 1. What are the customers needs, in terms of volume of purchase; delivery time; spatial convenience; product variety; and service support? 2. What are the objectives for using channels? 3. What are the major channel alternatives? 4. How should the channel alternatives be evaluated in terms of economic and control criteria?
Textbook
As you can see, channel decisions should begin with the final customer, their needs and wants in terms of service, delivery, availability, and work backwards to the manufacturer. Sometimes we may be constrained by what channels are available and perhaps some are already locked in to a competitor. Often well use two or three distinct channels, which in turn will have implications for marketing.
Activity 11.1
Consider a hair care provider such as Schwarzkopf, who has a range of over 400 products. Suggest some alternative channels for distribution of their products. What are the implications for marketing this product through these different channels?
Your next reading is an excellent article from the Harvard Business Review which suggests a framework to assist in selecting the right channel. Note that the article talks about a supply chain as opposed to a channel. The two terms are virtually interchangeable in this context. This reading is highly recommended. Once you have read this, attempt Activity 11.2 which asks you to choose suitable channels to market your new product through and justify them (i.e. this will become part of your marketing mix for Assignment 2!).
MKT00720 Topic 11 Value networks and marketing channels 121
Reading 11.1
Read What is the right supply chain for your product? by Fisher.
As Fisher suggests we are seeking another matching of supply chains to products. We should not just aim to maximise efficiency, which has tended to be the prime consideration in selecting channels. Instead we need to consider the nature of demand for our product, designate products as primarily functional or primarily innovative, and then match these products to either efficient or responsive supply chains as shown in Figure 11.1.
SUPPLY CHAIN PRODUCTS Functional Efficient Responsive Match Mismatch Innovative Mismatch Match
Figure 11.1 Matching supply chains to products
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Activity 11.2
Focusing on the product (or service) concept you are developing for Assignment 2, suggest the key channels you will use to market the product and justify why these distribution channels are the best ones for that product to get to the marketplace.
Whilst our approach thus far has been to match channels to (1) target segments and (2) products, as your next reading points out; todays customers are more sophisticated, knowledgeable and savvy; they shop differently and know they have channel options. This in turn poses new challenges for the marketer. Channel design thus becomes an exercise in creating pathways for customers to ultimately buy our product.
Reading 11.2
Turn to this excellent reading by Nunes and Cespedes.
Activity 11.3
Summarise the recommendations from Reading 11.2 for discussion in teleconferences/tutorials.
Whatever channel, or supply chain we select, it then needs to be effectively managed.
Channel management
Once the channel has been selected, the job of the manufacturer is to ensure that the ongoing performance of members in that channel is acceptable. Effective channel management includes the need for training and motivating the channels workforce and monitoring the performance of the channel members.
Textbook
The goal is to build a long-term partnership that will be profitable for all channel members.
However conflict will inevitably arise between channel members, invariably because objectives of channel members may conflict, or they find they are competing for the same customers. Channel conflict needs to be effectively managed usually through negotiation and diplomacy. Channel selection, channel management and channel conflict will be explored in greater depth in our advanced unit Business to Business Marketing (MKT00726). Suffice for this unit for you to understand the concepts and develop a customer focused approach. Channel members face their own marketing challenges. Lets now take a brief look at some of the marketing decisions confronting retailers and wholesalers. Retailers and wholesalers face the threat of being bypassed, for instance when manufacturers seek vertical integration or when technology prompts a rationalisation of channels. In the latter, back to the Internet. Is the Internet another distribution channel? Will this lead to conflict with existing channel? These are some of the questions to be addressed by marketers. Your next reading suggests manufacturers should be wary of upsetting existing distributors.
Reading 11.3
Read Cutting out the middleman can be dangerous by Gottliebsen.
Enough on marketing channels, distribution also involves the actual movement of goods the physical distribution. Lets turn to this now.
Physical distribution
Physical distribution involves order processing, inventory control, storage and transportation. Your text suggests we call this market logistics to ensure customer focus to our decision making. This is another area of critical importance to customer satisfaction and longer-term relationships. For example, slack order processing will lead to dissatisfied customers due to incorrect invoicing and delivery; poor inventory control can lead to lost customers due to out-of-stock situations, or conversely high stock holding costs. Companies with heavy involvement in physical distribution may have a specialised department to manage this aspect of the business. Marketers need to impress customer satisfaction. Your next reading covers the key issues in market logistics. Skim through this appreciating the key issues and noting how a well planned market logistics program can be a potent tool in competitive marketing.
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Textbook
Your next reading argues that persons in logistics have sometimes taken a myopic view of the discipline. Further, it suggests that Levitts historic article Marketing myopia has profound implications for the discipline of logistics.
Reading 11.4
Turn to Reading 11.4 and read Marketing myopia revisited: Lessons for logistics by Stock.
E-Commerce
We now turn our attention specifically to one particular mode of distribution that is rapidly gaining popularity in both goods and services marketing e-commerce, or simply put, distributing goods through electronic channels, particularly the Internet. eBay and Amazon.com, are probably two of the most well known global distributor of goods via the Internet. Your text discusses this form of distribution under two categories, depending on whether or not the seller of the goods also has a physical distribution presence or whether they do so totally through electronic formats: 1. Pure-Click Companies (e.g. eBay) 2. Bricks & Clicks Companies (e.g. Woolworths supermarkets).
Textbook
Note at the end of your last reading the new jargon: M-Commerce (M being for mobile) and the brief discussion on some of these developments within Australia. As the reading points out the potential market opportunities for M-Commerce are enormous with all sorts of customer service benefits. By the time you read these study notes technology will have already have moved us on in this regard!
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Activity 11.4
Read the Amazon marketing spotlight case on pp.498499 of your textbook and consider the following questions (for discussion in tutorials/teletutorials). 1. What have been the key success factors for Amazon? 2. Where is Amazon vulnerable? What should it watch out for? 3. What are your recommendations for future marketing strategy?
In the next reading, the reasons why many consumers are turning to online grocery shopping rather than making their usual visit to the grocery store are revealed.
Reading 11.5
Read Deliver us from Supermarkets by Manktelow.
Our discussion thus far in this topic has tended to consider the distribution of physical goods. Lets conclude this topic by addressing some issues specific to the distribution of services.
Distribution of services
Given the growing significance of the service sector, there is surprisingly less literature available on services marketing than on marketing manufactured and tangible products. While many of the concepts can apply closely in a service industry context, it is worth noting the differences where they occur. Distribution is one such case. When talking service industries, we generally include organisations in fields such as banking, finance, insurance, consulting and professional services (accounting, legal, engineering etc.), travel and media. Also included are government departments and instrumentalities which, although monopolistic in most circumstances, nevertheless exist to provide service to customers. Adoption of marketing principles is therefore vital to their efficient contribution to the economy and society.
In all these cases, however, there is no trading inventory to transport, manage, become obsolete or transfer title to, and therefore no chain of distributors through whom stock travels. There is, on the other hand, a network of other organisations which can critically affect the performance of any one firm or organisation. This network differs between industries, but an example will serve to highlight the inter-relationships and contrast with the traditional Manufacturer Wholesaler Retailer Consumer model that applies for most physical products. Take the finance industry. In it we have a wholesaler of finance (mortgage funds, lease finance, unsecured loans etc.), and customers who buy these services (property developers, commercial clients and families). The network can be seen when we add to the picture providers of funds (lending individuals and organisations), introducers of providers (accountants, solicitors, clubs and societies) and introducers of borrowers (real estate agents, builders, accountants, solicitors etc.). The network (equivalent to the marketing channel) can thus be illustrated as in . Figure 11.2.
Lenders Cashed up organisations, retirees (seek advice from) Introducers of lender Accountants, brokers, banks, solicitors, clubs, societies (channel funds to) Wholesaler Introducers of borrowers Finance companies (direct customers to) Real estate agents, builders, accountants, solicitors, brokers, banks Borrowers (seek service/advice from) Property developers, commercial/industrial clients, families. Figure 11.2 Finance industry network
The next brief text reading provides other examples of services which face distribution selection challenges.
Textbook
Turn again to, and read, the section on Service Sector Channels on pages 448449.
Summary
In this topic weve sought to emphasise that all distribution decisions require customer focus. We need to understand customer needs and wants and then select the right marketing channels for the distribution of our products as well as supporting this with effective physical distribution. You saw how selecting the right channel, or supply chain, called for a matching of product to supply chain, and then how effective channel management sought to ensure long-term relationships and satisfaction throughout the supply chain. The topic concluded by looking at distribution issues relating to services. You saw that whilst there is no tangible product requiring physical distribution there is a network of other organisations on which the successful sale of a service depends.
Activity 11.1
Possible channels for Schwarzkopf include: hairdressing salons for use in the salon and onward sale to consumers retail outlets such as supermarkets and chemist stores.
The salon market and retail market have different needs and will require different marketing mixes. Invariably products sold through these two channels will be different which in turn will avoid price competition between the two channels. In terms of service, the salons are likely to require a high level of personalised service, with merchandising support and maybe staff training for new products. The retail market will be dominated by large chains requiring head office selling, although independent stores may expect a higher service level. Heavy promotion support will be required for the retail market to pull the product through (to be discussed in Topic 12).
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Activity 11.2
The answers to this activity may become part of your second assignment. That is they will help you to develop the channel distribution strategy for getting your product into the customer marketplace!
Activity 11.3
(to be discussed in tutorials and in teletutorials)
Activity 11.4
Topic 12
Integrated marketing communications
Introduction
Some would say weve left the best till last! To complete this unit this topic turns to the promotion P or what should really be called marketing communications. Marketers need to communicate with target customers as well as more widely with other stakeholders and publics. The thrust of this topic will be on developing effective marketing communications. Firstly, well consider the basic communications process and then how to develop effective marketing communications. Next well consider the different tools that together comprise the marketing communications mix, noting how new technologies and techniques have expanded our options. Well also address how to ensure an integrated marketing communications approach. Your text devotes three chapters, Chapters 17, 18 and 19, to the communications mix. We shall consider Chapter 17 in some detail but then skim over relevant sections of Chapters 18 and 19, and in exploring some current trends well turn to some recent articles. However if this area is of specific interest to you, please explore these chapters in your text more fully. Our advanced unit Strategies in Marketing Communications (MKT00728) will investigate many of these concepts more fully.
Objectives
On completion of this topic, you should be able to: explain the elements in the communications process describe the steps involved in developing effective marketing communications discuss alternative methods of determining the communications budget discuss factors to consider in determining the marketing communications mix explain what is meant by integrated marketing communications outline key decisions relating to the various components of the communications mix.
The communications process

The word communication derives from the Latin communis meaning common. Think of any means of communication, and not specifically marketing related (e.g. a letter to a friend, a lecture, a conversation, an advertisement) to communicate effectively requires the establishment of a commonness of thought between the sender of the communication and the receiver. Effective communication requires common ground
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between sender and receiver. Hence the more knowledgeable the sender is of the receiver, the greater the likelihood of understanding the receivers needs, empathising with them, and then communicating effectively. So with marketing communications this again means a think customer approach. To develop effective communications marketers borrow a simple communications model from other disciplines as shown in Figure 12.1. Marketers (senders) need to encode their message in a way that empathises with the target audience (receiver) and transmit the message through media that will effectively reach the target audience and develop feedback channels that will monitor response to the message. The target audience may not receive the message due to various noise factors that interfere with the intended communication.
Sender
Encoding
Message Media
Decoding
Receiver
Noise
Feedback
Response
Source: Kotler, Keller & Burton, 2009, p.512. Figure 12.1 The communications process
This communications model is explored further in your next text reading.
Textbook
Your next reading suggests that marketers (and indeed the world at large) are failing to communicate effectively. Furthermore marketers are sidetracked into debating the relative merits of different media and promotional tools instead of addressing the fundamental issue: how to become better communicators.
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Reading 12.1
Read Statistics shmistics! Let the customer show you by Pritchard.
Activity 12.1
From our discussion thus far and your last reading summarise some factors that will contribute to developing effective marketing communication.
So lets look more specifically at how to develop effective marketing communications communications.
MKT00720 Topic 12 Integrated marketing communications 129
Developing effective marketing communications

We need to develop an objective, planned approach in order to develop effective marketing communications. As in the marketing planning process we discussed in Topic 2, we need to plan, then implement and finally evaluate our communications. More specifically your text suggests eight steps for developing effective marketing communications: 1. 2. 3. 4. 5. 6. 7. 8. identify the target audience determine the communication objectives design the communications select the communications channels establish the communications budget decide on the communications mix measure the communications results manage the integrated marketing communications process.
Lets look at each of these in turn.
1. Identifying the target audience

The target audience may be target customers or the wider publics well consider these publics when we look at public relations later in the topic. As has been our message throughout this unit the better we understand our targets the better equipped we will be to make decisions regarding marketing strategy. As your next reading points out the target audience is a critical influence on the communicators decisions about what to say, how, when, where and to whom. Once armed with this knowledge and understanding of the target audience we can turn to setting our communication objectives Step 2.
2. Determining the communications objectives

Communications objectives specify the desired audience response. Marketers seek a response that is: cognitive make aware affective change an attitude or behavioural act
Look back again at the response hierarchy models presented in Figure 17.3 on page 513 of your text which assume that a potentaila buyer passes through a cognitie, affective and behavioural stage, in that order. Probably the best known of these is the AIDA model:
Attention
Interest Desire
Action
So marketers can set communications objectives at any level of the hierarchy-ofeffects model As discussed in your next reading marketers seek a response that achieves one or more of the following: a category need create the recognition of the need for a product brand awareness ability to identify or recall a specific brand name brand attitude ability to evaluate a brand effectively brand purchase intention an intention to buy a specific product brand.
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Textbook
Turn to your textbook and read page 514.
Activity 12.2
Look at four or five advertisements in a magazine. Consider the target audience of each advertisement, then using the AIDA model what do you think are the communications objectives of these advertisements?
Communications objectives, like other objectives, need to be quantified and measurable (SMART). As your last reading pointed out the most effective communications can achieve multiple objectives. However note that sales volume is not usually an appropriate communications objective. Sales volume typically relates to an act response, whereas as weve discussed our communications are often seeking a cognitive or affective response. Now were ready to design the message.
3. Designing the communications

Developing effective communications to achieve the desired response requires we address: message strategy what to say creative strategy how to say it logically and creatively message source who should say it.
These decisions are discussed in your next reading.
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Textbook
Activity 12.3
Look again at the advertisements from your previous activity. Compare how the communications are designed in terms of message strategy, creative strategy and source. (Be prepared to discuss this in tutorials and in teletutorials.)
Having designed the message, next we must select efficient communication channels.
4. Selecting communications channels

Communication channels need to be selected to reach the target audience and can be divided into personal and non-personal channels. Personal communication channels involve two or more persons communicating directly with each other, for example, face to face, by telephone or by email. Non-personal communication channels include
media and events. As discussed in your next reading selecting efficient channels to carry the message becomes more difficult as channels of communication become more fragmented and cluttered.
Textbook
Note in your last reading the power of word-of-mouth. This reminds me of an acronym Ive recently seen in the marketing press: WOMBAT Word of Mouth, Best Advertising Technique Before we can finalise our communications decisions we need consider our budget how much should we spend?
5. Establishing the communications budget

Organisations vary considerably in their communications budget. Even within the same industry some will be big spenders, others not. But how do companies determine their communications budget? As you might suspect organisations would consider: what they can afford, and what are our competitors spending.
Often organisations will allocate a percentage of sales, which may incorporate consideration of the above but its main criticism is that it views sales as the determiner of promotion rather than the other way round. A better method is the objective-and-task method which, as the name implies, involves setting specific communication objectives, determining the tasks to achieve those objectives and then estimating the costs of performing those tasks. Your next reading explains these various methods for establishing the communications budget.
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Textbook
Activity 12.4
Try to investigate how your organisation (or an organisation of your choice) determines their communications budget. Do they rely on one or more of the methods weve just discussed?
Having determined the budget we must now decide the mix of promotional tools that will achieve our objectives in line with our budget.
6. Deciding on the communications mix

As with the marketing mix, marketers have traditionally described their various promotional components as a communications mix. In recent years new techniques have evolved often utilising new technologies. Your text identifies eight components in todays communications mix thus: advertising sales promotion public relations and publicity
events and experiences direct marketing interactive marketing word-of-mouth marketing personal selling.
As with the marketing mix, these various components need to be combined into an effective and consistent mix, hopefully producing synergistic results. Some factors to consider in deciding on the communications mix are discussed in your next reading.
Textbook
As part of your last reading, you saw how promotional allocations vary between consumer and business markets. Typically consumer markets spend heavily on advertising and sales promotion whereas personal selling is the major promotional tool for business (industrial) markets.
Activity 12.5
Compare the relative importance of different promotional tools for the following products: 1. toothpaste 2. a car 3. computer software to: (a) consumers (b) business customers.
Consumer products marketers may develop both push and pull communications strategies. A push strategy means we target distributors and retailers and so push our product through the distribution channel. Whereas a pull strategy means we target consumers so pulling the product through. Decisions made, we should now be ready to implement our communications strategies. Then the next step is evaluation did we achieve what we set out to?
7. Measuring the communications results

This step is sadly often neglected. Organisations spend big dollars developing communications and then carp at allocating relatively small dollars to evaluate how effective they were. Evaluating whether we achieved our communications objectives calls for marketing research on the target audience both before and after the communications are implemented. Findings from such research will provide invaluable information for future communications decisions. Your previous textbook reading concluded with a short section on measuring results. Finally to the last step in our process for developing effective marketing communications managing integrated marketing communications.
8. Managing the integrated marketing communications process

This is not so much a specific step in the process of developing an effective communication but an umbrella strategy. Managing and coordinating the entire communications process calls for integrated marketing communication (IMC). IMC
is definitely in in marketing circles today but we are a little sceptical. After all marketers have long known of the need to develop consistent and synergistic communications mixes (and indeed marketing mixes). So whats so new? Read about IMC in your next reading for this topic.
Textbook
Now lets explore some current trends where, how and why are organisations spending their communications budgets.
Communications trends
Recall that in setting communications objectives and designing communications strategies, the ultimate goal is to achieve corporate and marketing objectives. Your next reading suggests todays focus is about sales performance and ROI, justifying to boards and shareholders that marketing initiatives work. This in turn is reflected in choices of communication channels, with a continuing shift away from advertising into below-the-line activity; the latter offering greater accountability.
Reading 12.2
Turn to the reading by Bunbury et al. and read pages 5357 which describes these trends.
Adding to the challenge for marketers is the more sophisticated customer. Just as we saw in Topic 11, customers have more channel options, similarly customers today have a wealth of media options. It is no longer a case of merely selecting a specific media to reach a specific target market. Now that you have a general understanding of the different marketing communication tools/components, we will now explore each in turn and consider some key decisions associated with each. Your text separates the ensuing discussion into two categories mass communications (Chapter 18) and personal communications (Chapter 19). As was pointed out at the beginning of the topic our aim for this unit is to have an overall appreciation of what these different tools embrace and some of the decisions that may be faced in developing our integrated marketing communications.
Advertising
Your text defines advertising thus (p.538):
Advertising is any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor.
Your text illustrates the key decisions to be made about advertising in Figure 18.1 on page 538. They can be summarised as: Mission Money Message Media Measurement.
Glean as much detail on these decisions as you feel you need at this stage, from your next reading.
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Textbook
Current trends in advertising decisions

As we saw earlier, marketers are faced with an increasing choice of media options and harder-to-reach customers. Your next reading suggests inventive (and invasive?) ploys to reach target segments including guerrilla marketing and product placements.
Reading 12.3
Turn to Reading 12.3 by Cave.
Enough discussion on advertising, now to sales promotion decisions.
Sales promotion
Your text defines sales promotion thus (p.554):
Sales promotion consists of a collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade.
Typically, especially for consumer products, sales promotions budgets have been rising at the expense of advertising budgets in recent years. Why? From a marketers viewpoint it is usually easier to see, and measure, the effectiveness of a sales promotion campaign and specifically in terms of actual sales (remember communications objectives especially for advertising may not specify sales volume). Also sales promotion is generally perceived as offering better value for money than advertising campaigns, generally perceived as expensive, facing increasing advertising clutter and noise. Sales promotion tools are many and varied and can be targeted at consumers, distributors and/or salespeople. Different sales promotion tools are discussed in your next reading covering managing sales promotions.
Textbook
Trends in sales promotions

Weve already discussed the growth in the use of sales promotion. This in turn is leading to promotion clutter similar to advertising clutter. Some sales promotions provide product differentiation. Frequent flyer programs are, or were, a good example of this. The first airline (reputedly American Airlines in 1981) to offer such a program achieved product differentiation but of course the competition rapidly followed suit. Now we could even say a frequent flyer program was part of the actual product level as discussed in Topic 7. Nevertheless frequent flyer programs and other loyalty programs seek to win and keep customers, to build the relationship.
Companies need to be very careful in explaining the mechanics of a sales promotion. You may enjoy the pudding scam described in your next reading where an astute customer realised he could make a killing on an on-pack promotion run by Healthy Choice in the USA.
Reading 12.4
Read The pudding scam.
Healthy Choice may however have enjoyed the resulting publicity from this. Another example of a sales promotion debacle in Australia was the McDonalds Monopoly competition, where apparently cards from the previous year were handed out resulting in too many winners. This case ended up before the courts and there was much negative publicity for McDonalds as a result. Next well turn our attention to events and public relations.
Events and experiences

Companies seek to deepen their relationships with customers through sponsorship of events and by creating product and brand experiences. Reasons for doing this and key decisions to be made are discussed in your next textbook reading
Textbook
Sponsorship of major events is often a promotional strategy used by companies to develop positive public relations.
Public relations and publicity

Public relations entails communicating with a range of interested publics. Often this extends to handling corporate communications, corporate image and corporate relations and so may extend beyond just a marketing brief. Larger companies are thus likely to have a specialised public relations department dealing with corporate affairs. Publicity is usually free promotion as opposed to advertising which we defined as a paid form of promotion. Public relations may include publicity but in the context of the marketing communications mix, we are invariably aiming for some free media coverage which may be targeted at target customers, distributors or other publics. We can usually get free media coverage if we have something newsworthy to say or are organising an interesting event. For example a new product or a new venture may get media coverage. Organisations will supply publicity releases to the appropriate media and seek to build relationships with media contacts to maximise this free coverage. Your next text reading explores the tools and decisions relating to public relations and publicity.
Textbook
Some companies will utilise specialised PR companies to handle both publicity and broader PR. As you saw in your last reading, accountability and measuring the effectiveness of PR can become a thorny issue.
Now we will turn to the more personal elements in the communications mix, beginning with direct marketing.
Direct marketing
Your text suggests (p.578) direct marketing is the use of consumer-direct channels to reach and deliver goods and services to customers without using marketing middlemen. Direct marketers can choose from a number of possible channels. The main alternatives are: direct mail catalogue marketing telemarketing.
The choice of channel will clearly depend on the message and the target market. Your text discusses the development of direct marketing campaigns in your next reading.
Textbook
Turn to your textbook and read pages 578584
Trends in direct marketing

The biggest criticism of direct mail has been the irritation of receiving junk mail and the invasion of privacy issue. In many countries this has resulted in legislation that protects people from receiving unsolicited telemarketing calls. A range of other privacy laws have been introduced globally. Similarly, Australias Direct Marketing Associations Code of Practice includes a privacy protection requirement that:
gives consumers some control over their personal information by limiting the amount of information that companies can collect about individuals. In addition marketers are required to inform consumers who is collecting the information, how the company can be contacted and the intended usage of the personal information, including whether it will be disclosed to third parties. Consumers must be given the opportunity opt-out of future direct marketing approaches and block transfer of their contact details to any other marketer.
(Source: Australian Direct Marketing Association website, http://www.adma.com.au)
So does this mean the death of direct marketing? Your last textbook reading included a discussion of e-marketing. This is the big potential growth area for direct marketing but as with other uses of the Internet in marketing the jury is still out in terms of how successfully this can be utilised. Junk mail is called SPAM. Your next reading provides an overview of the problems of SPAM marketing via email in the New Zealand context (the issues raised are equally applicable to the Australian and AsiaPacific context!).
Reading 12.5
Turn to this reading by Young.
So, in order to build a win-win relationship with customers, organisations need to be move away from an interruption-based approach to a permission-based approach in their direct marketing communications. Heres yet another challenge for todays marketer. To do this we will need to have an even greater understanding of customers, their needs and their behaviour.
Next to some new channels for communications.
Interactive marketing
Interactive marketing provides marketers with opportunities for greater interaction and individualisation through well designed websites as well as online ads and other approaches. This is explored in your next reading. Read as much, or as little, of this, as you require; only an overview is required for this unit.
Textbook
Another challenge for todays marketer is how to engage customers so they choose to talk with others about products, services and brands in essence promoting Word-ofMouth our next component in the marketing communications mix.
Word-of-mouth
As discussed in your next text reading companies have become acutely aware of the power or word-of-mouth. Clever marketers utilise todays technologies to promote word-of-mouth communications. In most cases this positive word-of-mouth is carefully managed and facilitated. Many examples are described in your next textbook reading which goes on to discuss three popular modes of word-of-mouth marketing: buzz and viral marketing opinion leaders blogs.
Activity 12.6
What word-of-mouth marketing has targeted you? Is it effective why/why not?
Now to our last component in the communications mix personal selling.
Personal selling
Personal selling is an important component in the communications mix. It can also be another component of direct marketing. It usually involves face to face contact, is dyadic and can be tailor-made to an individual customer. Especially in business markets personal selling is critical in establishing and developing relationships with customers. Effective personal selling calls for an effectively managed sales force. Marketing thus takes responsibility for effective sales force management. The next textbook reading is devoted to personal selling. If you are involved with management of the sales force this reading will be of particular interest to you, otherwise just skim over it.
Textbook
Trends in personal selling

An obvious trend over the years is that salespeople can no longer be sales orientated, they need a customer orientation. Salespeople are marketing people. Some organisations may call them business development managers. Whatever the title, the job has become much more complex and demanding. Throughout this unit weve discussed the importance of relationship marketing. This has obvious repercussions for salespeople. Team-selling and systems-selling approaches reflect this relationship approach. Then there are technological developments. Our salespeople now need to be computer savvy and laptop equipped! Weve looked at the various components of the communications mix and sought to develop a management approach to developing campaigns. Recall from the previous topic, it is not a case of choosing between these different promotional tools but developing an integrated marketing communications strategy that combines and harnesses together the different components of the communications mix, so achieving maximum communications impact and effect.
Summary
This topic has focused on the development of integrated marketing communications. At the outset you saw how an understanding of the basic communications process should undermine our decision making in seeking to develop effective marketing communications. We then explored an eight-step process for developing effective marketing communications. You saw the first step requires clear identification of the target audience and then (Step 2) the need to determine specific communications objectives. Designing the message in terms of what to say (message strategy), how to say it (creative strategy) and who should say it (message source) is Step 3 followed by the selection of the communications channels (Step 4) and determination of the communications budget (Step 5). Next we focused on the communications mix (step 6). Your text identifies eight components in the communications mix and within our discussion of the eight-step process we explored factors to consider in choosing between these. You then saw how Step 7 is the important evaluation step whereby we determine the outcomes of our various communications campaigns critical information for future decision making. In the final step (Step 8) you saw how managing and coordinating the entire communications process calls for integrated marketing communications. By combining and harnessing together the various components of the communications mix our goal is to achieve maximum communications impact and effect. The latter part of the topic revisited, in turn, the components of the communications mix grouping these as either mass, or personal, communications. This afforded you an overview of some trends and developments, as well as issues and decisions.
Farewell to students
We trust you have enjoyed exploring Marketing Management. Hopefully youve seen from this introductory marketing course that marketing is an exciting, dynamic business concept indeed a philosophy of doing business successfully!
If you have gained benefit from this unit, you may like to consider more marketing units in the trimesters ahead. Our advanced marketing units build on the basics youve encountered in this unit. We are thus taking the opportunity to market to you the following:
International Marketing (MKT00724)

This unit embraces the challenges of international marketing and is divided into two parts. The first part covers researching international markets: the additional challenges of undertaking international research and the gathering of marketing research to evaluate and then select alternative international markets; highlighting the opportunities and threats posed by the differences in environmental factors. The second part addresses the determination of international marketing strategy; examining decisions on product, branding, communications and pricing. Key themes throughout the unit are the impact of cultural differences and the globalisation of markets debate.
Business to Business Marketing (MKT00726)

Focuses on marketing strategy and decision making in the business to business marketing environment where a vast range of products/services are targeted at business users by other business organisations. A key thrust of the unit is on creating and delivering value. Case studies and real life examples reflect the practical orientation of the unit.
Strategies in Marketing Communications (MKT00728)

Develops students understanding of marketing communication strategies from a consumer behaviour perspective. Students will be introduced to a marketing communications planning framework and undertake practical applications, A strong emphasis on the use of tactical and practical applications of marketing communications tools and strategies is also incorporated into this unit.
Marketing in Retail and Service Environments (MKT03220)

This unit aims to provide students with an understanding of the unique aspects of services and retail marketing. It also aims to provide students with an awareness of suitable techniques and strategies used by service providers and retailers to maximise the effectiveness of their marketing efforts. In particular, it emphasises the role and importance of service quality, the service encounter and the management of the service and retail experience in achieving customer satisfaction. Note: You need to complete three of the above units to achieve a marketing specialisation within your MBA.
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Activity 12.1
Some factors that youve seen contribute to the development of effective marketing communications are: appreciating the fundamental elements of the communications process knowledge and understanding of our target audience adopting a think customer approach
The reading by Pritchard emphasised the need for a customer focus by identifying and getting to know our customers and by deciding what it is we need to say rather than what we want to say.
Activity 12.2
Did you find different advertisements focused on different stages in the AIDA model? Some advertisements (and other communications) may try to take the target audience right through the AIDA model e.g. a headline to grab attention, body copy to create interest and desire and a special offer if you act NOW. Other advertisements may be focused at the earlier stages of the AIDA, for example awareness of a new brand or new product, then relying on other promotional tools (to be discussed later in the topic) to move the target through subsequent stages.
Activity 12.3
Activity 12.4
Activity 12.5
1. Toothpaste: This will be fairly typical of a consumer product with heavy spending on sales promotion and advertising. Personal selling will make a lesser contribution in terms of making sure the product is stocked by both large and small retailers plus follow-up orders and merchandising activities. Publicity could be utilised for a new product offering say new-to-the-market benefits. Public relations could be critical if for example there was an extortion poisoning scare. 2. Car: We could argue that advertising may be more important than sales promotion here. Personal selling too is certainly more visible. Publicity again for new products and public relations could come into play, for example, if we had to recall certain models over a quality scare. The Internet is becoming increasingly important in car marketing. Do you see this as advertising, sales promotion, personal selling, publicity or all four? 3. Computer software: Compare this for consumer and business markets. Typically in consumer markets an off-the-shelf product would require advertising, sales promotion and some personal selling; in business markets the emphasis would be more on personal selling in perhaps developing a tailor-made suite of programs. Note in this activity it is hard to compare actual spend, especially in fairly general discussion. The purpose of the activity is more to assess relativities.

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g r a d u at e c o l l e g e o f m a n a g e m e n t

Sixth edition 2010

MKT00720 Marketing Management

MKT00720 Marketing Management

About the writers

MKT00720 Marketing Management

Using the study guide

Organisation of the unit

MKT00720 Marketing Management

MKT00720 Marketing Management

MKT00720 Topic 1 The marketing concept

The evolution of marketing

MKT00720 Marketing Management

Figure 1.1 Marketing is a matching process

Other definitions acknowledged the importance of relationships or the competition:

MKT00720 Topic 1 The marketing concept

The development of a marketing orientation

MKT00720 Marketing Management

Figure 1.2 The development of the marketing concept

Selling Orientation Marketing Orientation

Societal Marketing Orientation

Figure 1.3 Organisational orientations and attitudes

MKT00720 Topic 1 The marketing concept

The holistic marketing concept

MKT00720 Marketing Management

A new dominant logic for marketing?

MKT00720 Topic 1 The marketing concept

Marketings role in the organisation

MKT00720 Marketing Management

In adopting a holistic marketing orientation your text points out (p.22):

These relate closely to the three marketing roles we identified earlier.

MKT00720 Topic 1 The marketing concept

For you to think about

The marketing mix

MKT00720 Marketing Management

Figure 1.5 An expanded marketing mix

MKT00720 Topic 1 The marketing concept

MKT00720 Marketing Management

Case study practice

MKT00720 Topic 1 The marketing concept

MKT00720 Marketing Management

Activity 1.8 and 1.9

MKT00720 Marketing Management

Marketing and strategic planning

Thus we have another matching process as shown in Figure 2.1.

Organisation s objectives, skills and resources

Mission Corporate Objectives Corporate Plan

Human Resource Plan

Figure 2.2 Corporate planning

MKT00720 Topic 2 Marketing planning

Selecting strategic alternatives

increasing market newness

MKT00720 Marketing Management

MKT00720 Topic 2 Marketing planning

Other favourite textbook examples include:

MKT00720 Marketing Management

Now lets focus on marketing planning.

The marketing planning process

1. Marketing Audit/Situation Analysis

Where are we now?

Where do we want to be?

3. Marketing Strategies How do we get there?