INTRODUCTION

Today’s central problem facing banking system is not a shortage of

staffs but a shortage of customers. Most of the world’s bank can offer more
staffs that can serve all customers worldwide. Overcapacity results from
individual competitors projecting a greater market share growth than is
possible. If each company projects a 10 percent growth in its sales and the
total market is growing by only 3 percent, the result is excess capacity. This
in turn leads to hyper competition. Competitors, desperate to attract
customers, lower their prices and add giveaways. These strategies ultimately
mean lower margins, lower profits, some failing companies, and more
mergers and acquisitions.
Marketing is the answer to how to compete on bases other than price.
Because of overcapacity, marketing has become more important than ever.
Marketing is the company’s customer manufacturing department. That is
why the aim of this work is to develop management of marketing conception
of an enterprise.
But marketing is still a terribly misunderstood subject in business
circles and in the public’s mind. Companies think that marketing exists to
help manufacturing get rid of the company’s products. The truth is the
reverse, that manufacturing exists to support marketing. A company can
always outsource its manufacturing. What makes a company prosper is its
marketing ideas and offerings. Manufacturing, purchasing, research and
development (R&D), finance, and other company functions exist to support
the company’s work in the customer marketplace.
Marketing is not the art of finding clever ways to dispose of what you
make. Marketing is the art of creating genuine customer value. It is the art of
helping your customer’s become better off. The marketer’s watchwords are
quality, service, and value.
Selling starts only when you have a product. Marketing starts before a
product exists. Marketing is the homework your company does to figure out
what people need and what your company should offer. Marketing
determines how to launch, price, distribute, and promote your
product/service offerings to the marketplace. Marketing then monitors the
results and improves the offering over time. Marketing also decides if and
when to end an offering.
In short, marketing’s job is to convert people’s changing needs into
profitable opportunities. Marketing’s aim is to create value by offering
superior solutions, saving buyer search and transaction time and effort, and
delivering to the whole society a higher standard of living.
Marketing practice today must go beyond a fixation on transactions
that often leads to a sale today and a lost customer tomorrow. The
marketer’s goal is to build a mutually profitable long term relationship with
its customers, not just sell a product. A business is worth no more than the
lifetime value of its customers. This calls for knowing your customers well
enough to deliver relevant and timely offers, services, and messages that
meet their individual needs.
The function of marketing is typically organized as a department
within a business. This is good and bad. It’s good because it brings together
a number of skilled people with specific abilities for understanding, serving,
and satisfying customers. It’s bad because other departments believe that all
marketing is done in one department.
Marketing is not restricted to a department that creates ads, selects
media, sends out direct mail, and answers customer questions. Marketing is
a larger process of systematically figuring out what to make, how to bring it
to the customer’s attention and easy access, and how to keep the customer
wanting to buy more from you.
Furthermore, marketing strategy and actions are not only played out
in customer markets. For example, your company also has to raise money
from investors. As a result you need to know how to market to investors.
You also want to attract talent to your company. So you need to develop a
value proposition that will attract the most able people to join your
company. Whether marketing to customers, investors, or talent, you need to
understand their needs and wants and present a competitively superior value
proposition to win their favor.
 1 NATURE AND SCOPE OF MARKETING

Marketing can occur any time a person or an organization strives to

exchange something of value with another person or organization. Thus, at
its core marketing is a transaction or exchange. In this broad sense,
marketing consists of activities design to generate and facilitates exchanges
intended to satisfy human or organizational needs and wants.

1.1 Exchange as the focus of marketing

Exchange is just one of three ways we can satisfy our needs. If you
want something, you can make it yourself, acquire it by theft or some form
or coercion, or you can offer something of value to a person or organization
that has that desired good or services and will exchange it for what you
offer. Only this last alternative is the sense that marketing is occurring.
The following conditions must exist for a marketing exchange to take
place:
3 Two or more people or organizations must be involved, and each
must have needs or wants to be satisfied. If you are totally self-
sufficient, there is no need for an exchange.

4 The parties to the exchange must be involved voluntarily.

5 Each party must have something to value or contribute in

exchange, and each must believe that it will benefit from the
exchange.
 6 The parties must communicate with each other. The
communication can take many forms and may even be through a
third party, but without awareness and information, there can be no
exchange.
These exchange conditions introduce a number of terms that deserve
some elaboration. First there are the parties involved in the exchange. On
one side of the exchange is the marketer. Marketers take the initiative by
trying to stimulate and facilitates exchanges. They develop marketing plans
and programs and implement them in hopes of creating an exchange. In this
respect, a retailer such as Trader Joe’s, a college or a university recruiting
students, the American cancer society soliciting donors, and United Airlines
seeking passengers are all marketers.
On the other side of exchange is the market, which consists of people
or organization which needs to satisfy, money to spend and the willingness
to spend to it. Marketing programs are directed at markets that either accept
or reject the offer. Markets are made up of current and prospective
customers, defined as any person, group, or organization with which a
marketer has an existing or potential exchange relationship.
The object of the exchange or what is being marketed is referred to
generically as the product. It can be a good, service, idea, person, or place.
All of these can be marketed, as we shall see.
We must often think of something of value as money. However, barter
(trading one product for another) is still fairly common among small
business and even countries. Of course, many changes in the nonbusiness
world, such as donating blood in exchange for the good feeling of helping
others, do not involve cash.
Marketers use many forms of personal and nonpersonal
communication, from billboard to personal selling, to inform and persuade
there desired markets. Because there are so many communication methods
available, selecting the most effective combination is an important
marketing task.
In describing exchanges, we use the small terms needs and wants
interchangeably because marketing is relevant to both. Technically, needs
could be viewed in a strict physiological sense (food, clothing, and shelter),
with everything else defines as a want. However, from a customer’s
perspective, the distinction is not clear. For example, many people consider
a cellular phone or a home computer as necessity.

1.2 What is marketing?

Marketing based on the concept of exchange and applicable in any

organization is a total system of business activities designed to plan, price,
promote, and distribute want satisfying products to targets market in order to
achieve organizational objectives. This definition has two significant
implications:
7 Focus: The entire system of business activities should be
customer-oriented. Customers’ wants must be recognized and
satisfied.

8 Duration: Marketing should start with an idea about a want-

satisfying product and should not end until the customers’ wants
 are completely satisfied, which may be sometime after the
exchange is made.

Marketing is the process by which companies determine what

products or services may be of interest to customers, and the strategy to use
in sales, communications and business development. It is an integrated
process through which companies create value for customers and build
strong customer relationships in order to capture value from customers in
return.

Marketing is used to identify the customer, to keep the customer, and

to satisfy the customer. With the customer as the focus of its activities, it can
be concluded that marketing management is one of the major components
of business management. Marketing evolved to meet the stasis in developing
new markets caused by mature markets and overcapacities in the last 2-3
centuries. The adoption of marketing strategies requires businesses to shift
their focus from production to the perceived needs and wants of their
customers as the means of staying profitable.

The term marketing concept holds that achieving organizational goals

depends on knowing the needs and wants of target markets and delivering
the desired satisfactions. It proposes that in order to satisfy its organizational
objectives, an organization should anticipate the needs and wants of
consumers and satisfy these more effectively than competitors.

Marketing is defined by the American Marketing Association (AMA)

as "the activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large."The term developed from
the original meaning which referred literally to going to a market to buy or
sell goods or services. Seen from a systems point of view, sales process
engineering views marketing as "a set of processes that are interconnected
and interdependent with other functions, whose methods can be improved
using a variety of relatively new approaches.

1.3 Evolution of marketing

The foundations of marketing in America were laid in the Colonial

times, when the early settlers traded among themselves and with the Native
Americans. Some settlers became retailers, wholesalers, and itinerant
peddlers. However, large-scale marketing in the U.S. did not begin to take
shape until the Industrial revolution in the latter part of the 1800s. Since
then, marketing thought was evolve through three successive stages of
development: product orientation, sales orientation, and market orientation.

Product-orientation stage
Firms with a product orientation typically focus on the quality and
quantity of offerings while assuming that the customers will seek out and
buy reasonably priced, well made products. This mindset is commonly
associated with a long-ago era when the demands for goods generally
exceeded the supply, and the primary focus in business was to efficiently
produce large quantities of products. Finding the customers was viewed as a
relatively minor function.
Manufacturers, wholesalers, and retailers operating in the stage
emphasized internal operations and focused on efficiency and cost control.
There wasn’t much need to worry about what customers wanted because it
was highly predictable. Most people spent the vast majority of their incomes
on necessities. If a firm could make a good quality shoe inexpensively, for
example, a market almost certainly existed.
When this was the prevailing approach to business the term marketing
was not in use. Instead, producers had sales department headed by
executives whose primary responsibility was to supervise a sale force. The
function of the sales department was to simply carry out the transaction, at a
price often dictated by the cost of production.

Sales-orientation stage
The world economic crisis of the late 1920s (commonly referred to as
the Great depression) changed perceptions. As the developed countries
emerged from the depression it became clear that the main economic
problem no longer was hoe to manufacture efficiently, but rather it was how
to sell the resulting output. Just offering a quality product was no assurance
of success. Managers began to realize that to sell their product in an
environment where consumers had limited resources and numerous option
required substantial postproduction effort. Thus, a sales orientation,
characterized by a heavy reliance on promotional activity to sell the product
the firm wanted to make, became common. In this stage, advertising
consumed a larger share of a firm’s resources, and sales executives began to
gain respect and responsibility from company management.
Along with the responsibility came expectation for performance.
Unfortunately, these pressures resulted in some managers resorting to overly
aggressive selling-the “hard sell”-and unscrupulous advertising tactics. As a
result, selling developed an unsavory reputation in the eyes of many. Old
habits die hard, and even now some organizations believe that they must use
a hard-sell approach to prosper. In the United States the sales stage was
common into the 1950s, when modern marketing began to emerge.
Market-orientation stage
At the end of World War II there was strong pent-up demand for the
consumer goods created by wartime shortages, as a result, manufacturing
plants turned out tremendous quantities of goods that were quickly
purchased. However, the postwar surge in consumer spending slowed down
as supply caught up with demand, and many firms found that they had
excess production capacity.
In an attempt to stimulate sales, firms reverted to the aggressive
promotional and sales activities of sale-orientation. However, these time
consumers were less willing to be persuaded. Sellers discovered that the war
years had also changed consumers. The thousand of service men and women
who spent time overseas came home more sophisticated and worldly. In
addition, they had more choices. The technology that was developed during
the war made it possible to produce a much greater variety of goods when
converted to peacetime activity.
Thus the evolution of marketing continued. Many companies
recognized that to put idle capacity to work they had to make available what
consumers wanted to buy instead of what the business wanted to sell. With a
market orientation, companies identify what customers want and tailor all
the activities of the firm to satisfy those needs as efficiently as possible.
Note that not every organization as to be market-oriented to prosper.
A monopolist selling a necessity is guaranteed of having customers.
Therefore, its management should be much more concerned with low-cost,
efficient production than with marketing.
Table 1.1 - The marketing orientation

Western
Orientation Profit driver European Description
timeframe

A firm employing a product orientation is chiefly

concerned with the quality of its own product. A firm
Quality of until the
Product would also assume that as long as its product was of a
the product 1960s
high standard, people would buy and consume the
product.

A firm using a sales orientation focuses primarily on the

selling/promotion of a particular product, and not
determining new consumer desires as such.
Consequently, this entails simply selling an already
Selling 1950s and existing product, and using promotion techniques to
Selling attain the highest sales possible.
methods 1960s

Such an orientation may suit scenarios in which a

firm holds dead stock, or otherwise sells a product that is
in high demand, with little likelihood of changes in
consumer tastes diminishing demand.

Marketing Needs and 1970 to The 'marketing orientation' is perhaps the most
wants of present day common orientation used in contemporary marketing. It
customers involves a firm essentially basing its marketing plans
around the marketing concept, and thus supplying
 products to suit new consumer tastes. As an example, a
firm would employ market research to gauge consumer
desires, use R&D to develop a product attuned to the
revealed information, and then utilize promotion
techniques to ensure persons know the product exists.

1.4 The marketing concept

Managers who adopt a market orientation recognize that marketing is

vital to the success of their organization. This realization is reflected in a
fundamental approach to doing business that gives the customer the highest
priority. Called the marketing concept, it emphasizes customer orientation
and coordination of marketing activities to achieve the organization’s
performance objectives.
Implementing the marketing concept
The marketing concept is an appealing idea, but it must be converted
into specific activities to be useful for managers. Over the years it has been
interpreted and applied in a number of different ways. “No question asked”
return policies to satisfy customers and automated warehouses to speed up
delivery and support discounted prices are examples from the past. Today
the marketing concept is being applied in a number of other ways. Several of
the most important developments are introduced below.
Customer Orientation
9 Relationships. The value of good relationship is not a new idea.
 However, it has been fairly recently that organization, with the
benefit of extensive data, have made a concerted effort at customer
relationship management (CRM)-establishing multidimensional
connections with a customer such that the organization is seen as a
partner. Data are often a key ingredient in CRM. By sorting and
analyzing data supplied by customers, gathered from third parties,
and collected from previous transactions, a marketer is able to
understand a customer’s needs and preferences. But there is more
to relationship management than data. By examining successful
partnership in business and elsewhere, marketers have discovered
that enduring relationships are built on trust and mutual
commitment, require a lot of time and effort to create and
maintain, and are not appropriate for every exchange situation.
Applying this concept to their marketing programs, many firms are
dedicating much of their marketing effort to building lasting
relationships with selected customers.

10 Mass Customization. The modern marketing system was built on

identifying a need experienced by a large number of people (a

mass market), and using mass production techniques and mass
marketing (relying heavily on network television advertising) to
satisfy that needs. By producing and selling large quantities of
standardized products. Firms were able to keep the unit cost low
and offer need-satisfying products at attractive prices. However,
the market has changed. Mass marketing is being challenged my
mass customization, that is, developing, producing, and delivering
 affordable products with enough uniqueness that nearly every
potential customer can have what he or she wants. The movement
towards mass customization is made possible by the tremendous
advances in information, communication, and manufacturing
technology. Firms are now able to learn a lot more about their
current and prospective customers, and use that information in
designing products, and manufacturing technology.

Coordinated Marketing Activities

11 Quality. Although most firms do not ignore quality, there is a

tendency to think in terms of “acceptable” level of quantity is

determined by engineers and manufacturing people. However,
when some firms added quality as defined by customers as a key
ingredient of their strategies, it wasn’t long before consumer
responded. Soon the benefits of a commitment to quality became
evident in the success of firms such as Sony and Honda.

Through careful study, firms found it is possible to substantially

increase quality without unacceptable cost increase by:

12 Obtaining and responding to input from customers about how they
define quality and what they expect in a particular product.

13 Improving designs to reduce problems in manufacturing, and

identifying and correcting problems early in the production
process to reduce expensive reworking and waste.

14 Encouraging employees to call attention to quality problems, and

empowering them to initiate action to improve quality.
15 Value creation. The customer’s perception of al benefits of a

product weighed against all the costs of acquiring and consuming

the product is its value. The benefits can be functional (the
roominess of a minivan for a large family), aesthetic (the
attractiveness of the minivan), or psychological (the peace of mind
that the van is designed to withstand a collision). Besides the
money paid to the seller, the costs might include learning about the
product, negotiating the purchase, arranging financing, learning
how to use the product, and disposal of the product when it is no
longer useful.
 2 ENTERPRISE

An enterprise (also called a company, business or firm) is a legally

recognized organization designed to
provide goods and/or services to consumers. Businesses are predominant
in capitalist economies. Most businesses are privately owned. A business is
typically formed to earn profit that will increase the wealth of its owners and
grow the business itself. The owners and operators of a business have as one
of their main objectives the receipt or generation of financial returns in
exchange for work and acceptance or risk. Notable exceptions
include cooperative enterprises and state-owned enterprises. Businesses can
also be formed not-for-profit or be state-owned.

The etymology of "business" relates to the state of being busy either

as an individual or society as a whole, doing commercially viable and
profitable work. The term "business" has at least three usages, depending on
the scope — the singular usage (above) to mean a
particular company or corporation, the generalized usage to refer to a
particular market sector, such as "the music business" and compound forms
such as agribusiness, or the broadest meaning to include all activity by the
community of suppliers of goods and services. However, the exact definition
of business, like much else in the philosophy of business, is a matter of
debate and complexity of meanings.

2.1 Basic forms of ownership

 Although forms of business ownership vary by jurisdiction, there are
several common forms:

16 Sole proprietorship: A sole proprietorship is a business owned by

one person. The owner may operate on his or her own or may
employ others. The owner of the business has personal liability of
the debts incurred by the business.

17 Partnership: A partnership is a form of business in which two or

more people operate for the common goal which is often making
profit. In most forms of partnerships, each partner has personal
liability of the debts incurred by the business. There are three
typical classifications of partnerships: general partnerships, limited
partnerships, and limited liability partnerships.

18 Corporation: A corporation is either

a limited or unlimited liability entity that has a separate legal
personality from its members. A corporation can be organized for-
profit or not-for-profit. A corporation is owned by
multiple shareholders and is overseen by a board of directors,
which hires the business's managerial staff. In addition to
privately-owned corporate models, there are state-owned
corporate models.

19 Cooperative: Often referred to as a "co-op", a cooperative is a

limited liability entity that can organize for-profit or not-for-profit.

A cooperative differs from a corporation in that it has members, as
opposed to shareholders, who share decision-making authority.
Cooperatives are typically classified as either consumer
 cooperatives or worker cooperatives. Cooperatives are
fundamental to the ideology of economic democracy.

2.2 Classifications

There are many types of businesses, and because of this, businesses

are classified in many ways. One of the most common focuses on the
primary profit-generating activities of a business:

20 Agriculture and mining businesses are concerned with the

production of raw material, such as plants or minerals.

21 Financial businesses include banks and other companies that

generate profit through investment and management of capital.

22 Information businesses generate profits primarily from the resale

of intellectual property and include movie studios, publishers and
packaged software companies.

23 Manufacturers produce products, from raw materials or component

parts, which they then sell at a profit. Companies that make
physical goods, such as cars or pipes, are considered
manufacturers.

24 Real estate businesses generate profit from the selling, renting, and
development of properties, homes, and buildings.

25 Retailers and Distributors act as middle-men in getting goods

produced by manufacturers to the intended consumer, generating a
profit as a result of providing sales or distribution services. Most
consumer-oriented stores and catalogue companies are distributors
 or retailers.

26 Service businesses offer intangible goods or services and typically

generate a profit by charging for labor or other services provided
to government, other businesses, or consumers. Organizations
ranging from house decorators to consulting firms, restaurants, and
even entertainers are types of service businesses.

27 Transportation businesses deliver goods and individuals from

location to location, generating a profit on the transportation costs

28 Utilities produce public services, such as heat, electricity, or

sewage treatment, and are usually government chartered.

There are many other divisions and subdivisions of businesses. The

authoritative list of business types for North America is generally considered
to be the North American Industry Classification System, or NAICS. The
equivalent European Union list is the NACE.

2.3 Organizing an enterprise

The major factors affecting how a business is organized are usually:

29 The size and scope of the business, and its anticipated

management and ownership. Generally a smaller business is more

flexible, while larger businesses, or those with wider ownership or
more formal structures, will usually tend to be organized as
partnerships or (more commonly) corporations. In addition a
business that wishes to raise money on a stock market or to be
owned by a wide range of people will often be required to adopt a
 specific legal form to do so.

30 The sector and country: Private profit making businesses are

different from government owned bodies. In some countries,

certain businesses are legally obliged to be organized in certain
ways.

31 Limited liability: Corporations, limited liability partnerships, and

other specific types of business organizations protect their owners

or shareholders from business failure by doing business under a
separate legal entity with certain legal protections. In contrast,
unincorporated businesses or persons working on their own are
usually not so protected.

32 Tax advantages: Different structures are treated differently in tax

law, and may have advantages for this reason.

33 Disclosure and compliance requirements: Different business

structures may be required to make more or less information

public (or reported to relevant authorities), and may be bound to
comply with different rules and regulations.

Many businesses are operated through a separate entity such as a

corporation or a partnership (either formed with or without limited liability).
Most legal jurisdictions allow people to organize such an entity by filing
certain charter documents with the relevant Secretary of State or equivalent
and complying with certain other ongoing obligations. The relationships and
legal rights of shareholders, limited partners, or members are governed
partly by the charter documents and partly by the law of the jurisdiction
where the entity is organized. Generally speaking, shareholders in a
corporation, limited partners in a limited partnership, and members in a
limited liability company are shielded from personal liability for the debts
and obligations of the entity, which is legally treated as a separate "person."
This means that unless there is misconduct, the owner's own possessions are
strongly protected in law, if the business does not succeed.

Where two or more individuals own a business together but have

failed to organize a more specialized form of vehicle, they will be treated as
a general partnership. The terms of a partnership are partly governed by a
partnership agreement if one is created and partly by the law of the
jurisdiction where the partnership is located. No paperwork or filing is
necessary to create a partnership, and without an agreement, the
relationships and legal rights of the partners will be entirely governed by the
law of the jurisdiction where the partnership is located.

A single person who owns and runs a business is commonly known as

a sole proprietor, whether he or she owns it directly or through a formally
organized entity.

A few relevant factors to consider in deciding how to operate a

business include:

1. General partners in a partnership (other than a limited liability

partnership), plus anyone who personally owns and operates a business
without creating a separate legal entity, are personally liable for the debts
and obligations of the business.

2. Generally, corporations are required to pay tax just like "real"

people. In some tax systems, this can give rise to so-called double taxation,
because first the corporation pays tax on the profit, and then when the
corporation distributes its profits to its owners, individuals have to include
dividends in their income when they complete their personal tax returns, at
which point a second layer of income tax is imposed.

3. In most countries, there are laws which treat small corporations

differently than large ones. They may be exempt from certain legal filing
requirements or labor laws, have simplified procedures in specialized areas,
and have simplified, advantageous, or slightly different tax treatment.

4. To "go public" (sometimes called IPO) -- which basically

means to allow a part of the business to be owned by a wider range of
investors or the public in general—you must organize a separate entity,
which is usually required to comply with a tighter set of laws and
procedures. Most public entities are corporations that have sold shares, but
increasingly there are also public LLCs that sell units (sometimes also called
shares), and other more exotic entities as well (for example, REITs in the
USA, Unit Trusts in the UK). However, you cannot take a general
partnership "public."

2.3.1 Commercial law

Most commercial transactions are governed by a very detailed and

well-established body of rules that have evolved over a very long period of
time, it being the case that governing trade and commerce was a strong
driving force in the creation of law and courts in Western civilization.

As for other laws that regulate or impact businesses, in many

countries it is all but impossible to chronicle them all in a single reference
source. There are laws governing treatment of labor and generally relations
with employees, safety and protection issues (Health and Safety), anti-
discrimination laws (age, gender, disabilities, race, and in some
jurisdictions, sexual orientation), minimum wage laws, union laws, workers
compensation laws, and annual vacation or working hours time.

In some specialized businesses, there may also be licenses required,

either due to special laws that govern entry into certain trades, occupations
or professions, which may require special education, or by local
governments. Professions that require special licenses range from law and
medicine to flying airplanes to selling liquor to radio broadcasting to selling
investment securities to selling used cars to roofing. Local jurisdictions may
also require special licenses and taxes just to operate a business without
regard to the type of business involved.

Some businesses are subject to ongoing special regulation. These

industries include, for example, public utilities, investment securities,
banking, insurance, broadcasting, aviation, and health care providers.
Environmental regulations are also very complex and can impact many
kinds of businesses in unexpected ways.

2.3.2 Capital

When businesses need to raise money (called 'capital'), more laws

come into play. A highly complex set of laws and regulations govern the
offer and sale of investment securities (the means of raising money) in most
Western countries. These regulations can require disclosure of a lot of
specific financial and other information about the business and give buyers
certain remedies. Because "securities" is a very broad term, most investment
transactions will be potentially subject to these laws, unless a special
exemption is available.

Capital may be raised through private means, by public offer (IPO) on

a stock exchange, or in many other ways. Major stock exchanges include the
Shanghai Stock Exchange, Singapore Exchange, Hong Kong Stock
Exchange, New York Stock Exchange and Nasdaq (USA), the London Stock
Exchange (UK), the Tokyo Stock Exchange (Japan), and so on. Most
countries with capital markets have at least one.

Businesses that have gone "public" are subject to extremely detailed

and complicated regulation about their internal governance (such as how
executive officers' compensation is determined) and when and how
information is disclosed to the public and their shareholders. In the United
States, these regulations are primarily implemented and enforced by the
United States Securities and Exchange Commission (SEC). Other Western
nations have comparable regulatory bodies. The regulations are
implemented and enforced by the China Securities Regulation Commission
(CSRC), in China. In Singapore, the regulation authority is Monetary
Authority of Singapore (MAS), and in Hong Kong, it is Securities and
Futures Commission (SFC).

As noted at the beginning, it is impossible to enumerate all of the

types of laws and regulations that impact on business today. In fact, these
laws have become so numerous and complex, that no business lawyer can
teach them all, forcing increasing specialization among corporate attorneys.
It is not unheard of for teams of 5 to 10 attorneys to be required to handle
certain kinds of corporate transactions, due to the sprawling nature of
modern regulation. Commercial law spans general corporate law,
employment and labor law, healthcare law, securities law, M&A law (who
specialize in acquisitions), tax law, ERISA law (ERISA in the United States
governs employee benefit plans), food and drug regulatory law, intellectual
property law (specializing in copyrights, patents, trademarks and such),
telecommunications law, and more.

In Thailand, for example, it is necessary to register a particular

amount of capital for each employee, and pay a fee to the government for
the amount of capital registered. There is no legal requirement to prove that
this capital actually exists, the only requirement is to pay the fee. Overall,
processes like this are detrimental to the development and GDP of a country,
but often exist in "feudal" developing countries.

2.3.3 Intellectual property

Businesses often have important "intellectual property" that needs

protection from competitors for the company to stay profitable. This could
require patents or copyrights or preservation of trade secrets. Most
businesses have names, logos and similar branding techniques that could
benefit from trademarking. Patents and copyrights in the United States are
largely governed by federal law, while trade secrets and trademarking are
mostly a matter of state law. Because of the nature of intellectual property, a
business needs protection in every jurisdiction in which they are concerned
about competitors. Many countries are signatories to
international treaties concerning intellectual property, and thus companies
registered in these countries are subject to national laws bound by these
treaties.

Exit plans

Businesses can be bought and sold. Business owners often refer to

their plan of disposing of the business as an "exit plan." Common exit plans
include IPOs, MBOs and mergers with other businesses. Businesses are
rarely liquidated, as it is often very unprofitable to do so.

34 MARKETING MIX

The term "marketing mix" was first used in 1953 when Neil Borden,
in his American Marketing Association presidential address, took the recipe
idea one step further and coined the term "marketing-mix". A prominent
marketer, E. Jerome McCarthy, proposed a 4 P classification in 1960, which
has seen wide use. The four Ps concepts are explained in most marketing
textbooks and classes.

Elements of the marketing mix are often referred to as 'the four Ps':

35 Product - A tangible object or an intangible service that is mass

produced or manufactured on a large scale with a specific volume
of units. Intangible products are service based like the tourism
industry & the hotel industry or codes-based products like
cellphone load and credits. Typical examples of a mass produced
tangible object are the motor car and the disposable razor. A less
obvious but ubiquitous mass produced service is a computer
 operating system. Packaging also needs to be taken into
consideration.

36 Price – The price is the amount a customer pays for the product. It
is determined by a number of factors including market share,
competition, material costs, product identity and the customer's
perceived value of the product. The business may increase or
decrease the price of product if other stores have the same product.

37 Place – Place represents the location where a product can be

purchased. It is often referred to as the distribution channel. It can
include any physical store as well as virtual stores on the Internet.

38 Promotion represents all of the communications that a marketer

may use in the marketplace. Promotion has four distinct
elements: advertising, public relations, word of mouth and point of
sale. A certain amount of crossover occurs when promotion uses
the four principal elements together, which is common in film
promotion. Advertising covers any communication that is paid for,
from cinema commercials, radio and Internet adverts through print
media and billboards. Public relations are where the
communication is not directly paid for and includes press releases,
sponsorship deals, exhibitions, conferences, seminars or trade fairs
and events. Word of mouth is any apparently informal
communication about the product by ordinary individuals, satisfied
customers or people specifically engaged to create word of mouth
momentum. Sales staff often plays an important role in word of
mouth and Public Relations.
 Figure 3.1 - The four main fields of the Marketing mix

3.1 Product

The word product is defined as a "thing produced by labor or

effort" or the "result of an act or a process", and stems from the
verb produce, from the Latin prōdūce(re) '(to) lead or bring forth'. Since
1575, the word "product" has referred to anything produced.[3] Since 1695,
the word has referred to "thing or things produced". The economic or
commercial meaning of product was first used by political economist Adam
Smith.

In marketing, a product is anything that can be offered to a market that

might satisfy a want or need. In retailing, products are called merchandise.
In manufacturing, products are purchased as raw materials and sold
as finished goods. Commodities are usually raw materials such as metals and
agricultural products, but a commodity can also be anything widely
available in the open market. In project management, products are the
formal definition of the project deliverables that make up or contribute to
delivering the objectives of the project.

In general usage, product may refer to a single item or unit, a group of

equivalent products, a grouping of goods or services, or an industrial
classification for the goods or services.

A related concept is subproduct, a secondary but useful result of a

production process.
3.1.1 Product life cycle

Product life cycle is the succession of strategies used by business

management as a product goes through its life cycle. The condition in which
a product is sold (advertising, saturation) changes over time and must be
managed as it moves through its succession of stages.

Like human beings, products also have their own life-cycle. From
birth to death human beings pass through various stages e.g. birth, growth,
maturity, decline and death. A similar life-cycle is seen in the case of
products. The product life cycle goes through multiple phases, involves
many professional disciplines, and requires many skills, tools and processes.
Product life cycle (PLC) has to do with the life of a product in the market
with respect to business/commercial costs and sales measures. To say that a
product has a life cycle is to assert four things:

39 that products have a limited life,

40 product sales pass through distinct stages, each posing different

challenges, opportunities, and problems to the seller,

41 profits rise and fall at different stages of product life cycle, and

42 products require different marketing, financial, manufacturing,

purchasing, and human resource strategies in each life cycle stage.

There are six stages in a product's life cycle. Here four of them:

Table 3.1 - The Product Life Cycle

Stage Characteristics
 1. costs are high
2. slow sales volumes to start
1. Market 3. little or no competition
introduction stage 4. demand has to be created
5. customers have to be prompted to try the product
6. makes no money at this stage
1. costs reduced due to economies of scale
2. sales volume increases significantly
3. profitability begins to rise
2. Growth
stage 4. public awareness increases
5. competition begins to increase with a few new
players in establishing market
6. increased competition leads to price decreases
1. costs are lowered as a result of production volumes
increasing and experience curve effects
2. sales volume peaks and market saturation is reached
3. increase in competitors entering the market
3. Maturity
stage 4. prices tend to drop due to the proliferation of
competing products
5. brand differentiation and feature diversification is
emphasized to maintain or increase market share
6. Industrial profits go down
1. costs become counter-optimal
2. sales volume decline or stabilize
4. Saturation
and decline stage 3. prices, profitability diminish
4. profit becomes more a challenge of
production/distribution efficiency than increased sales

Limitations

The PLC model is of some degree of usefulness to marketing

managers, in that it is based on factual assumptions. Nevertheless, it is
difficult for marketing management to gauge accurately where a product is
on its PLC graph. A rise in sales per se is not necessarily evidence of
growth. A fall in sales per se does not typify decline. Furthermore, some
products do not (or to date, at the least, have not) experienced a
decline. Coca Cola and Pepsi are examples of two products that have existed
for many decades, but are still popular products all over the world. Both
modes of cola have been in maturity for some years.

Another factor is that differing products would possess different PLC

"shapes". A fad product would hold a steep sloped growth stage, a short
maturity stage, and a steep sloped decline stage. A product such as Coca
Cola and Pepsi would experience growth, but also a constant level of sales
over a number of decades. It can probably be said that a given product (or
products collectively within an industry) may hold a unique PLC shape, and
the typical PLC model can only be used as a rough guide for marketing
management. This is why it’s called the product life cycle.

3.1.2 Product groups

Tangible and intangible products

Products can be classified as tangible or intangible. A tangible

product is any physical product that can be touched like a computer,
automobile, etc. An intangible product is a non-physical product like an
insurance policy. Insertformulaherevicky In its online product catalog,
retailer Sears, Roebuck and Company divides its products into departments,
and then presents products to shoppers according to (1) function or (2)
brand. Each product has a Sears’s item number and a manufacturer's model
number. The departments and product groupings that Sears’s uses are
intended to help customers browse products by function or brand within a
traditional department store structure.

Sizes and colors

A catalog number, especially for clothing, may group sizes and

colors. When ordering the product, the customer specifies size, color and
other variables.

Product line

A product line is "a group of products that are closely related, either
because they function in a similar manner, are sold to the same customer
groups, are marketed through the same types of outlets, or fall within given
price ranges." Many businesses offer a range of product lines which may be
unique to a single organization or may be common across the business's
industry. In 2002 the US Census compiled revenue figures for the finance
and insurance industry by various product lines such as "accident, health and
medical insurance premiums" and "income from secured consumer loans”.
Within the insurance industry, product lines are indicated by the type of risk
coverage, such as auto insurance, commercial insurance and life insurance.

National and international product classifications

Various classification systems for products have been developed for

economic statistical purposes. The North American Industry Classification
System (NAICS) classifies companies by their primary product [this is not
even close to true, NAICS is a production-oriented classification system, not
a product-oriented classification system – the NAFTA signatories are
working on a system that classifies products called NAPCS as a companion
to NAICS . The European Union uses a "Classification of Products by
Activity" among other product classifications. The United Nations also
classifies products for international economic activity reporting.

The Aspinwall Classification System (Leo Aspinwall, 1958)

classifies and rates products based on five variables:

1. Replacement rate (How frequently is the product

repurchased?).

2. Gross margin (How much profit is obtained from each

product?).

3. Buyer goal adjustment (How flexible are the buyers' purchasing

habits with regard to this product?).

4. Duration of product satisfaction (How long will the product

produce benefits for the user?).

5. Duration of buyer search behavior (How long will consumers

shop for the product?).
The National Institute of Governmental Purchasing (NIGP) developed
a commodity and services classification system for use by state and local
governments, the NIGP Code. The NIGP Code is used by 33 states within
the United States as well as thousands of cities, counties and political
subdivisions. The NIGP Code is a hierarchical schema consisting of a 3 digit
class, 5 digit class-items, 7 digit class-item-groups and an 11 digit class-
item-group-detail. Applications of the NIGP Code include vendor
registration, inventory item identification, and contract item management,
spend analysis and strategic sourcing.
3.2 Pricing

Pricing is the process of determining what a company will receive in

exchange for its products. Pricing factors are manufacturing cost, market
place, competition, market condition, and quality of product. Pricing is also
a key variable in microeconomic price allocation theory. Pricing is a
fundamental aspect of financial modeling and is one of the four Ps of
the marketing mix. The other three aspects are product, promotion,
and place. Price is the only revenue generating element amongst the four Ps,
the rest being cost centers.

Pricing is the manual or automatic process of applying prices to

purchase and sales orders, based on factors such as: a fixed amount, quantity
break, promotion or sales campaign, specific vendor quote, price prevailing
on entry, shipment or invoice date, combination of multiple orders or lines,
and many others. Automated systems require more setup and maintenance
but may prevent pricing errors. The needs of the consumer can be converted
into demand only if the consumer has the willingness and capacity to buy
the product. Thus pricing is very important in marketing.

What a price should do

A well chosen price should do three things:

43 Achieve the financial goals of the company (e.g., profitability).

44 Fit the realities of the marketplace (Will customers buy at that

price?).

45 Support a product's positioning and be consistent with the other

 variables in the marketing mix.

46 Price is influenced by the type of distribution channel used, the

type of promotions used, and the quality of the product.

47 Price will usually need to be relatively high if manufacturing is

expensive, distribution is exclusive, and the product is supported

by extensive advertising and promotional campaigns.

48 A low price can be a viable substitute for product quality, effective

promotions, or an energetic selling effort by distributors.

From the marketer's point of view, an efficient price is a price that is

very close to the maximum that customers are prepared to pay. In economic
terms, it is a price that shifts most of the consumer surplus to the producer.
A good pricing strategy would be the one which could balance between the
price floor (the price below which the organization ends up in losses) and
the price ceiling (the price beyond which the organization experiences a no
demand situation).

3.2.1 Price Terminology

There are numerous terms and strategies specific to pricing:

49 Effective price

The effective price is the price the company receives after accounting
for discounts, promotions, and other incentives.

50 Price lining

Price lining is the use of a limited number of prices for all product
offerings of a vendor. This is a tradition started in the old five and
dime stores in which everything cost either 5 or 10 cents. Its underlying
rationale is that these amounts are seen as suitable price points for a whole
range of products by prospective customers. It has the advantage of ease of
administering, but the disadvantage of inflexibility, particularly in times
of inflation or unstable prices.

51 Loss leader

A loss leader is a product that has a price set below the operating
margin. This result in a loss to the enterprise on that particular item in the
hope that it will draw customers into the store and that some of those
customers will buy other, higher margin items.

Promotional pricing

Promotional pricing refers to an instance where pricing is the key

element of the marketing mix.

52 Price/quality relationship

The price/quality relationship refers to the perception by most

consumers that a relatively high price is a sign of good quality. The belief in
this relationship is most important with complex products that are hard to
test, and experiential products that cannot be tested until used (such as most
services). The greater the uncertainty surrounding a product, the more
consumers depend on the price/quality hypothesis and the greater premium
they are prepared to pay. The classic example is the pricing of Twinkies, a
snack cake which was viewed as low quality after the price was lowered.
Excessive reliance on the price/quantity relationship by consumers may lead
to an increase in prices on all products and services, even those of low
quality, which causes the price/quality relationship to no longer apply.

53 Premium pricing

Premium pricing (also called prestige pricing) is the strategy of

consistently pricing at, or near, the high end of the possible price range to
help attract status-conscious consumers. Examples of companies which
partake in premium pricing in the marketplace include Rolex and Bentley.
People will buy a premium priced product because:

1. They believe the high price is an indication of good quality;

2. They believe it to be a sign of self worth - "They are worth it;"

it authenticates the buyer's success and status; it is a signal to others that the
owner is a member of an exclusive group;

3. They require flawless performance in this application - The cost

of product malfunction is too high to buy anything but the best - example:
heart pacemaker.
54 Goldilocks pricing

The term Goldilocks pricing is commonly used to describe the

practice of providing a "gold-plated" version of a product at a premium price
in order to make the next-lower priced option look more reasonably priced;
for example, encouraging customers to see business-class airline seats as
good value for money by offering an even higher priced first-class option.
Similarly, third-class railway carriages in Victorian England are said to have
been built without windows, not so much to punish third-class customers
(for which there was no economic incentive), as to motivate those who
could afford second-class seats to pay for them instead of taking the cheaper
option. This is also known as a potential result of price discrimination. The
name derives from the Goldilocks story in which Goldilocks chose neither
the hottest nor the coldest porridge, but instead the one that was "just right".
More technically, this form of pricing exploits the general cognitive
bias of aversion to extremes. This practice is known academically as
"framing". By providing three options (i.e. small, medium, and large; first,
business, and coach classes) you can manipulate the consumer into choosing
the middle choice and thus, the middle choice should yield the most profit to
the seller, since it is the one chosen most often.

55 Demand-based pricing

Demand-based pricing is any pricing method that uses consumer

demand - based on perceived value - as the central element. These
include: price skimming, price discrimination and yield management, price
points, psychological pricing, bundle pricing, penetration pricing, price
lining, value-based pricing, geo and premium pricing. Pricing factors are
manufacturing cost, market place, competition, market condition, quality of
product.

56 Multidimensional pricing

Multidimensional pricing is the pricing of a product or service using

multiple numbers. In this practice, price no longer consists of a single
monetary amount (e.g., sticker price of a car), but rather consists of various
dimensions (e.g., monthly payments, number of payments, and a
downpayment). Research has shown that this practice can significantly
influence consumers' ability to understand and process price information.

3.2.2 Laws of Price Sensitivity

 In their book, The Strategy and Tactics of Pricing, Thomas
Nagle and Reed Holden outlined 9 laws or factors that influence a buyer's
price sensitivity with respect to a given purchase:

1. Reference price effect: Buyer’s price sensitivity for a given

product increases the higher the product’s price relative to perceived
alternatives. Perceived alternatives can vary by buyer segment, by occasion,
and other factors.

2. Difficult comparison effect: Buyers are less sensitive to the

price of a known / more reputable product when they have difficulty
comparing it to potential alternatives.

3. Switching costs effect: The higher the product-specific

investment a buyer must make to switch suppliers, the less price sensitive
that buyer is when choosing between alternatives.

4. Price-quality effect: Buyers are less sensitive to price the more

that higher prices signal higher quality. Products for which this effect is
particularly relevant include: image products, exclusive products, and
products with minimal cues for quality.

5. Expenditure effect: Buyers are more price sensitive when the

expense accounts for a large percentage of buyers’ available income or
budget.

6. End-benefit effect: The effect refers to the relationship a given

purchase has to a larger overall benefit, and is divided into two
parts: Derived demand: The more sensitive buyers are to the price of the end
benefit, the more sensitive they will be to the prices of those products that
contribute to that benefit. Price proportion cost: The price proportion cost
refers to the percent of the total cost of the end benefit accounted for by a
given component that helps to produce the end benefit (e.g., think CPU and
PCs). The smaller the given components share of the total cost of the end
benefit, the less sensitive buyers will be to the component's price.

7. Shared-cost effect: The smaller the portion of the purchase

price buyers must pay for themselves, the less price sensitive they will be.

8. Fairness effect: Buyers are more sensitive to the price of a

product when the price is outside the range they perceive as “fair” or
“reasonable” given the purchase context.

9. The framing effect: Buyers are more price sensitive when they
perceive the price as a loss rather than a forgone gain, and they have greater
price sensitivity when the price is paid separately rather than as part of a
bundle.

Approaches
Pricing as the most effective profit lever. Pricing can be approached at
three levels. The industry, market, and transaction level.

57 Pricing at the industry level focuses on the overall economics of

the industry, including supplier price changes and customer
demand changes.

58 Pricing at the market level focuses on the competitive position of

the price in comparison to the value differential of the product to
that of comparative competing products.

59 Pricing at the transaction level focuses on managing the

implementation of discounts away from the reference, or list price,
 which occur both on and off the invoice or receipt?

Tactics
Micromarketing is the practice of tailoring products, brands (micro
brands), and promotions to meet the needs and wants of micro
segments within a market. It is a type of market customization that deals
with pricing of customer/product combinations at the store or individual
level.

3.3 Promotion

Promotion is the same as channels of distribution is one of the four

elements of marketing mix. An organization or set of organizations (go-
betweens) involved in the process of making a product or service available
for use or consumption by a consumer or business user.
A promotion is an increase in rank which may also be accompanied
by a raise in pay, benefits, and responsibility. Most people view promotions
positively, as they indicate that the individual being promoted is successful,
valuable, and useful. In many workplaces, people actively work towards
promotion and its accompanied benefits. The term is also sometimes used to
refer to a general change in status such as a graduation, which is why you
may find yourself attending a “fifth grade promotion” instead of a fifth
grade graduation.

Typically, someone is rewarded with a promotion when he or she

performs exemplary work, or shows aptitude for a position with more
responsibility. This is usually a cause for celebration, as it indicates that the
employee has a potential for development and long employment within the
company. A promotion may include supervision responsibilities, as the
promoted employee becomes responsible for administrative assistants and
other staff. These responsibilities should not be taken lightly, as most
employees look to their supervisors for guidance and examples of
appropriate workplace behavior.

A promotion may also require more work, which goes along with
general increases in responsibility. This work may be more complex or more
interesting; however, so most employees are happy to take it on. In
recognition of the increased workload and status of the employee, most
employers offer a pay raise with a promotion, and employees may become
eligible for additional benefits. In a ranked system like the military or a fire
department, the promotion may be called an increase in rank or grade, and
the employee's pay will be adjusted according to a rigid scale.

Notification of a promotion and congratulations are usually offered by

a supervisor or high ranking member of the company. If you have been
selected for a promotion, be aware that this is an excellent time to make
negotiations, such as a request for a change in hours, because your employer
is indicating that you are valued as an employee. When you are promoted,
you may have to sign paperwork indicating the type of promotion and noting
any changes in pay.

Not all people view promotions as cause for celebrations. Some

people, for example, prefer to remain lower in rank so that they can stay in
the field in professions like policing. Others enjoy jobs with light
responsibilities, despite the lower pay. In some cases, it is possible to reject
such a promotion, although an employer may be puzzled. In others, a
promotion is not an option.
 Promotion involves disseminating information about a product,
product line, brand, or company. It is one of the four key aspects of the
marketing mix. (The other three elements are product marketing, pricing,
and distribution.) Promotion is generally sub-divided into two parts: Above
the line promotion: Promotion in the media (e.g. TV, radio, newspapers,
Internet and Mobile Phones) in which the advertiser pays an advertising
agency to place the ad below the line promotion: All other promotion. Much
of this is intended to be subtle enough for the consumer to be unaware that
promotion is taking place. E.g. sponsorship, product placement,
endorsements, sales promotion, merchandising, direct mail, personal selling,
public relations, trade shows The specification of these four variables
creates a promotional mix or promotional plan. A promotional mix specifies
how much attention to pay to each of the four subcategories, and how much
money to budget for each. A promotional plan can have a wide range of
objectives, including: sales increases, new product acceptance, creation of
brand equity, positioning, competitive retaliations, or creation of a corporate
image. The term "promotion" is usually an "in" expression used internally
by the marketing company, but not normally to the public or the market -
phrases like "special offer" are more common. An example of a fully
integrated, long-term, large-scale promotion is My Coke Rewards and Pepsi
Stuff.

Promotion Types

You can create promotions of any of the following types:

Product promotions

• Percentage off per item.

 • Fixed amount off per item.

• Fixed amount off for all.

• Buy X, get one or more items at a discount.

• Free gift with purchase.

Order promotions

• Percentage off.

• Fixed amount off.

• Free gift with purchase.

Shipping promotions

• Free shipping.

• Discounted shipping for an order using a selected ship mode.

• Discounted shipping for all items using a selected ship mode.

• Discounted shipping per item using a selected ship mode.

3.3.1 Promotional Mix

It is not enough for a business to have good products sold at attractive

prices. To generate sales and profits, the benefits of products have to be
communicated to customers. In marketing, this is commonly known as
"promotion".
Promotion is all about companies communicating with customers.
A business' total marketing communications program is called the
"promotional mix" and consists of a blend of advertising, personal selling,
sales promotion and public relations tools. In this revision note, we describe
the four key elements of the promotional mix in more detail. It is helpful to
define the four main elements of the promotional mix before considering
their strengths and limitations.
60 Advertising

Any paid form of non-personal communication of ideas or products in

the "prime media": i.e. television, newspapers, magazines, billboard posters,
radio, cinema etc. Advertising is intended to persuade and to inform. The
two basic aspects of advertising are the message (what you want your
communication to say) and the medium (how you get your message across)

61 Personal Selling

Oral communication with potential buyers of a product with the

intention of making a sale. The personal selling may focus initially on
developing a relationship with the potential buyer, but will always
ultimately end with an attempt to "close the sale".

62 Sales Promotion

Providing incentives to customers or to the distribution channel to

stimulate demand for a product.

63 Publicity

The communication of a product, brand or business by placing

information about it in the media without paying for the time or media space
directly. Otherwise known as "public relations" or PR.
Table 3.2 - Advantages and Disadvantages of Each Element of the
Promotional Mix
Mix Element Advantages Disadvantages
Advertising Good for building awareness Impersonal - cannot answer
Effective at reaching a wide all a customer's questions.
audience. Not good at getting
Repetition of main brand and customers to make a final
product positioning helps build purchasing decision.
customer trust.
Personal Highly interactive - lots of Costly - employing a sales
Selling communication between the buyer force has many hidden costs in
and seller. addition to wages.
Excellent for communicating Not suitable if there are
complex / detailed product thousands of important buyers.
information and features.
Relationships can be built up -
important if closing the sale make
take a long time.
Sales Can stimulate quick increases If used over the long-term,
Promotion in sales by targeting promotional customers may get used to the
incentives on particular products. effect.
Good short term tactical tool. Too much promotion may
damage the brand image.
Public Often seen as more Risk of losing control -
Relations "credible" - since the message cannot always control what other
seems to be coming from a third people write or say about your
party (e.g. magazine, newspaper). product.
Cheap way of reaching many
customers - if the publicity is
achieved through the right media.
 4 MARKETING PLAN

There are two major components to your marketing strategy:

• How your enterprise will address the competitive marketplace.
• How you will implement and support your day to day
operations.
In today's very competitive marketplace a strategy that insures a
consistent approach to offering your product or service in a way that will
outsell the competition is critical. However, in concert with defining the
marketing strategy you must also have a well defined methodology for the
day to day process of implementing it. It is of little value to have a strategy
if you lack either the resources or the expertise to implement it. In the
process of creating a marketing strategy you must consider many factors. Of
those many factors, some are more important than others. Because each
strategy must address some unique considerations, it is not reasonable to
identify 'every' important factor at a generic level. However, many are
common to all marketing strategies. Some of the more critical are described
below. You begin the creation of your strategy by deciding what the overall
objective of your enterprise should be. In general this falls into one of four
categories:
64 If the market is very attractive and your enterprise is one of the
strongest in the industry you will want to invest your best
resources in support of your offering.
65 If the market is very attractive but your enterprise is one of the
weaker ones in the industry you must concentrate on strengthening
the enterprise, using your offering as a stepping stone toward this
 objective.
66 If the market is not especially attractive, but your enterprise is one
of the strongest in the industry then an effective marketing and
sales effort for your offering will be good for generating near term
profits.
67 If the market is not especially attractive and your enterprise is one
of the weaker ones in the industry you should promote this
offering only if it supports a more profitable part of your business
(for instance, if this segment completes a product line range) or if
it absorbs some of the overhead costs of a more profitable
segment. Otherwise, you should determine the most cost effective
way to divest your enterprise of this offering.
Having selected the direction most beneficial for the overall interests
of the enterprise, the next step is to choose a strategy for the offering that
will be most effective in the market. This means choosing one of the
following 'generic' strategies (first described by Michael Porter in his work,
Competitive Advantage).
• A cost leadership strategy is based on the concept that you
can produce and market a good quality product or service at a lower cost
than your competitors. These low costs should translate to profit margins
that are higher than the industry average. Some of the conditions that should
exist to support a cost leadership strategy include an on-going availability of
operating capital, good process engineering skills, and close management of
labor, products designed for ease of manufacturing and low cost distribution.
• A differentiation strategy is one of creating a product or
service that is perceived as being unique "throughout the industry". The
emphasis can be on brand image, proprietary technology, special features,
superior service, a strong distributor network or other aspects that might be
specific to your industry. This uniqueness should also translate to profit
margins that are higher than the industry average. In addition, some of the
conditions that should exist to support a differentiation strategy include
strong marketing abilities, effective product engineering, creative personnel,
the ability to perform basic research and a good reputation.
• A focus strategy may be the most sophisticated of the generic
strategies, in that it is a more 'intense' form of either the cost leadership or
differentiation strategy. It is designed to address a "focused" segment of the
marketplace, product form or cost management process and is usually
employed when it isn't appropriate to attempt an 'across the board'
application of cost leadership or differentiation. It is based on the concept of
serving a particular target in such an exceptional manner, those others
cannot compete. Usually this means addressing a substantially smaller
market segment than others in the industry, but because of minimal
competition, profit margins can be very high.
Pricing
Having defined the overall offering objective and selecting the
generic strategy you must then decide on a variety of closely related
operational strategies. One of these is how you will price the offering. A
pricing strategy is mostly influenced by your requirement for net income
and your objectives for long term market control. There are three basic
strategies you can consider.
• A skimming strategy. If your offering has enough
differentiation to justify a high price and you desire quick cash and have
minimal desires for significant market penetration and control, then you set
your prices very high.
 • A market penetration strategy. If near term income is not so
critical and rapid market penetration for eventual market control is desired,
then you set your prices very low.
• A comparable pricing strategy. If you are not the market
leader in your industry then the leaders will most likely have created a 'price
expectation' in the minds of the marketplace. In this case you can price your
offering comparably to those of your competitors.
Promotion: To sell an offering you must effectively promote and advertise
it. There are two basic promotion strategies, PUSH and PULL.
• The push strategy maximizes the use of all available channels
of distribution to "push" the offering into the marketplace. This usually
requires generous discounts to achieve the objective of giving the channels
incentive to promote the offering, thus minimizing your need for
advertising.
• The pull strategy requires direct interface with the end user of
the offering. Use of channels of distribution is minimized during the first
stages of promotion and a major commitment to advertising is required. The
objective is to "pull" the prospects into the various channel outlets creating a
demand the channels cannot ignore.
There are many strategies for advertising an offering. Some of these
include:
• Product comparison advertising: In a market where your
offering is one of several providing similar capabilities, if you’re offering
stacks up well when comparing features then a product comparison ad can
be beneficial.
• Product benefits advertising: When you want to promote
your offering without comparison to competitors, the product benefits ad is
the correct approach. This is especially beneficial when you have introduced
a new approach to solving a user need and comparison to the old approaches
is inappropriate.
• Product family advertising: If you’re offering is part of a
group or family of offerings that can be of benefit to the customer as a set,
then the product family ad can be of benefit.
• Corporate advertising: When you have a variety of offerings
and your audience is fairly broad; it is often beneficial to promote your
enterprise identity rather than a specific offering.

4.1 Distribution

You must also select the distribution method(s) you will use to get the
offering into the hands of the customer. These include:
• On-premise Sales involves the sale of your offering using a
field sales organization that visits the prospect's facilities to make the sale.
• Direct Sales involves the sale of your offering using a direct,
in-house sales organization that does all selling through the Internet,
telephone or mail order contact.
• Wholesale Sales involves the sale of your offering using
intermediaries or "middle-men" to distribute your product or service to the
retailers.
• Self-service Retail Sales involves the sale of your offering
using self service retail methods of distribution.
• Full-service Retail Sales involves the sale of your offering
through a full service retail distribution channel.
Making a decision about pricing, promotion and distribution is
heavily influenced by some key factors in the industry and marketplace.
These factors should be analyzed initially to create the strategy and then
regularly monitored for changes. If any of them change substantially the
strategy should be reevaluated.

The Environment: Environmental factors positively or negatively

impact the industry and the market growth potential of your product/service.
Factors to consider include:
• Government actions - Government actions (current or under
consideration) can support or detract from your strategy. Consider subsidies,
safety, efficacy and operational regulations, licensing requirements,
materials access restrictions and price controls.
• Demographic changes - Anticipated demographic changes may
support or negatively impact the growth potential of your industry and
market. This includes factors such as education, age, income and geographic
location.
• Emerging technology - Technological changes that are
occurring may or may not favor the actions of your enterprise.
• Cultural trends - Cultural changes such as fashion trends and
life style trends may or may not support your offering's penetration of the
market.
The Prospect: It is essential to understand the market segment(s) as
defined by the prospect characteristics you have selected as the target for
your offering. Factors to consider include:
• The potential for market penetration involves whether you are
selling to past customers or a new prospect, how aware the prospects are of
what you are offering, competition, growth rate of the industry and
demographics.
• The prospect's willingness to pay higher price because you’re
offering provides a better solution to their problem.
• The amount of time it will take the prospect to make a purchase
decision is affected by the prospects confidence in your offering, the number
and quality of competitive offerings, the number of people involved in the
decision, the urgency of the need for your offering and the risk involved in
making the purchase decision.
• The prospect's willingness to pay for product value is
determined by their knowledge of competitive pricing, their ability to pay
and their need for characteristics such as quality, durability, and reliability,
ease of use, uniformity and dependability.
• Likelihood of adoption by the prospect is based on the
criticality of the prospect's need, their attitude about change, the significance
of the benefits, barriers that exist to incorporating the offering into daily
usage and the credibility of the offering.
The Product/Service: You should be thoroughly familiar with the
factors that establish products/services as strong contenders in the
marketplace. Factors to consider include:
• Whether some or all of the technology for the offering is
proprietary to the enterprise.
• The benefits the prospect will derive from use of the offering.
• The extent to which the offering is differentiated from the
competition.
• The extent to which common introduction problems can be
avoided such as lack of adherence to industry standards, unavailability of
materials, poor quality control, regulatory problems and the inability to
explain the benefits of the offering to the prospect.
• The potential for product obsolescence as affected by the
enterprise's commitment to product development, the product's proximity to
physical limits, the ongoing potential for product improvements, the ability
of the enterprise to react to technological change and the likelihood of
substitute solutions to the prospect's needs.
• Impact on customer's business as measured by costs of trying
out your offering, how quickly the customer can realize a return from their
investment in your offering, how disruptive the introduction of your offering
is to the customer's operations and the costs to switch to your offering.
• The complexity of your offering as measured by the existence
of standard interfaces, difficulty of installation, number of options,
requirement for support devices, training and technical support and the
requirement for complementary product interface.
The Competition: It is essential to know who the competition is and
to understand their strengths and weaknesses. Factors to consider include:
• Each of your competitor's experience, staying power, market
position, strength, predictability and freedom to abandon the market must be
evaluated.
Your Enterprise: An honest appraisal of the strength of your
enterprise is a critical factor in the development of your strategy. Factors to
consider include:
• Enterprise capacity to be leader in low-cost production
considering cost control infrastructure, cost of materials, economies of scale,
management skills, availability of personnel and compatibility of
manufacturing resources with offering requirements.
• The enterprise's ability to construct entry barriers to
competition such as the creation of high switching costs, gaining substantial
benefit from economies of scale, exclusive access to or clogging of
distribution channels and the ability to clearly differentiate your offering
from the competition.
• The enterprise's ability to sustain its market position is
determined by the potential for competitive imitation, resistance to inflation,
ability to maintain high prices, the potential for product obsolescence and
the 'learning curve' faced by the prospect.
• The prominence of the enterprise.
• The competence of the management team.
• The adequacy of the enterprise's infrastructure in terms of
organization, recruiting capabilities, employee benefit programs, customer
support facilities and logistical capabilities.
• The freedom of the enterprise to make critical business
decisions without undue influence from distributors, suppliers, unions,
creditors, investors and other outside influences.
• Freedom from having to deal with legal problems.
Development: A review of the strength and viability of the
product/service development program will heavily influence the direction of
your strategy. Factors to consider include:
• The strength of the development manager including experience
with personnel management, current and new technologies, complex
projects and the equipment and tools used by the development personnel.
• Personnel who understand the relevant technologies and are
able to perform the tasks necessary to meet the development objectives.
• Adequacy and appropriateness of the development tools and
equipment.
 • The necessary funding to achieve the development objectives.
• Design specifications that are manageable.

4.2 Production

You should review your enterprise's production organization with

respect to their ability to cost effectively produce products and services. The
following factors are considered:
• The strength of production manager including experience with
personnel management, current and new technologies, complex projects and
the equipment and tools used by the manufacturing personnel.
• Economies of scale allowing the sharing of operations, sharing
of production and the potential for vertical integration.
• Technology and production experience
• The necessary production personnel skill level and/or the
enterprise's ability to hire or train qualified personnel.
• The ability of the enterprise to limit suppliers bargaining
power.
• The ability of the enterprise to control the quality of raw
materials and production.
• Adequate access to raw materials and sub-assembly production.

4.3 Marketing and Sales

The marketing and sales organization is analyzed for its strengths and
current activities. Factors to consider include:
• Experience of Marketing/Sales manager including contacts in
the industry (prospects, distribution channels, media), familiarity with
advertising and promotion, personal selling capabilities, general
management skills and a history of profit and loss responsibilities.
• The ability to generate good publicity as measured by past
successes, contacts in the press, quality of promotional literature and market
education capabilities.
• Sales promotion techniques such as trade allowances, special
pricing and contests.
• The effectiveness of your distribution channels as measured by
history of relations, the extent of channel utilization, financial stability,
reputation, access to prospects and familiarity with your offering.
• Advertising capabilities including media relationships,
advertising budget, past experience, how easily the offering can be
advertised and commitment to advertising.
• Sales capabilities including availability of personnel, quality of
personnel, location of sales outlets, ability to generate sales leads,
relationship with distributors, ability to demonstrate the benefits of the
offering and necessary sales support capabilities.
• The appropriateness of the pricing of your offering as it relates
to competition, price sensitivity of the prospect, prospect's familiarity with
the offering and the current market life cycle stage.

Customer Services
The strength of the customer service function has a strong influence on
long term market success. Factors to consider include:
• Experience of the Customer Service manager in the areas of
similar offerings and customers, quality control, technical support, product
documentation, sales and marketing.
• The availability of technical support to service your offering
after it is purchased.
• One or more factors that causes your customer support to stand
out as unique in the eyes of the customer.
• Accessibility of service outlets for the customer.
• The reputation of the enterprise for customer service.
After defining your strategy you must use the information you have
gathered to determine whether this strategy will achieve the objective of
making your enterprise competitive in the marketplace. Two of the most
important assessments are described below:
Cost to enter market: This is an analysis of the factors that will
influence your costs to achieve significant market penetration. Factors to
consider include:
• Your marketing strength.
• Access to low cost materials and effective production.
• The experience of your enterprise.
• The complexity of introduction problems such as lack of
adherence to industry standards, unavailability of materials, poor quality
control, regulatory problems and the inability to explain the benefits of the
offering to the prospect.
• The effectiveness of the enterprise infrastructure in terms of
organization, recruiting capabilities, employee benefit programs, customer
support facilities and logistical capabilities.
• Distribution effectiveness as measured by history of relations,
the extent of channel utilization, financial stability, reputation, access to
prospects and familiarity with your offering.
• Technological efforts likely to be successful as measured by the
strength of the development organization.
• The availability of adequate operating capital.
Profit potential: This is an analysis of the factors that could influence
the potential for generating and maintaining profits over an extended period.
Factors to consider include:
• Potential for competitive retaliation is based on the
competitor’s resources, commitment to the industry, cash position and
predictability as well as the status of the market.
• The enterprise's ability to construct entry barriers to
competition such as the creation of high switching costs, gaining substantial
benefit from economies of scale, exclusive access to or clogging of
distribution channels and the ability to clearly differentiate your offering
from the competition.
• The intensity of competitive rivalry as measured by the size and
number of competitors, limitations on exiting the market, differentiation
between offerings and the rapidity of market growth.
• The ability of the enterprise to limit suppliers bargaining
power.
• The enterprise's ability to sustain its market position is
determined by the potential for competitive imitation, resistance to inflation,
ability to maintain high prices, the potential for product obsolescence and
the 'learning curve' faced by the prospect.
• The availability of substitute solutions to the prospect's need.
• The prospect's bargaining power as measured by the ease of
switching to an alternative, the cost to look at alternatives, the cost of the
offering, the differentiation between your offering and the competition and
the degree of the prospect's need.
• Market potential for new products considering market growth,
prospect's need for your offering, the benefits of the offering, the number of
barriers to immediate use, the credibility of the offering and the impact on
the customer's daily operations.
• The freedom of the enterprise to make critical business
decisions without undue influence from distributors, suppliers, unions,
investors and other outside influences.
 5 MARKETING CONCEPT

Managers who adopt a market orientation recognize that marketing is

vital to the success of their organization. This realization is reflected in a
fundamental approach to doing business that gives the customer the highest
priority. Called the marketing concept, it emphasizes customer orientation
and coordination of marketing activities to achieve the organization’s
performance objectives.

5.1 Business-to-Business Marketing

Most marketing is business-to-business (B2B) marketing even though

textbooks and business magazines devote most of their attention to business-
to-consumer (B2C) marketing. The disproportion-ate attention to B2C has
been justified by saying that (1) B2C is where most of modern marketing
concepts first arose, and (2) B2B marketers can learn a lot by adopting B2C
thinking. While these two statements are true, B2B is having its own
renaissance, and maybe B2C marketers have a lot to learn from B2B
practices. B2B, in particular, has focused more on individual customers, and
B2C is increasingly moving into one-to-one customer thinking.
The sales force is the main driver in B2B marketing. Its importance
cannot be overestimated, especially when selling complex customized
equipment such as B-47s or power plants or selling to large national and
global accounts. Today’s companies increasingly assign national and global
account managers to manage their largest customers. Account management
systems will grow in the future as more of the world’s business becomes
concentrated in fewer but larger companies.
But today B2B companies also are driven to replace high-cost sales
calls with less expensive contact channels such as tele and
videoconferencing and Web-based communications, where possible. As
videoconferencing improves and costs come down, companies will reduce
the number of field visits to customers and save on the high costs of
transportation, hotels, dining out, and entertaining.
Another force that might reduce the role of the sales force is the
growth of Web-based market exchanges. Price differences—especially for
commodity materials and components—will become more visible, thus
making it harder for salespeople to influence buyers to pay more than the
market price.

5.2 Customer Relationship Management (CRM)

Everyone is talking about customer relationship management (CRM)

as the new panacea. Yet it is an empty term until it is defined. Some people
define it as the application of technology to learning more about each
customer and being able to respond to them one-to-one. Others don’t see it
as a technology issue but rather a humane issue: treating each customer with
empathy and sensitivity. One cynic said that CRM is an expensive way to
learn what otherwise might be learned by chatting with customers for five
minutes.
Customer relationship marketing, in practice, involves the purchase of
hardware and software that will enable a company to capture detailed
information about individual customers that can be used for better target
marketing. By examining a customer’s past purchases, demographics, and
psychographics, the company will know more about what the customer
might be interested in. The company will send specific offers only to those
with the highest possible interest and readiness to buy, and will save all the
mailing or contact costs usually lost in mass marketing. Using the
information carefully, the company can improve customer acquisition,
cross-selling, and up-selling.
Yet CRM has not worked out that well in practice. Large companies
sometimes spend $5 million to $10 million on CRM systems only to find
disappointing results. Less than 30 percent of CRM-adopting companies
report achieving the expected return from their CRM investments. And the
problem isn’t software failure (only 2 percent of the cases). CRM-Forum
reported the following causes of failure: organizational change (29 percent),
company politics/inertia (22 percent), lack of CRM understanding (20
percent), poor planning (12 percent), and lack of CRM skills (6 percent),
budget problems (4 percent), software problems (2 percent), and bad advice
(1 percent), other (4 percent).
Too many companies see technology as a silver bullet that will help
them overcome their bad habits. But adding new technology to an old
company only makes it a more expensive old company. Companies should
not invest in CRM until they reorganize to become customer-centric
companies. Only then will they and their employees know how to use CRM
properly.
Frederick Newell goes further and accuses CRM of falling far short of
the answer to serving customer’s well. CRM puts the company in the
driver’s seat with a hunting gun instead of putting the customer in the
driver’s seat with a hunting gun. He wants companies to empower
customers, not target them. Instead of companies just sending mailings to
sell their products (a product-centered approach), they need to ask their
customers what they are interested in (and not interested in), what
information they would like, what services they would want, and how,
when, and how often they would accept communications from the company.
Instead of relying on in-formation about customers, companies can rely on
information from customers. With this information, a company would be in
a much better position to make meaningful offers to individual customers
with much less waste of company money and customer time. Newell
advocates replacing customer relationship marketing (CRM) with customer
management of relationships (CMR).
My belief is that the right kind of CRM or CMR is a positive
development for companies and for society as a whole. It will humanize
relationships. It will make the market work better. It will deliver better
solutions to customers.

5.3 Database Marketing

At the heart of CRM is database marketing. Your company needs to

develop separate databases on customers, employees, products, ser-vices,
suppliers, distributors, dealers, and retailers. The databases make it easier for
marketers to develop relevant offerings for individual customers.
In building the customer database, you have to decide on what
information to collect.
68 The most important information to capture is the transaction

history of each buyer. Knowing what a customer has purchased in

the past affords many clues as to what he or she might be
interested in buying next time.
 69 You could benefit by collecting demographic information about

each buyer. For consumers, this means age, education, income,

family size, and other attributes. For business buyers, this means
job position, job responsibilities, job relationships, and contact
addresses.
70 You may want to add psychographic information describing the

activities, interests, and opinions (AIO) of individual customers

and how they think, make decisions, and influence others.
The second challenge is to get this information. You train your
salespeople to gather and enter useful information into the customer’s file
after each sales visit. Your telemarketers can gather additional information
by phoning customers or credit rating agencies.
The third challenge is to maintain and update the information. About
20 percent of the information in your customer database can become
obsolete each year. You need telemarketers to phone a sample of customers
each working day to update the information.
The fourth challenge is to use the information. Many companies fail
to use the information they have. Supermarket chains have mountains of
scanner data on individual customer purchases but fail to use these data for
one-to-one marketing. Banks collect rich trans-action information that
mostly goes unanalyzed. At the very least, these companies need to hire a
person skilled in data mining. By applying advanced statistical techniques,
the data miner might detect interesting trends, segments, and opportunities.
With all these benefits, why don’t more companies adopt database
marketing? All this costs money. Consultant Martha Rogers of Peppers &
Rogers Group does not deny the costs: “Establishing a rich data warehouse
can cost millions of dollars for the technology and the associated
implementation and process changes. Throw in a few hundred thousand for
strategic consulting; a little more for various data integration and change
management issues, and voilà, you’ve got yourself one hefty investment.”
Clearly one-to-one marketing is not for everyone. It is not for
companies that sell a product purchased once in a lifetime, such as a grand
piano. It is not for mass marketers like Wrigley to gather individual
information about the millions of its gum-chewing customers. It is not for
companies with small budgets, although the investment costs can be scaled
down somewhat.
However, companies such as banks, telephone companies, business
equipment firms, and many others normally collect lots of information on
individual customers or dealers. The first company in each of these
respective industries to exploit database marketing could achieve a
substantial competitive lead.
There is a growing threat to effective database marketing that is
coming from the inherent conflict between customer and company interests.

What Customers Want

71 We want companies not to have extensive personal information
about us.
72 We would be willing to tell some companies what we might like to
be informed about.
73 We would want companies to reach us only with relevant
messages and media at proper times.
74 We would want to be able to reach companies easily by phone or
e-mail and get a quick response.
 What Companies Want
75 We want to know many things about each customer and prospect.
76 We would like to tempt them with offers, including those that they
might not have awareness of or initial interest in.
77 We would like to reach them in the most cost effective way
regardless of their media preferences.
78 We want to reduce the cost of talking with them live on the phone.
The irony is that as companies learn more about each customer in
order to make more relevant offers, customers see this as an invasion of
privacy. The matter is made worse by intrusive junk mail, junk phone calls,
and junk e-mail. As privacy concerns rise and lead to legislation curtailing
what companies may know about individual customers and how the
companies can reach customers, companies will be forced to return to less
efficient mass marketing and transaction oriented marketing.
One answer is for companies to practice permission marketing, as
promoted by Seth Godin. You should ask your customers what information
they will volunteer, what messages they would accept, and what contact
media they would prefer.

5.4 Markets

Markets can be defined in different ways. Originally a market was a

physical place where buyers and sellers gathered. Economists describe a
market as a collection of buyers and sellers who transact (in person, over the
phone, by mail, whatever) over a particular product or product class. Thus
economists talk about the car market or the housing market. But marketers
view the sellers as the “industry” and the buyers as the “market.” Thus
marketers will talk about markets of “35 to 50 year old low income
homemakers” or “Auto Company purchasing agents who buy paint for their
companies.”
Clearly markets can be defined broadly or narrowly. The “mass
market” is the broadest definition and describes the billions of people who
buy and consume basic products (e.g., soap, soft drinks). Much of U.S.
economic growth has resulted from American companies mastering mass
production, mass distribution, and mass marketing.
At the other extreme we can talk about a “market of one” to describe
a specific individual or company that a marketer may be concerned with.
IBM would be called a market of one for consultants who spend all of their
time selling their services only to IBM.
The key point is that the marketer needs to define the target market as
carefully as possible. The “mass market” is too vague. It is hard to make a
product that everyone will want. It is easier to make a product that some will
love. This has led businesses to pursue niches and mini-markets. But the
downside is that as markets become sliced into finer segments, the resulting
low volume in each will permit only one or a few companies to survive in
that market.
Markets are often contrasted to hierarchies as a way of getting things
done. Markets involve people entering into voluntary agreements that will
leave both parties better off. Hierarchies, on the other hand, consist of
people of high rank ordering those of lower rank to perform actions. Relying
on markets rather than hierarchies is thought by many to be the best way to
build a sustainable self regulating economy. Command-and-control
economies have not worked.
Marketing is a democratizing force. There are only four ways to
obtain something that you want: steal, borrow, beg, or exchange. Using
exchange (giving something to get something) is the most moral and
efficient way and is the heart of marketing.
One thing is sure: Markets change faster than marketing. Buyers
change in their numbers, wants, and purchasing power in response to
changes in the economy, technology, and culture. Companies often don’t
notice these changes and maintain marketing practices that have lost their
edge. The marketing practices of many companies today are obsolete.

5.5 Public Relation

I expect companies to start shifting more money from advertising to

public relations. Advertising is losing some of its former effectiveness. It is
hard to reach a mass audience because of increasing audience fragmentation.
TV commercials are getting shorter; they are bunched together; they are
increasingly undistinguished; and consumers are zapping them. And the
biggest problem is that advertising lacks credibility. The public knows that
advertising exaggerates and is biased. At its best, advertising is playful and
entertaining; at its worst, it is intrusive and dishonest.
Companies overspend on advertising and under spend on public
relations. The reason: Nine out of 10 PR agencies are owned by advertising
firms. Advertising agencies make more money putting out ads than putting
out PR. So they don’t want PR to get an upper hand.
Ad campaigns do have the advantage of being under greater control
than PR. The media are purchased for the ads to appear at specific times; the
ads are approved by the client and will appear exactly as designed. PR, on
the other hand, is something you pray for rather than pay for. You hope that
when Oprah Winfrey ran her book club, she would nominate your book as
the month’s best read; you hope that Morley Safer will run a 60 Minutes
segment on why red wine keeps cheese eating and oil eating Europeans
healthy.
Building a new brand through PR takes much more time and
creativity, but it ultimately can do a better job than “big bang” advertising.
Public relations consist of a whole bag of tools for grabbing attention and
creating “talk value.” I call these tools the PENCILS of public relations:
79 Publications.

80 Events.

81 News.

82 Community affairs.

83 Identity media.

84 Lobbying.

85 Social investments.

Most of us got to hear about Palm, Amazon, eBay, The Body Shop,
Blackberry, Beanie Babies, Viagra, and Nokia not through advertising but
through news stories in print and on the air. We started to hear from friends
about these products, and we told other friends. And hearing from others
about a product carries much more weight than reading about the product in
an ad.
A company planning to build a new brand needs to create a buzz, and
the buzz is created through PR tools. The PR campaign will cost much less
and hopefully create a more lasting story. Al and Laura Ries, in their book
The Fall of Advertising and the Rise of PR, argue persuasively that in
launching a new product, it is better to start with public relations, not
advertising. This is the reverse of most companies’ thinking when they
launch new products.

5.6 Sales Promotion

Sales promotion describes incentives and rewards to get customers to

buy now rather than later. Whereas advertising is a long run tool for shaping
the market’s attitude toward a brand, sales promotion is a short term tool to
trigger buyer action. No wonder brand managers increasingly rely on sales
promotion, especially when falling behind in achieving sales quotas. Sales
promotions work! Sales promotions yield faster and more measurable
responses in sales than advertising does. Today the split between advertising
and sales promotion may be 30–70, the reverse of what it used to be.
The growth of sales promotion reflects the higher priority companies
are attaching to current sales than to long term brand building. It is a return
to transaction marketing (TM) rather than relationship marketing (RM).
Sales promotion can be directed at retailers, consumers, and the sales
force. Retailers will work harder if offered price-offs advertising and display
allowances, and free goods. Consumers are more likely to buy in response to
coupons, rebates, price packs, premiums, patron-age awards, contests,
product demonstrations, and warranties. The sales force operates more
vigorously in response to contests with prizes for superior performance.
Because of the variety of sales promotion tools, marketers need
experience in knowing which to use. Some large companies have a sales
promotion specialist who can advise brand managers. Or the company can
engage the services of a specialist sales promotion agency. The main need is
to not only use promotions but to review and record results so that the
company can improve its sales promotion efficiency over time.
Although most sales promotions increase sales, most lose money. One
analyst estimated that only 17 percent of a given set of sales promotion
campaigns were profitable. These are the cases where the sales promotion
brings in new customers to sample the product and where they like the new
product better than their previous brand. But many sales promotions only
attract brand switchers looking for a lower price, who naturally abandon the
brand when another brand goes on sale. Sales promotions are less likely to
entice away loyal users of other brands.
Thus sales promotions work poorest in product markets of high brand
similarity. They tend to attract brand switchers who are looking for low
price or premiums and who won’t be loyal to a brand. It is better to use sales
promotions in product markets of high dissimilarity where new customers
may find that they like your product and its features better than their
previous choice.
Sales promotions tend to be used more by weaker and smaller brands
than stronger brands. Smaller brands have fewer funds to spend on
advertising, and for a small cost they can get people to at least try their
product.
Sales promotions in general should be used sparingly. Incessant prices
off, coupons, deals, and premiums can devalue the brand in the consumers’
minds. They can lead customers to wait for the next promotion instead of
buying now.
Companies are forced to use more sales promotion than they want by
the trade. The trade demands discounts and allowances as a condition for
putting the product on the shelf. The trade may demand consumer
promotions also. So many companies have little choice but to comply.
Prefer sales promotions that agree or enhance your brand image and
add value. Try to use sales promotions with advertising. Advertising
explains why the customer should buy the product, and sales promotion
provides the incentive to buy. When used together, ads and sales promotions
make a powerful combination.

5.7 Trends in Marketing Thinking and Practice

Here are the main marketing trends that I see:

86 From make-and-sell marketing to sense-and-respond marketing.
Your company will perform better if you view the marketing
challenge as that of developing a superior understanding of your customer
needs rather than as simply pushing out your products better.
87 From focusing on customer attraction to focusing on customer

retention. Companies need to pay more attention to serving and

satisfying their present customers before they venture in an endless
race to find new customers. Companies must move from
transaction marketing to relationship marketing.
88 From pursuing market share to pursuing customer share. The best

way to grow your market share is to grow your customer share,

namely to find more products and services that can be sold to the
same customers.
• From marketing monologue to customer dialogue. You can
create stronger relationships with customers by listening to and conversing
with them than by only sending out one-way messages.
• From mass marketing to customized marketing. The mass
market is splintering into mini-markets and your company now has the
capability of marketing to one customer at a time.
• From owning assets to owning brands. Many companies are
be-ginning to prefer owning brands to owning factories. By owning fewer
physical assets and outsourcing production, these companies believe they
can make a greater return.
• From operating in the marketplace to operating in cyberspace.
Smart companies are developing a presence online as well as off-line.
They are using the Internet for buying, selling, recruiting, training,
exchanging, and communicating.
• From single-channel marketing to multichannel marketing.
Companies no longer rely on one channel to reach and serve all their
customers. Their customers have different preferred channels for accessing
the company’s products and services.
• From product-centric marketing to customer-centric
marketing.
The sign of marketing maturity is when a company stops focusing on
its products and starts focusing on its customers.
These trends will affect different industries and companies at different
rates and times. Your company must decide where it stands with respect to
each marketing trend.
 CONCLUSION

The foundation of marketing is exchange, in which one party provides

to another party something of value in return for something else of value. In
a broad sense, marketing consists of all activities designed to generate or
facilitate an exchange intended to satisfy human needs.
Business firms and nonprofit organization engage in marketing.
Products marketed include goods as well as services, ideas, people, and
places. Marketing activities are targeted at markets consisting of potential
purchasers and also individuals and groups that influence the success of an
organization.
In a business context, marketing is a total system of business activities
designed to plan, price, promote, and distribute want-satisfying products to
target markets in order to achieve organizational objectives.
Marketing’s evolution has gone through three stages: It began with a
product orientation, passed through the sales orientation, and is now in a
market orientation. In this third stage a company’s effort are focused on
identifying and satisfying customer’s needs.
Some successful organizations remain at the first or second stage, not
progressing to a market orientation stage, because they have monopoly
power or because their products are in such great demand. Other firms have
difficulty accepting a market-driven approach to business or have problems
implementing a market orientation.
A business philosophy called the marketing concept was developed to
aid companies with supply capabilities that exceed consumer demand.
According to the marketing concept, a firm is best able to achieve its
performance objectives by adopting a market or customer orientation,
coordinating all of its marketing activities, and fulfilling its organization’s
entire goal. Examples of implementation of the marketing concept include
relationship building, mass customization, heightened sensitivity to quality,
value creation, utilizing performance metrics, and the societal marketing
concept. Ethics, the standards of behavior accepted by society, are important
concerns of market-oriented organizations,
The first commandment in marketing is “know thy customer,” and the
second is “know thy product.” The relative number and success of
company’s new product are a prime determinant of its sales, growth rate,
and profits. A firm can best serve its customers by producing and marketing
want-satisfying goods or services.
To manage its product effectively, a firm’s marketer must understand
the full meaning of product, which stresses that customers are buying want
satisfaction. Products can be classified into two basic categories- consumer
products and business products. Each category is then subdivided, because a
different marketing program is required for each distinct group of products.
Advertising, sales promotion, and public relation are the non personal,
mass-communication components of a company’s promotional mix.
Advertising consists of all activities involved in presenting to an audience a
non personal, sponsor-identified, paid for message about a product or
organization.
Sales promotion consists of demand stimulating devices designed to
supplement advertising and facilitate personal selling. The amount of sales
promotion increased in the past two decades as management sought
measureable, short term sales result.
Public relation is a management tool designed to favorably influence
attitudes towards an organization, its products, and its policies. It is a
frequently overlooked form of production. Publicity, a part of public
relations, is any communication about an organization, its product or
policies through the media that is not paid for by the organization.
Marketing management involves segmenting markets, selecting target
markets, and establishing a desirable position in the minds of buyers. The
primary focus of marketing is the marketing mix- the combination of a
product, price, promotion, distribution process to meet the needs of a
targeted segment of a market.
Marketing is practiced today in all modern nations, regardless of their
political philosophy. As international competition has heated up, the
attention paid to marketing as increased. In the U.S. between one-fourth and
one-third of the civilian work force is involved with marketing and about
one-half of consumers spending cover the cost of marketing. This
investment in marketing is justified by the form, information, place, time,
and possession utilities it creates.
Depending on circumstances, marketing can be vital to an
organization’s success. In recent years numerous services firms and
nonprofit organizations have found marketing to be necessary and
worthwhile. Marketing also is useful to individuals. Students particularly
find marketing helpful in the search for career opportunities.
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