Principles of Marketing

Presented by

Ian Rheeder
Chartered Marketer (SA)

© 2006 Markitects Consulting. All rights reserved.

 Programme Overview – 3 Days

Lecture & Pages Lecture Topic

1: p.4 -7 Intro to Marketing Management & Plan
2: p.8 - 48 The Marketing Manager as a Strategist
3: p.49 - 53 Introduction to Marketing
Intro 4: p.54 - 61 Research (Like the Ps, a great marketer’s tool)
5: p.62 - 73 Personality styles & Consumer behaviour
6: p.74 - 79 Segmentation
7: p.80 - 81 Targeting
8: p.82 - 86 Positioning
10: p.87-98 Product, USP, CA’s, Differentiation, PLC
4Ps 11: p.99 -104 Pricing techniques
12: p.105 -111 Placement techniques
13: p.111-152 Promotion/IMC techniques
14: p.153-158 Services Marketing
15: p.159-164 Forecasting techniques
16: p.165-167 Budgeting techniques
7Ps
17: p.168-173 KAM Introduction (Key Account Management)
18: p.174-178 High Trust Selling
Evaluation: 30 Mark

“There is only one purpose for an organisation, that is to obtain and retain a
customer.” (Drucker)

A Marketers’ task is to self-destruct by making themselves unnecessary,

because they have succeeded in making the whole organisation market-
oriented. (Tom Bowman 1990)

Because market orientation is an organisation-wide prescription, it is necessary

that the whole company is organised and coordinated to serve the customer.
(Leyland Pitt 1998)
© 2006 Markitects Consulting. All rights reserved.

Principles of Marketing 2
 Exercises: Day 1, 2 & 3
Exercise & Page Type of Exercise
1: start of notes Pre-evaluation; go over the 30 Mark Test
2. p.30 Key Success Factors & Key Issues
3. p.31 - 32 Your Company SWOT
4. p.39 Positioning ‘gap’ exercise
Intro 5. p.41 Strat-map #1: Segmentation
to the 6. p.42 Strat-map #2: Market Analysis, Strat-map #3 at end
Ps 7. p.48 Strategy Homework for day one
8. p.56, 59 Research Problem, Hypothesis, Sample, Type of Questions
9. p.61 Personality Styles, fill in questionnaire
10. p.71 Consumer Values for Tag watch
11. p.81 Segmentation, Targeting
12. p.82 Positioning, Carling Black Label

Exercise & Page Type of Exercise

1: p.88 Product need satisfaction
2. p.92 Citi Golf Case
3. p.98 Product Portfolio: Boston Matrix
4. p.101 Price Exercise #1
The 5. p.104 Price Exercise #2
4Ps 6. p.105 Distribution Exercise #1
7. p.108 Distribution Exercise #2
8. p.149 Promotion General
9. p.150 Promotional Mix
10. p.151 Promotion Budget
11. p. 152 Promotion Recall

Exercise & Page Type of Exercise

7Ps
1: p.153 Service (another 3Ps in the Mix)

The aim of marketing is to make selling superfluous. (Peter Drucker)

The exchange between parties must be so mutually satisfying, that the product
should almost sell itself.

Principles of Marketing 3
 Outcome of programme
Learners will be able to do the following:

1. Grasp the Marketing Strategy concept and apply the guidelines to writing a
Strategic Marketing Plan
2. Define Marketing
3. Explain what marketing concepts and objectives are, and analyse their
impact on the business
4. Explain the importance of the marketing research ‘tool’
5. Explain consumer behaviour & different personality styles
6. Explain guidelines for segmenting consumer markets
7. Apply guidelines for identifying attractive market segments to target
8. Explain positioning and discovering positioning gaps
9. Product: Explain new product development, branding advantages, and the
product life cycle (PLC)
10. Price: Explain factors to consider when setting price
11. Place: Explain the distribution of a product, and the importance of
marketing channels
12. Promotion: Discuss Integrated Marketing Communications (IMC)
13. Explain Personal Selling
14. Discuss the advantages & disadvantages of Advertising
15. Explain PR, Sponsorship, Direct Marketing, Sales Promotion

“A business is market-oriented or focused when its culture is systematically and entirely

committed to the continuous creation of customer value ... this entails collecting and
coordinating information on customers, competitors, and other significant market influencers
...it provides a unifying focus for the efforts and projects of the organization, thereby
leading to superior performance and a sustainable competitive advantage.”

Stanley F. Slater and John C. Naver

Market Orientation, Customer Value, and Superior Performance
Business Horizons
March-April 1994, Vol. 37, p. 22.

Principles of Marketing 4
 1. Marketing Plan Structure (p.5-48)
1. Executive Summary (2 pages)

Introduction, Goals/Milestones to be achieved,

Key Issues aggravating the objectives, Core Strategies

Market Niche (key market drivers/success factors), Key Competitor Sales

Product, Price, Place & Promotion strategy overview

Financial Outlook. I.e. 2006 Budget/Plan

2. Strategic Management Planning

Three year Objectives/Goals/ROI

Core marketing strategic thrusts and Key Success Factors

Vision: Customers, Competitors, Company

Core Purpose and Marketing BHAGs

PESTI Environment

Competitive Conditions/Analysis/ their Key Success Factors

Resources SWot, General SWOT

Financial, R&D, Personnel, Production

Management Culture

Distinctive Competencies (Marketing, Financial, Technology, Information
Systems)

3. Strategic Marketing Planning

Basic strategic thrusts

Build, hold, harvest, divest strategies (Boston Matrix/PLC)

Strategy: Segmentation, Target Marketing, Positioning/Differentiation

Marketing Mix Programmes (4Ps), Growth Strategies

4. Strategic Marketing Dept Decisions

Market Access (KAM, Distributors, Telemarketing, Agents, Internet,
Alliances)

Acc Relationship Strategy (Transactional, Consultative, Enterprise)

Action to be taken by individuals with deadlines (Strategy translated)

5. The Marketing Budget

Calculations of budget spend, where to spend it (training, recruitment,
marketing aids, commission, motivation, recognition awards etc),

Expenditure, Forecast Sales, projected profit & loss statement

Notes & Assumptions Re: Financial Projections, Appendices

Principles of Marketing 5
 The Six Steps to Plan a Marketing Strategy
(Note: This is done after the Environmental Analysis (PESTIE and Micro) has been done.)

Define Corporate business Mission: Step 1

Decide on Product Portfolio; and Customer Segments (markets) to
be served. What are the Customer’s Drivers/needs for
‘Positioning’.

Identify & Assess attractive market opportunities: Step 2

Do resource & product SWOT. Do market SWOT.

Select target market segments: Step 3

Do detailed customer analysis, segmentation and decide which
segments to target

Do competitor analysis (Start with Key Success Factor model)

Set Marketing Objectives: Step 4

Revisit Mission, the market opportunities and target market
segments to check if objectives are realistic

Design a marketing mix strategy: Step 5

Design 4-8P Mix, target segment with an SCA for superior
‘positioning’ vs. competitors

Draw up budget to implement
Product Mix Strategy Price Mix Strategy

Target
Segment/s

Distribution Mix Strategy Promotion (IMC) Mix

Implementation & Control Step 6

of marketing strategy and action programmes: Feedback

Principles of Marketing 6
 Introduction to Marketing Principles
As marketing is an organic subject, it just keeps changing. Marketing is also
an art and a science, requiring right (art) and left-brain (logical) disciplines.
However, too many marketers try and hide behind the fact that it is all ‘arty’,
when in fact, marketing should be able to quantify the ROMI (return on
marketing investment), albeit calculating the ROMI of a creative/arty
advertising campaign. Marketing is also such a broad subject, it would take at
least a lifetime to master, which is why one tends to specialise in a particular
field that hopefully matches our particular temperament, personality style or
aptitude. Imagine the following ‘marketing’ fields and realise how broad the
subject is: Strategist, researcher, statistician, sales manager, marketing or
brand manager, salesperson, public relations, sponsorship, advertising (radio,
TV, print, Internet or below-the-line), creative director, direct marketing, sales
promotion, e-commerce expert, distribution and product development.

The layman usually thinks that marketing is purely ‘advertising’, when in fact
marketing is an extremely broader matter, comprising of the four basic “Ps”,
namely Product, Price, Placement (distribution) and Promotion.

Advertising falls under Promotion, however, to fully grasp the Promotional

Concept, one must explain this later under a much broader promotional
concept called Integrated Marketing Communication (IMC).

The IMC concept recognises the added value of a synergistic ‘media plan’
which will ‘advertise’ your product or service with maximum impact and
clarity. Advocates of IMC therefore argue that it is one of the easiest ways for
a company to maximise its promotional ROI. ‘Adverting’ only form part of the
IMC Concept in your promotional mix, and can basically be split into print,
radio, Internet, outdoor and TV.

History in the making:

Marketing’s first real cornerstones were laid down in the 1940’s by Neil
Borden & Jerome McCarthy. Borden referred to marketing as: product,
pricing, branding, distribution channels, personal selling, advertising,
promotions, packaging, display, servicing, physical handling, and fact finding
& analysis. McCarthy simplified this and documented the 4P Mix (Product,
Price, Placement & Promotion). It was James Culliton (1940’s) who rightfully
first described the Marketer as a “mixer of ingredients”.

Principles of Marketing 7
Marketing today; 4P now 7P Mix: (7Ps expanded on p.46)
Because we live in such a hyper-competitive world, marketing has become
very refined! Marketers are commanding huge salaries today because they
are very often the difference between placing the Company on the race-
podium or just being an ‘also-ran’ in your industry.

If you are in the manufacturing, trading or service sector, all business have a
‘service’ side to them. Marketers have therefore created additional Ps; People
(your staff), Processes and Physical Facilities/Evidence.

The next 100 pages will logically and systematically cover the cornerstones of
Marketing Strategy, and Marketing Principles. Marketers need to achieve 3
objectives: meet Customer’s needs (customer-centric orientation),
implement strategies (achieve company goals) and make enough profit.

This course covers the Principles of Marketing, however no marketing

practitioner can venture into the field of marketing without an introduction to
Marketing Strategy (Lecture 2: p.8-48) and the contents of a Marketing
Plan (p.5). This course therefore begins with these topics to weave the
Principles of Marketing together, without which, the Principles of Marketing
are unguided and useless.

Marketing Strategy can be very complex in theory! I have therefore

unbundled complex concepts, and logically and systematically made graphic
notes to practically lead you through the process. I have burrowed from the
richest and most up-to-date sources available, and much of my thinking
reflects their thinking. The rest is extracted from years of very varied practical
marketing experience as a manager and consultant.

Looking at the programme overview, we cover the full spectrum of Marketing

Principles, however, marketing is a VERY broad subject and therefore only
the most important cornerstones of each principle are covered. Having said
this, if you keep these notes by your side, they will help you through 90% of
your Marketing career challenges. Promotion is a massive subject, so I have
included 40 pages on the subject (excluding consumer behaviour).

Enjoy the most dynamic journey on earth. Marketing!

Principles of Marketing 8
2. The Marketing Manager as a Strategist
There is no doubt that the Marketer should also be a Strategic Marketing
Manager. My personal definition of Marketing Management is “research your
target market, then give them what they want, at a profit.” This sounds
simple, but most marketing consultants will tell you that few companies do
this. To do this properly one needs to wear both sales & marketing caps,
requiring research skills to depth-probe Product, Price, Distribution and
Promotional issues.

It’s important to embrace the sales department. Sales is actually part of the
marketing “P”, Promotion. Thus personal selling, or any form of selling, falls
under Marketing. This is perhaps why it is also widely accepted that the sales
function is part of, and should report to the marketing function. Whichever way
you look at it, marketing and sales overlap heavily and should strategise
together as a closely intertwined team. If the Sales Team is the “sharp tip of
the pencil”, then marketing is the next most important part of the writing
instrument.

Sales and Marketing Overlap under the “P” called Promotion (see page 46)
The basic 4Ps of product Marketing is shown below. Note, if one is in the
service industry, we have 3 more Ps. (People, Processes, Physical Facilities)

Which is the most important P? Over the long-term, definitely Product!

Without Product you can’t Price, Place or Promote effectively. Customers will
not support a suspect Product, even though your other Ps are brilliantly
executed! Unethical marketers can manipulate and misrepresent a Product
using the other 3Ps, but will not succeed over the long-term. Over the short-
term? Price. Price is the only P that can be manipulated immediately with
staggering results. The best answer to which P? This depends on your Product
Life Cycle (PLC), Competitor activities and the uncontrollable PESTIE
environment (PESTIE can bolter or destroy your Sales Plan).
Product Marketing (4Ps), Product = Car, TV;
Service Product Marketing (8Ps), Service = Dry cleaning, haircut, restaurant, theatre/Service Product Marketing (8Ps)
Product Price Place Promotion (IMC) People Processes Physical Evidence Productivity & Quality
Packaging Cost Storage Personal Selling Skills IT Facilities TQM
Range Customers Transport Advertising Dress HR Staff OE
Quality Competitors Stock Direct Marketing Motivation Invoicing Stationary
Warranty Price Lists Distributors New Media
Training Credit terms Location Sales Promotions
PR
Sponsorship
Customer Cost Convenience Communication (4C's)
Solutions Value Access Information (SVAI) (4Cs & SVAI left = Customer's perspective)

Principles of Marketing 9
 Core Purpose: Centre of Strategy
(This article may save your career and your company.)

Too many marketing managers rely on strategic initiative to be lead

from the top, but it often never comes! It’s quite disturbing how many
MDs literally hate Vision Statement. It’s even more absurd when one
considers that all the greatest strategists (and leaders) agree that a
shared Vision and Purpose is by far the most important part of
strategy! Helen Keller put it succinctly. “What is worse than being
blind is to have perfect sight, but no vision.” So how do Sales
Managers overcome this common and painful management dilemma?

Understanding your role as Strategic Marketing Manager may require much

more ‘stretching’ than you may be comfortable with, however, there’s no
alternative when you consider the benefits. Take the high ground and lead
your superiors through a joint-strategic-workshop. You may even need to do
this to keep your job, the company afloat or to simply make target!

Strategic Reticence and Tension

If your execs aren’t acquainted with solid strategic processes and language,
boardroom meetings clumsily feel a bit like trying to crack a foreign code. To
increase tension and mistrust further, they sometimes feel intimidated by
their lack of strategic prowess, while we feel incapacitated because
marketing managers have only been empowered to run ‘marketing’. In my
experience as a consultant, this ‘gap’ always exists; it’s just the extent that
differs. Unless you’re working with a recently strategically qualified and
enlightened MD, your qualification and experience probably has a much
higher strategic value than you realise; all you need to do is sell yourself
better as a strategic facilitator.

So what’s the solution?

Carefully write a strategic Power Point presentation for your next company
conference or meeting to facilitate a live interactive-joint-strategic-session.
Take advantage of technology and realise you can actually do live updates
on the projected-screen while your colleagues are debating amongst
themselves. Test it out on a colleague, and then e-mail your ‘workshop’ to
your MD to book your slot at the next Strategic Planning Meeting.

Principles of Marketing 10
What the Workshop must cover
A featured Harvard Business School article suggested that just two things
make managers brilliant; focus and energy. One could obviously add many
other attributes to the list, however this is what separated the ‘busy’ looking
space-cadet with the best there was. Focused energy leads to focussed
activities. However companies are not run with personalised agendas, but
should be shared by everyone in the organisation, and then translated into
action through a strategic plan for each individual.

Because I believe that finding a company’s Core Purpose is the most

important area that must be covered in a strategic workshop, I’m going to
focus on that area. However, for the more aspirant two-day workshop junkie,
here’s my agenda recommendation for your fix (and the Company’s).
Selection of a Strategic Business Unit (SBU) & Targeted Segment, Key
Success Factors for SBU chosen with Competitor Analysis, in depth SWOT,
Objective Setting, “Problems” Target Market is Experiencing, Choice of a
Value Proposition/Positioning Strategy, Selecting Resources Capabilities to
match/fit Strategy, Desired Brand Essence Workshop with Pay-off
Line/Slogan/Ad-Promise Confirmation, Actionable Vision with Core
Purpose and 3 Major Goals, Group Problem Solving Workshop and then
finally Set Specific Tasks with Deadlines.

Why Core Purpose?

What's your Core Purpose? If you don't know, and if it's not customer
centric, you're treading on thin ice! If you’re a marketer or sales manager
and don’t believe in Core Purpose, please don’t let the marketing police find
you! When lecturing or facilitating sales or marketing workshops, I’ve given
up asking managers what their particular company’s Core Purpose is; they
either embarrass themselves with their answers or just don’t know! One
cannot even begin to set strategic activities when you don’t know what the
most important Big Hairy Audacious Goals (BHAGS) are, which should be
inline with your Core Purpose.
Core Purpose Illuminated
Core Purpose should be customer centric, for instance “We will maximise
our Clients profits by doing xyz.” This may sound easy, however may take
hours of brainstorming to pinpoint and usually requires Customer research
to fully expose and confirm. To give you an example how obscenely off the
mark some companies are, one company’s Core Purpose read “To make as
much profit as possible by manufacturing a quality range of widgets to ISO

Principles of Marketing 11
9002 standards.” This company was focussing all their attention on quality,
when in fact our research showed that their quality was already too high!
They were ironically planning their activities to go out of business. What
their clients wanted was increased responsiveness and on-time-delivery.
Their new Core Purpose read “To maximise our customers profitability by
delivering value-for-money widgets on time, every time.” This new Core
Purpose completely changed the BHAGS, activities of the company and the
performance appraisal system for most staff. Employees in this company
now know exactly what their Core Purpose is because it’s in their letter of
appointment, performance appraisal and makes up 25% of their annual
bonus if their ‘core purpose’ activities are achieved.

If you ask the layman what McDonald’s Core Purpose is, they
simultaneously shout out burgers! Some deeper thinkers then shout out toys
or property rental. Thank goodness they’re not marketing McDonald’s!
McDonald’s Core Purpose is not burgers (now you know why their burgers
aren’t the best), or toys or property rental, but Consistent Convenience for
the Customer! Imagine the difference in focussed goals they set for each
individual as apposed to toys, burgers and property rental! Find your
company’s Customer Centric Core Purpose by group consensus, and then
make sure all the bosses and troops are committed to driving it.

Sustainable Competitive Advantage

Once you know what your shared Core Purpose is, the customer centric
BHAGS follow swiftly, allowing all SBUs to align their objectives and
activities with it. Decisions to invest in achieving the companies
mission/vision now becomes so much easier; “Will it achieve our Core
Purpose?” “Yes”. “Well then spend it!” Morale, focus and energy levels
increase dramatically. But most of all, Marketing is doing what it’s designed
to do, which is to create handsome profits by giving customers what they
want.

Like Tom Bowman says, “A Marketers’ task is to self-destruct by making

themselves unnecessary, because they have succeeded in making the
whole organisation market-oriented.”

The article was written by Ian Rheeder to assist Marketing Managers grasp
the bigger picture of their responsibility towards Strategy. The secondary
aim was to gently persuade executives to embrace Marketing Strategy, and
of course to find a Customer Centric Core Purpose to drive Strategic
Activities. (Published in Journal of Marketing SA, Aug 2005)

Principles of Marketing 12
 Definitions
Marketing Management is:
The management of the Innovation and Imitation Processes,
that firms use to Identify and Increase Customer Satisfaction,
and Reduce Costs,
Faster than their rivals. (Prof R. Abratt, 2003)

Personal Selling is:

a) “Direct communication between paid Representatives & Prospects that lead
to purchase orders, customer satisfaction, and account development”
(Dalrymple, Cron & DeCarlo, 2001)

b) “Non-manipulative face-to-face communication to assist people to purchase.”

(Ian Rheeder)

Sales Management is: (not Selling Definition)

“The planning, organising, leading, and controlling of personal contact programs
designed to achieve the sales and profit objectives of the firm”
(Dalrymple, Cron & DeCarlo, 2001)

Marketing Managers have Major Responsibilities!

1. Meet Customers needs (at a profit)

2. Achieve and implement strategies
3. Make enough profit
4. Develop & motivate Marketing & Sales Staff

Principles of Marketing 13
 Marketing Strategy
Why do Marketing & Sales Managers need to be Strategists?
The world has become hyper-competitive! Ford only offered cars in black,
however when General Motors offered more colours, Ford lost a huge slice of
‘his’ pie. Running a business is a war zone. The Sales & Marketing
department needs intelligence to modify its strategies, or the enemy wins.
Companies go out of business every minute of the day because their go-to-
market strategies are flawed, or at least the implementation of the strategy is
flawed.

Customer Centric Oriented Approach

Note that in the center of the marketing environment (macro & micro) is the
Customer. Sales Managers must continually update/modify the 4P Marketing
Mix, which surrounds the Customer. Never stop doing market research.

Price
sensitive Distributors/Agents New Technology
world looking speeding up
Sa

for value service. World

le P
s/ l a
ys ch

keeps changing
M n

1. Product
al ar

ar
is
An ese

Quality, Range, Packaging,

ke

Delivery Speed, Training,

tin
R

Warranty,
g

3. Place
Customer
2. Price Suppliers
Objectives Objectives
Location Centric Discounts Production
Storage
Public Transport •Manufacturers
Payment Terms
Sister
Credit
nt

Speed •Retailers Increases Companies

g’ e

Stock Price Lists

tin lem
Ad on

Agents Ad Agency
ju tro

Distributors
ke p
C

4. Promotion
st l

ar Im

IMC Objectives,
/m Pl

Micro Direct
‘M ts.

Advertising, Sales force,

ea an

Training, Motivation,
ep

Internal Direct
su s

lD

Micro Direct
re

Al

MACRO/PESTI
New investors in
Legal Bill
Competitors Africa are not
WTO African
Diag 1: The Micro & Macro Marketing Environment (Adapted from P Kotler)

Principles of Marketing 14
 Understanding the Strategy Planning Process
Using the above and below diagrams (Diag. 1 & 2), strategic planning
becomes less complicated. One must also warn that a too simplistic
approach to strategy has caused major business disasters! Strategy is a
broad subject, requiring lengthy planning sessions to scan many possible
alternatives. Authors of The Balanced Score Card, Kaplan & Norton warns,
“Many companies continue to use management processes – top down,
financially driven – that were designed to run yesterday’s organizations.”
The Planning Process is more important than the Plan
The key in planning is NOT the plan. Plans outdate fast, and are also worth
very little if management and staff do not collectively buy-in. A manager can
write the best customer oriented plan, but may fail dismally if the plan was
not also co-written by colleagues. (Read article on Core Purpose, page 8-
10). This is because the plan needs to be well implemented, not just written.
The solution is to have dedicated Strategic Planning meetings, to review and
address strategic issues.

Strategy Planning Process, Marketing (Spot the Ps & PESTI)

Narrowing down to focused product-market strategy,with
Quantitative (I.e. ROI) & Qualitative (I.e. SWOT) Screening Criteria
ROI%=Net Profit/Assetsx100/1
Customer & Market
Needs & other segmenting
dimensions of Micro
Environ (unmet needs,
Direct Environ Internal & Micro

size, key success factors)

Segmentation
& Target 4-8P Mix
S Marketing
Company Target
Blend
Objectives & Resources W &
Market

(internal/self analysis, O Adapt (Customer)

Vision)
T Controllable Mix
Differentiation
& Positioning
Competitors
Current & Prospective Market
(do analysis, SWOT) Orientated
Strategy!
External Macro Market Environment,
P.E.S.T.I. (uncontrollable variable)
Diag 2: Logical steps in planning marketing/sales/business strategy
(Mc Carthy 2001)

Principles of Marketing 15
Strategic Thrust Options for Sustainable Competitive Advantage (SCA)
One Sustainable Competitive Advantage (SCA) is to be different from your
competitors by developing a hard to copy, and relevant Unique Selling
Proposition (USP). The Japanese were the first marketers to perfect low cost
production while simultaneously differentiating the product through innovation,
imitation and quality. Up until then, it was considered impossible to make the
best camera with relatively low input costs. In today’s hyper-competitive
market environment this is becoming necessary for survival; i.e. to combine
more than one ‘thrust’, however, depending on the relative competitive
environment, you may just be lucky and get away with “only producing it in
black”. (Chose your ‘overall generic marketing strategies’; i.e.: cost leadership)

Strategic Thrust Options

Porter’s alternative generic strategies

Focus
Low Cost (niche segments)
(Input costs)

Strategic Pre-emption
Thrust (First to do…)

Synergy
Differentiation (Join forces)
(Safest car)
Highlight Your Choice

Diag 3: Companies must choose their basic Strategic Thrust (Aaker)

6 x Key Terms (when talking strategy, see p.49 for detail):

USP – Unique Selling Proposition (can be an SCA if relevant)

SCA – Sustainable Competitive Advantage

Differentiation – Meaningful USP or SCA relevant to the target market

Positioning – What you wish to do to the minds of your audience

Marketing Mix = Product, Price, Placement, Promotion = Strategy

Key Success Factors: E.g. Cell phone KSF is reception!

Principles of Marketing 16
Macro: P.E.S.T.I.E Environment
Enter ‘PESTIE’ Centre Stage!
Is the Uncontrollable Variable completely out of our control? This is a
very topical discussion in SA with the pressing issues created by
globalisation.

Generally speaking, any one of below three environmental reasons is the

cause of a sales manager’s strategic failure:

1. Lack of understanding of PESTI Factors or the adjustment to the macro

(external), and micro (internal) marketing environment
2. Improper blending of the four Ps (eight Ps if the product is a service)
3. Lack of in depth market research (Customer-microenvironmental data
collection)

Points two and three above need no introduction in their ability to change
marketing’s destiny, however, the traditionally less obtrusive ‘uncontrollable’
PESTI Factors seemed to have recently dominated the marketing force field.
In fact, this is what is really creating our recent hyper-competitive
environment, where consumers and retailers are demanding sobering price-
performance-ratios from manufacturers.

What are the PESTIE Factors?

To avoid a fatal flaw in your SWOT and sales strategy, it is imperative to
study ones marketing environment under three headings. Internal
environment (i.e. company, staff, processes), Micro environment (customers,
agents, distributors, competitors) and thirdly, the Macro environment,
summarised by the acronym PESTIE (Political, Economic, Sociocultural,
Technological, Internationalisation/Globalisation and Environment).

Principles of Marketing 17
 PESTIE Political (and Legal) Factors
Political decisions create havoc with businesses barriers-to-entry and the
power of consumers. Consider these ‘uncontrollable’ variables and how they
impact on your ‘controllable’ four Ps and ability to create a sustainable
competitive advantage:
1. How will the WTO deregulation on 1st January 2005 affect your marketing
mix?
2. How has the Government interfered with the R/US$ exchange rate?
3. What is the Government’s position on the recent flood of cheap Chinese
imports and legislation on unfair dumping?
4. How has the Government’s stance on minimum wages impacted on your
price competitiveness?
5. What alternative strategies do you have in place if our Free Trade
Agreement with the USA is withdrawn?

DESTROY Or SUPPORT!

“PESTIE can destroy or bolster your Sales Strategy.”

Principles of Marketing 18
 PESTIE Economic Factors
1. How does the ‘changing economic dragon’ i.e. international interest rates,
inflation and exchange rates affect your Pricing and Distribution?
2. Are you going to climb on the export ‘learning curve’ or stay in the dark
forever?
3. The strong rand has decimated local production; will you exploit export
markets in Africa as a stopgap, or go global? Are you going to hang on to
your international market and nurture it until our currency depreciates?
4. What are your alternative strategies if the rand strengthened below
R5/US$?
How does high unemployment and recent GDP per capita impact on your
“mix”?

Due to Globalisation, 911 changed the Political, Legal, Economic, and

Sociocultural environment, instantly. Many companies suffered, and many
were bolstered by this ‘uncontrollable’ PESTIE Environment.

Principles of Marketing 19
PESTIE Sociocultural Factors
Social and cultural influences vary from country to country. Consider the
following demographic and lifestyle factors in SA:
1. How are the Baby-boomers (age 55-65), Generation X (age 25-34) and the
Millennial Generation (younger than 14 years old) changing their lifestyles?
Does your traditional psychographic segmentation still apply?
2. What are South African’s attitudes and buyer behaviour to foreign
products?
3. Tension between the ‘have’ and ‘have-nots’ is growing. In 2003 there were
more Black millionaires in SA than any other segment. Are you targeting
the right race groups in your advertising? Do they still live in the same
suburbs?

PESTIE Technological Factors

Adopting the right technology can create instant competitive advantage:
1. Customers often far preferred being updated via SMS instead of e-mail?
2. Have you or your competitors exploited the latest software (i.e. SMS)?
3. Can you distribute faster using Internet technology?
4. Will all cell phones need to have a built in digital camera to compete?

PESTIE Internationalisation (Globalisation)

We need a global village mentality, as our competition is now the entire world!
1. Considering our local idiosyncrasies, will your ‘global’ ad-campaign work?
2. Are your sister companies your biggest competitors?
3. Has China undercut your prices by 50%?
4. Do your customers go to tender on the Internet?
5. Have you considered using India for your call-centre base?

PESTIE Environmental Factors

The environmental impact of disposing your product (i.e. neon tubes) can put
you in or out of business. Phillips took the neon tube market by storm in the
USA by making the first easy to dispose neon bulb.

Principles of Marketing 20
PESTIE Conclusion
The uncontrollable PESTIE Factors, in spite of the acronym ‘pest’, can in fact
bolster and propel your company when exploited. Spend time and money
doing this! Sales Managers need to continuously research the shifting macro
environment and actually become excited about the eminent prospect of
implementing alternative strategies. Yes, you can tame the uncontrollable
variable by choosing innovative strategies that will change the rules of the
game for your competitors, or you may want to be really proactive and attempt
to influence the environment yourself. Silently recite your new mantra – ‘I love
change and the possibilities it brings’.

Product Price Place/Channel Promotion/

IMC
Quick development Electronic Internet Space Database
due to fast PLC Auctions/Bids Clicks targeting
CAD & R&D Teams Exchange rate Vertical Global
analysis Integration comms
Better quality & Excel for Price Larger retailers SMS
technology Analysis
Shift away from Value based Real-time Interactive
diversification pricing inventory media
Attention to Faster JIT Global
superior category response Agencies
value
Environmental Logistic Direct
concerns outsourcing response
TV
Table 1: How the ‘uncontrollable’ PESTI environment is affecting the 4P
‘controllable’ Mix

“The Planning Process is far more important than the Plan!

Plans outdate fast!”

“Nobody plans to fail; they just fail to plan the planning process.”

Principles of Marketing 21
 Market Planning: Write the Plan
Because market orientation is an organisation-wide prescription, it is
necessary that the whole company is organised and coordinated to serve the
customer. (Leyland Pitt 1998)

Without deadlines, Strategy is just a dream or a wish. However, a Strategic

Marketing Plan has deadlines/timelines with specific tasks for specific people
that must be achieved. However, Marketing/Sales Strategy and Planning must
meet the Company objectives (see below), which is why Marketing/Sales
Managers need direct communication with their CEO/MD who both MUST be
well versed in strategy, and involved in the Planning Process.

Hierarchy of Objectives
Company
Objectives

Production Finance Marketing HR R&D

Objectives Objectives Objectives Objectives Objectives

Product Price Place Promotion

Objectives Objectives Objectives Objectives

IMC
Promotion
Objectives

Company objectives lead to Marketing & Sales Objectives

Diag 4: Hierarchy of objectives. All ‘functions’ follow the Company’s

objectives. (‘Functions’ are all the separate departments. I.e. IT, Sales)

Principles of Marketing 22
 Selling in the Marketing Mix
Marketing
Mix
4-8Ps

Promotion Place
Products Prices Distribution
IMC
Channels

Advertising PR Sales
“pull” Personal Selling
Sponsorship Promotion
Non-personal “push”
Rifle Approach

Planning Motivating
Budgeting Compensating
Recruiting Territories Sales
Training Evaluating Management

About 14% of the total workforce are in Sales!

Diag 5: Sales Management (Selling) falls under Promotion

Sales Management is the management of the Personal Selling Function and

includes far more than ‘selling’. Personal Selling (also referred to as Face-to-
Face Selling), falls under the Promotion ‘P’ in the Marketing 4P Mix.

Although Selling falls under Promotion it does not mean that the Sales
Manager should ignore Product, Price and Place! Sales Managers must
become professionals, and become involved in Product, Price and Placement
(Distribution) decisions. Not all companies have Marketing Managers, and
therefore in their absence, the Sales Manager must take full responsibility for
these P disciplines.

Principles of Marketing 23
 Setting Marketing Objectives
Qualitative and quantitative elements of objectives explain and contribute to
each other. Qualitative a statement in words. Quantitative the words in
numbers.

Examples:

Qualitative Quantitative
Growth, Introduce x, Maintain Sales, Market share, Profit, Growth %,
market share, Hold Strategy, Expenses,
Build/Invest, Harvest, Divest
(get rid of), Become market
leader, Profit
SALES MARKET SHARE
(MILLIONS)
Year 1 Launch 5 new products R2.0 45%

Year 2 Market leader R6.0 50%

Year 3 Maintain market R10.0 50%

leadership position

Qualitative and quantitative objectives are used to check each other for
consistency and objectivity.

Objectives need to be realistic & measurable.

Resources need to fit the objectives.

Have you calculated the Market and Industry Potentials?

What is your Industry Growth Rate vs. your growth rate?

Principles of Marketing 24