Marketing is part of all of our lives and touches us in some way every day. Most people think that marketing is only about the advertising and/or personal selling of goods and services. Advertising and selling, however, are just two of the many marketing activities.
In general, marketing activities are all those associated with identifying the particular wants and needs of a target market of customers, and then going about satisfying those customers better than the competitors. This involves doing market research on customers, analyzing their needs, and then making strategic decisions about product design, pricing, promotion and distribution.
Philip Kotler says, Marketing is managing profitable customer relationships. The twofold goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering satisfaction.
Broadly defined, marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging value with others. Narrowly defined marketing involves building profitable, value-laden exchange relationships with customers.
In short, it has been defined as the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return.
The new definition given by American Marketing Association reads, “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”
Create value for customers and build customer relationships Capture value from customers in return
In the first four steps, companies work to understand consumers, create customer value and build strong customer relationships. In the final step, companies reap the rewards of creating superior customer value. By creating value for customers, they in turn capture value from customers in the form of sales, profits and long term customer equity.
A marketer can rarely satisfy everyone in a market. Everyone in the market has different taste, likeliness, income and spending habit. Not everyone likes the same soft drink, automobile, college, and movie. Therefore, marketers start with market segmentation. They identify and profile distinct groups of buyers who might prefer or require varying products and marketing mixes. Market segments can be identified by examining demographic, psychographic, and behavioral differences among buyers. The firm then decides which segments present the greatest opportunity—whose needs the firm can meet in a superior fashion. The lucrative segment/s are selected or targeted for offering/selling the product. For each chosen target market, the firm develops a market offering. The offering is positioned in the minds of the target buyers as delivering some central benefit(s). For example, Volvo develops its cars for the target market of buyers for whom auto- mobile safety is a major concern. Volvo, therefore, positions its car as the safest car a customer can buy.
Needs are the basic human requirements. People need food, air, water, clothing, and shelter to survive. People also have strong needs for creation, education, and entertainment.
The above needs become wants when they are directed to specific objects that might satisfy the need. An American needs food but may want a hamburger, French fries, and a soft drink. A person in Mauritius needs food but may want a mango, rice, lentils, and beans. Wants are shaped by one’s society.
Demands are wants for specific products backed by an ability to pay. Many people want a Mercedes; only a few are able to buy one. Companies must measure not only how many people want their product but also how many would actually be willing and able to buy it.
Customers’ needs and wants are fulfilled through a marketing offer or product. A product is any offering that can satisfy a need or want, such as one of the 10 basic offerings of goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.
A brand is an offering from a known source. A brand name such as McDonald’s carries many associations in the minds of people: hamburgers, fun, children, fast food, and golden arches. These associations make up the brand image. All companies strive to build a strong, favorable brand image.
In terms of marketing, the product or offering will be successful if it delivers value and satisfaction to the target buyer. The buyer chooses between different offerings on the basis of which is perceived to deliver the most value. We define value as a ratio between what the customer gets and what he gives. The customer gets benefits and assumes costs, as shown in this equation:
Based on this equation, the marketer can increase the value of the customer offering by (1) raising benefits, (2) reducing costs, (3) raising benefits and reducing costs, (4) raising benefits by more than the raise in costs, or (5) lowering benefits by less than the reduction in costs.
Exchange, the core of marketing, involves obtaining a desired product from someone by offering something in return. For exchange potential to exist, ?ve conditions must be satis?ed:
Whether exchange actually takes place depends upon whether the two parties can agree on terms that will leave them both better off (or at least not worse off) than before. Exchange is a value-creating process because it normally leaves both parties better off.
Marketers use numerous tools to elicit the desired responses from their target markets. These tools constitute a marketing mix. Marketing mix is the set of marketing tools that the ?rm uses to pursue its marketing objectives in the target market. McCarthy classi?ed these tools into four broad groups that he called the four Ps of marketing: Product, Price, Place, and Promotion.
Robert Lauterborn suggested that the sellers’ four Ps correspond to the customers’ four Cs.
Winning companies are those that meet customer needs economically and conveniently and with effective communication.
There are ?ve competing concepts under which organizations conduct marketing activities: produc- tion concept, product concept, selling concept, marketing concept, and societal mar- keting concept.
The production concept, one of the oldest in business, holds that consumers prefer products that are widely available and inexpensive. Managers of production-oriented businesses concentrate on achieving high production efficiency, low costs, and mass distribution. This orientation makes sense in developing countries, where consumers are more interested in obtaining the product than in its features. It is also used when a company wants to expand the market. Texas Instruments is a leading exponent of this concept. It concentrates on building production volume and upgrading technology in order to bring costs down, leading to lower prices and expansion of the market. This orientation has also been a key strategy of many Japanese companies.
Other businesses are guided by the product concept, which holds that consumers favor those products that offer the most quality, performance, or innovative features. Managers in these organizations focus on making superior products and improving them over time, assuming that buyers can appraise quality and performance.
Product-oriented companies often design their products with little or no customer input, trusting that their engineers can design exceptional products. A General Motors executive said years ago: “How can the public know what kind of car they want until they see what is available?” GM today asks customers what they value in a car and includes marketing people in the very beginning stages of design.
The selling concept, another common business orientation, holds that consumers and businesses, if left alone, will ordinarily not buy enough of the organization’s products. The organization must, therefore, undertake an aggressive selling and promotion effort. This concept assumes that consumers must be coaxed into buying, so the company has a battery of selling and promotion tools to stimulate buying.
The selling concept is practiced most aggressively with unsought goods—goods that buyers normally do not think of buying, such as insurance and funeral plots. The selling concept is also practiced in the nonpro?t area by fund-raisers, college admissions offices, and political parties.
Most ?rms practice the selling concept when they have overcapacity. Their aim is to sell what they make rather than make what the market wants.
The marketing concept, in the mid-1950s, challenges the three business orientations we just discussed. The marketing concept holds that the key to achieving organizational goals consists of the company being more effective than its competitors in creating, delivering, and communicating customer value to its chosen target markets.
The marketing concept focuses on the needs of the buyer. Marketing is preoccupied with the idea of satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering and ?nally consuming it.”
The marketing concept rests on four pillars: target market, customer needs, integrated marketing, and pro?tability. The marketing concept takes an outside-in perspective. It starts with a well-de?ned market, focuses on customer needs, coordinates activities that affect customers, and produces pro?ts by satisfying customers.
Some have questioned whether the marketing concept is an appropriate philosophy in an age of environmental deterioration, resource shortages, explosive population growth, world hunger and poverty, and neglected social services. Are companies that successfully satisfy consumer wants necessarily acting in the best, long-run interests of consumers and society? The marketing concept sidesteps the potential conflicts among consumer wants, consumer interests, and long-run societal welfare.
Yet some ?rms and industries are criticized for satisfying consumer wants at society’s expense. Such situations call for a new term that enlarges the marketing concept. We propose calling it the societal marketing concept, which holds that the organization’s task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and ef?ciently than competitors in a way that preserves or enhances the consumer’s and the society’s well-being.
The societal marketing concept calls upon marketers to build social and ethical considerations into their marketing practices. They must balance and juggle the often con?icting criteria of company pro?ts, consumer want satisfaction, and public interest. Yet a number of companies have achieved notable sales and pro?t gains by adopting and practicing the societal marketing concept.
Oftentimes, marketing and sales are perceived interchangeably. But in actuality, these are two different things. Selling is a small portion of the entire marketing scheme. Selling is the transaction where a product is transferred from the business owner to a buyer for a price. In contrast, marketing is a process that involves several steps ranging from the generation of a product idea to the delivery of that product to the customer.
Even after delivery of the product to the customer, the marketing process continues with direct communication with the customer to obtain feedback about the product.
Theodore Levitt of Harvard drew a perceptive contrast between the selling and marketing concepts: “Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is preoccupied with the seller’s need to convert his product into cash; marketing with the idea of satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering and ?nally consuming it.”
The marketing concept rests on four pillars: target market, customer needs, integrated marketing, and pro?tability. The selling concept takes an inside-out perspective. It starts with the factory, focuses on existing products, and calls for heavy selling and promoting to produce pro?table sales. The marketing concept takes an outside-in perspective. It starts with a well-de?ned market, focuses on customer needs, coordinates activities that affect customers, and produces pro?ts by satisfying customers.
In order to correctly identify opportunities and monitor threats, the company must begin with a thorough understanding of the marketing environment in which the firm operates. The marketing environment consists of all the actors and forces outside marketing that affect the marketing management’s ability to develop and maintain successful relationships with target customers.
“A company’s marketing environment consists of the actors and forces outside marketing that affect marketing management’s ability to develop and maintain successful relationships with its target customers”
The micro environment consists of six forces (actors) close to the company that affect its ability to serve its customers:
The first actor is the company itself and the role it plays in the microenvironment.
Suppliers are firms and individuals that provide the resources needed by the company and its competitors to produce goods and services. They are an important link in the company’s overall customer “value delivery system.”
Marketing intermediaries are firms that help the company to promote, sell, and distribute its goods to final buyers.
Physical distribution firms help the company to stock and move goods from their points of origin to their destinations. Examples would be warehouses (that store and protect goods before they move to the next destination).
Marketing services agencies (such as marketing research firms, advertising agencies, media firms, etc.) help the company target and promote its products to the right markets.
Financial intermediaries (such as banks, credit companies, insurance companies, etc.) help finance transactions and insure against risks associated with buying and selling goods.
The company must study its customer markets closely because each market has its own special characteristics. These markets normally include:
Every company faces a wide range of competitors. A company must secure a strategic advantage over competitors to be successful in the marketplace. No single competitive strategy is best for all companies .
A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives. A company should prepare a marketing plan for all of its major publics as well as its customer markets.
Generally, publics can be identified as being:
The macroenvironment consists of the larger societal forces that affect the microenvironment:
The company and all of the other actors operate in a larger macroenvironment of forces that shape opportunities and pose threats to the company. Major forces in the company’s macroenvironment include:
Demography is the study of human populations in terms of size, density, location, age, sex, race, occupation, and other statistics. It is of major interest to marketers because it involves people, and people make up markets.
Demographic trends are constantly changing. Some of the more interesting trends are:
The economic environment includes those factors that affect consumer buying power and spending patterns. Major economic trends include:
The natural environment involves natural resources that are needed as inputs by marketers or that are affected by marketing activities. During the past two decades environmental concerns have steadily grown. Some trend analysts labeled the 1990s as the “Earth Decade,” where protection of the natural environment became a major worldwide issue facing business and the public.
The technological environment includes forces that create new technologies, creating new product and market opportunities.
The political environment includes laws, government agencies, and pressure groups that influence and limit various organizations and individuals in a given society. Business is regulated by various forms of legislation.
The cultural environment is made up of institutions and other forces that affect society’s basic values, perceptions, and behaviors. Certain cultural characteristics can affect marketing decision-making. Among the most dynamic cultural char- acterisitics are:
It is the process of dividing a market into distinct group of buyers who have distinct needs, characteristics or behavior and who might require separate product or marketing mixes.
A group of consumers who respond in a similar way to a given set of marketing efforts.
For Example: In the car market, consumers who want the biggest, most comfortable car regardless of the price make up one market segment. Consumers who care mainly about price and operating economy make up another segment.
In addition to having different needs, for segments to be practical they should be evaluated against the following criteria:
A good market segmentation will result in segment members that are internally homogenous and externally heterogeneous; that is, as similar as possible within the segment, and as different as possible between segments.
Consumer markets can be segmented on the following customer characteristics.
The following are some examples of geographic variables often used in segmentation.
Some demographic segmentation variables include:
Many of these variables have standard categories for their values. For example, family lifecycle often is expressed as bachelor, married with no children (DINKS: Double Income, No Kids), full-nest, empty-nest, or solitary survivor. Some of these categories have several stages, for example, full-nest I, II, or III depending on the age of the children.
Psychographic segmentation groups customers according to their lifestyle, Personality and Social class. Activities, interests, and opinions (AIO) surveys are one tool for measuring lifestyle. Some psychographic variables include:
Behavioral segmentation is based on actual customer behavior toward products. Some behavioral variables include:
Behavioral segmentation has the advantage of using variables that are closely related to the product itself. It is a fairly direct starting point for market segmentation.
There are several important reasons why businesses should attempt to segment their markets carefully. These are summarized below:
Customer needs differ. Creating separate offers for each segment makes sense and provides customers with a better solution
Customers have different disposable income. They are, therefore, different in how sensitive they are to price. By segmenting markets, businesses can raise average prices and subsequently enhance profits
Market segmentation can build sales. For example, customers can be encouraged to “trade-up” after being introduced to a particular product with an introductory, lower-priced product
Customer circumstances change, for example they grow older, form families, change jobs or get promoted, change their buying patterns. By marketing products that appeal to customers at different stages of their life (“life-cycle”), a business can retain customers who might otherwise switch to competing products and brands
Businesses need to deliver their marketing message to a relevant customer audience. If the target market is too broad, there is a strong risk that (1) the key customers are missed and (2) the cost of communicating to customers becomes too high / unprofitable. By segmenting markets, the target customer can be reached more often and at lower cost
Unless a business has a strong or leading share of a market, it is unlikely to be maximising its profitability. Minor brands suffer from lack of scale economies in production and marketing, pressures from distributors and limited space on the shelves. Through careful segmentation and targeting, businesses can often achieve competitive production and marketing costs and become the preferred choice of customers and distributors. In other words, segmentation offers the opportunity for smaller firms to compete with bigger ones.
Target marketing is the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.
Target market is the market segment to which a particular product is marketed. It is often defined by age, gender, geography, and/or socio-economic grouping.
Targeting strategy is the selection of the customers you wish to service. The decisions involved in targeting strategy include:
Levels of market segmentation/ Target marketing strategies
Positioning is the act of designing the company’s offering and image to occupy a distinctive place in the mind of the target market.
As per Ries and Trout – “Positioning is not what you do to a product. Positioning is what you do to the mind of the prospect”
Often a product is positioned in the following ways by a company-
“Best quality, best performance, best service, best styling, lowest price, safest, fastest, more reliable etc”
Positioning begins with actually differentiating the company’s marketing offer so that it will give consumers a superior value.
Differentiation is done on the following parameters
Choosing a Positioning strategy : The positioning task consists of the following steps:
Competitive advantage is achieved through Product differentiation, Services differentiation, Channel differentiation, Personnel differentiation, and Image differentiation.
A company must undertake the above differentiations and find out the areas in which it has advantage over its competitors.
A company in order to choose the right competitive advantages must decide on: How many differences to promote?
Which differences to promote? Not all differences are meaningful or worthwhile. A difference is worth establishing if it satisfies the following criteria:
Different positioning strategies are based on brand propositions . Typical brand propositions can include:
To (target segment and need) our (brand) is a (concept) that (point-of-difference).
The final step is communicating and delivering the chosen position. Once a position is chosen, the company must take strong steps to deliver and communicate the desired position to target consumers.
A product can be defined as any item which can be in the form of goods or services that a person receives in exchange for money or some other unit of value. Broadly defined, products include physical objects, services, persons, places, organizations, ideas, or mixes of these entities.
Consumers do not just buy the physical product. They buy the benefits the product offers and its packaging, quality, brand name, styling, warranty, after-sale service, and more. The most important task for the marketer is to understand what benefit consumers seek from this product.
Tangible product: products that can be seen or felt.
Examples of products in the form of goods (tangible) are CK perfume, Guess shirt, Dynamo detergent.
Intangible product: products that cannot be seen or touched
Example: Most of the products are in the form of services. Examples of products in the form of service (intangible) are legal advice by Karpal Singh and Co., medical treatment in Ampang Puteri Hospital, hair-cut service by Thomas & Guy.
There are five levels of a product
The core benefit is the essential use-benefit, problem-solving service that the buyer primarily buys when purchasing a product.
For example, a manufacturer of a new established watch company must find out the main benefits the watch will provide to customers that is as a time indicator.
The generic product is the basic version of the product.
Here the products are designed along with the five important characteristics; quality level, features, design, a brand name and packaging are combined together.
For example, the manufacturer of the watch company decided that the watch will be a water resistant, with alarm chronograph, colorful and fancy shaped, branded as Swatch and comes in a hard box together with a guarantee card.
The expected product is the set of attributes and conditions that the buyer normally expects in buying the product.
The augmented product is additional services and benefits that the seller adds to distinguish the offer from competitors
Augmented products are the additional consumer services provided by the manufacturer which come along with the product.
For example, the Swatch watch comes with a one-year guarantee and a booklet on how to operate the features like date, alarm and calculator.
The potential product is the set of possible new features and services that might eventually be added to the offer.
Consumer products can be defined as those bought by final consumers for personal, family or household use. Consumer products can be classified under four different categories, which are convenience product, shopping product, specialty product and unsought product.
Products that are most frequently and immediately bought by customers. They do not put so much effort to compare and buy these products.
A convenience product is an inexpensive item that requires little shopping effort. These products are purchased regularly, usually with little planning, and require wide distribution. Consumers will usually accept substitutes for a convenience product. Sugar, soap, cooking oil and papers are some examples of convenience products.
Convenience products can be divided into three sub-categories:
Products that are bought on the most regular basis for regular use. Examples: soap, detergent, and toothpaste.
Products that are bought with a minimum planning or search effort. Examples: newspapers, magazines and candy.
Products that are bought during emergency or critical condition.
Shopping products are consumer products that are less frequently bought by customers. Customers used to plan and compare the suitability, quality, price and style before making purchase decision. This is because shopping products are usually more expensive than convenience products. Furniture, electrical appliances and used cars are good examples of shopping products.
A shopping product requires comparison shopping, because it is usually more expensive than convenience products and is found in fewer stores. Consumers usually compare items across brands or stores.
Specialty products are consumer products that are unique and have special qualities that make them well-known among significant consumers. Buyers usually do not compare the brands of specialty products. They spend the appropriate time to go straight away to the dealers. Examples: Ferrari and Porsche cars, Rolex watches and custom-made men suites.
A specialty product is searched for extensively, and substitutes are not acceptable. These products may be quite expensive, and often distribution is very limited. Brand loyalty tends to be very strong for specialty products.
Unsought products are consumer products that are not known by the customer or are not normally think of buying. Examples: Insurance and Encyclopedia.
An unsought product is a product that is unknown about or inactively sought by consumers. Unsought products require aggressive personal selling and highly persuasive advertising.
Industrial products are the ones purchased for further operation or for business use. The difference between consumer products and industrial products is based on the purpose. If the consumer purchases the product for personal or home use, then it is categorized as a consumer product. If the consumer buys the product for his business use or to earn profit out of it, then it is categorized as industrial product. (Kotler & Armstrong, seventh edition) Examples: A Lawn mower that is purchased to be used in landscaping business is an industrial product.
The classification scheme includes seven categories: major equipment, accessory equipment, component parts, processed materials, raw materials, services and supplies.
Materials and parts are products that are purchased and then reacts as a small part of the buyer’s product when the buyer manufactures his products.
Example: In order to manufacture a Proton Satria, EON has to buy parts like wheels and cushions from HICOM industry. In this situation, the parts such as the wheels and the cushions are industrial products which are categorized under materials and parts.
Industrial products that help the buyer to manufacture his own products. Capital items are different compared to materials and parts in the sense that capital items are not going to be part of the product. Office building, computer system and escalator are the examples of capital items.
Supplies are industrial products that do not enter the finished product at all, they are items that help the operation. Examples: Supplies include lubricant oil, computer and stationary.
Services are industrial products in the form of business services that plays important roles in helping the operation of the buyer.
Services are usually supplied under contract. Examples: Legal advice provided by Karpal Singh, Sanitarium service provided by Alam Flora and Training and Development Service provided by MIMT is another example of service.
Product line can be define a set of product items which are similar to one another in terms of their functions, consumers, distributors and price ranges. The number of different items in product lines determines the depth of the product line.
The company can systematically increase the length of its’ product lines in two ways:
To come out with new products which have differences in quality and price compared to the present products.
A product line can be lengthened by adding more items within the present range of the line. However, the company should ensure that new items are noticeably different from existing ones.
Some of the product lines at Procter & Gamble are bar soaps, deter- gents, toothpaste, skin lotions and deodorants.
Product lines can be organized by product function, customer group targeted, retail outlets used, and price range.
Product mix refers to several product lines which consist of groups of products that share common characteristics, channels, customers or uses. An organization’s product mix includes all the products it sells.
For example, Honda might come out with several kinds of transportation that consist of automobiles like cars, motorcycles and trucks. These automobiles are the product mix of Honda.
A company’s product mix has four important dimensions, namely width, length, depth and consistency.
A brand is a name, term, symbol, and design or combination thereof that identifies a seller’s products and differentiates them from competitors’ products. Disneyland and Nissan, Toyota are examples of brand names.
Brand Equity is a set of assets (and liabilities) linked to a brand’s name and symbol that adds to (or substracts from) the value provided by a product or service to a firm and/or that firm’s customers.
Brand equity is the value built-up in a brand. It is measured based on how much a customer is aware of the brand. The value of a company’s brand equity can be calculated by comparing the expected future revenue from the branded product with the expected future revenue from an equivalent non-branded product. This calculation is at best an approximation. This value can comprise both tangible, functional attributes (e.g. TWICE the cleaning power or HALF the fat) and intangible, emotional attributes (e.g. The brand for people with style and good taste).
Price is one of the elements of the marketing mix that that produces revenue, the other elements produce costs. It is the value of the product at which the seller offers the product to the buyers.
A firm must set a price for the first time when it develops a new product or when it introduces its regular product into a new distribution channel or geographical area.
The firm must decide where to position its product on quality and price. There can be a competition between price – quality segments. Following figure shows the four price-quality strategies.
The firm has to consider many factors in setting its pricing policy. It can be explained as six step procedure.
The firm’s pricing objectives must be identified in order to determine the optimal pricing. Common objectives include the following:
Current profit maximization – seeks to maximize current profit, taking into account revenue and costs. Current profit maximization may not be the best objective if it results in lower long-term profits.
Maximize Market Share – seeks to maximize the number of units sold or the number of customers served in order to decrease long-term costs as predicted by the experience curve.
Product quality leadership – use price to signal high quality in an attempt to position the product as the quality leader.
Survival – in situations such as market decline and overcapacity, the goal may be to select a price that will cover costs and permit the firm to remain in the market. In this case, survival may take a priority over profits, so this objective is considered temporary.
Price Skimming – Skim pricing attempts to “skim the cream” off the top of the market by setting a high price and selling to those customers who are less price sensitive and ready to purchase new technological product. Once a specific group of customers is captured, the price is reduced to cater the higher price sensitive customer. Skimming is most appropriate when a sufficient number of customers have a high current demand. Demand is expected to be relatively inelastic that is, the customers are not highly price sensitive.
Market Penetration – Penetration pricing pursues the objective of quantity maximization by means of a low price. The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. It is most appropriate when demand is expected to be highly elastic that is, customers are price sensitive and the quantity demanded will increase significantly as price declines.
Each price leads to a different level of demand and therefore has a different impact on a company’s marketing objective. The relation between alternative price and resulting demand can be understood by
For marketers the important issue with elasticity of demand is to understand how it impacts company revenue. In general the following scenarios apply to making price changes for a given type of market demand:
When analyzing cost, the marketer will consider all costs needed to get the product to market including those associated with production, marketing, distribution and company administration (e.g., office expense). These costs can be divided into two main categories:
Within the range of possible prices determined by market demand and company’s costs, the firm must take the competitors’ costs and prices. The fir can decide whether it can charge more, the same or less than the competitors. The firm must be aware, that competitors can change their prices in relation to the prices set by the form.
Once the step of price calculation is over, managers responsible for pricing, select the one price, which is appropriate for meeting the company’s objective, the customer value and expectation.
Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption.
The main function of a distribution channel is to provide a link between production and consumption. Organizations that form any particular distribution channel perform many key functions:
Gathering and distributing market research and intelligence – important for marketing planning
Developing and spreading communications about offers
Finding and communicating with prospective buyers
Adjusting the offer to fit a buyer’s needs, including grading, assembling and packaging
Reaching agreement on price and other terms of the offer
Transporting and storing goods
Acquiring and using funds to cover the costs of the distribution channel
Assuming some commercial risks by operating the channel (e.g. holding stock)
Each layer of marketing intermediaries that performs some work in bringing the product to its final buyer is a “channel level”. The figure below shows some examples of channel levels for consumer marketing channels:
In the figure given, Channel 1 is called a “direct-marketing” channel, since it has no intermediary levels. In this case the manufacturer sells directly to customers. An example of a direct marketing channel would be a factory outlet store. Many holiday companies also market direct to consumers, bypassing a traditional retail intermediary – the travel agent.
The remaining channels are “indirect-marketing channels”.
Channel 2 contains one intermediary. In consumer markets, this is typically a retailer. The consumer goods market is typical of this arrangement whereby producers sell their goods directly to large retailers which then sell the goods to the final consumers.
Channel 3 contains two intermediary levels – a wholesaler and a retailer. A wholesaler typically buys and stores large quantities of several producers goods and then breaks into the bulk deliveries to supply retailers with smaller quantities. For small retailers with limited order quantities, the use of wholesalers makes economic sense. This arrangement tends to work best where the retail channel is fragmented – i.e. not dominated by a small number of large, powerful retailers who have an incentive to cut out the wholesaler.
Channel 4 contains three intermediary levels – a wholesaler, retailer and a jobber. A wholesaler typically buys and stores large quantities of several producers’ goods and then breaks into the bulk deliveries to supply retailers with smaller quantities. The role of a jobber is to facilitate in between whole seller and the retailer so that this arrangement works best where the retail channel is limited .
There is a variety of intermediaries that may get involved before a product gets from the original producer to the final user. These are described briefly below:
Such as wholesalers and retailers—buy, take title to, and resell the merchandise.
Brokers, manufacturers’ representatives and sales agents—search for customers and may negotiate on the producer’s behalf but do not take title to the goods.
Transportation companies, independent ware- houses, banks, and advertising agencies—assist in the distribution process but neither take title to goods nor negotiate purchases or sales.
A new ?rm typically starts as a local operation selling in a limited market through existing intermediaries. The problem at this point is not deciding on the best channels, but convincing the available intermediaries to handle the ?rm’s line. If the ?rm is successful, it might enter new markets and select different channels in response to the opportunities and conditions in the different markets.
In designing the ?rm’s channel system, management must carefully analyze customer needs, establish channel objectives, and identify and evaluate the major channel alternatives.
Because the point of a marketing channel is to make a product available to customers, the marketer must understand what its target customers actually want. Channels produce ?ve service outputs:
Smart marketers recognize that providing greater service outputs means increased channel costs and higher prices for customers, just as a lower level means lower costs and prices. The success of discount stores and Web sites indicates that many consumers will accept lower outputs if they can save money.
Once it understands what customers want, the company is ready to establish channel objectives related to the targeted service output levels. According to Bucklin, under competitive conditions, channel institutions should arrange their functional tasks to minimize total channel costs with respect to desired levels of service outputs.
Producers can usually identify several market segments that desire differing service output levels. Thus, effective planning means determining which market segments to serve and the best channels to use in each case.
Channel objectives vary with product characteristics. For instance, perishable products such as Ben & Jerry’s ice cream require more direct channels, whereas bulkier products such as Owens Corning Fiber Glass insulation require channels that minimize the shipping distance and the amount of handling in the movement from producer to consumer. In contrast, nonstandardized products, such as custom-built machinery, typically are sold directly by company sales representatives.
Channel design must also take into account the limitations and constraints of working with different types of intermediaries. As one example, reps that carry more than one ?rm’s product line can contact customers at a low cost per customer because the total cost is shared by several clients, but the selling effort per customer will be less intense than if each company’s reps did the selling. In addition, channel design can be constrained by such factors as competitors’ channels, the marketing environment, and country-by- country legal regulations and restrictions. U.S. law looks unfavorably upon channel arrangements that tend to substantially lessen competition or create a monopoly.
After a ?rm has examined its customers’ desired service outputs and has set channel objectives, the next step is to identify channel alternatives. These are described by
Intermediaries known as merchants—such as wholesalers and retailers—buy, take title to, and resell the merchandise. Agents—brokers, manufacturers’ representatives and sales agents—search for customers and may negotiate on the producer’s behalf but do not take title to the goods. Facilitators—transportation companies, independent ware- houses, banks, and advertising agencies—assist in the distribution process but neither take title to goods nor negotiate purchases or sales. The most successful companies search for innovative marketing channels. The Conn Organ Company, for example, sells organs through merchants such as department and discount stores, drawing more attention than it ever enjoyed in small music stores. Similarly, Ohio-based Provident Bank reaches new mortgage customers by selling through the lend- ingtree.com Web site, which acts as a facilitator.
In deciding how many intermediaries to use, successful companies use one of three strategies:
The producer must also determine the rights and responsibilities of participating members when considering channel alternatives. From an ethical perspective, each channel member must be treated respectfully and given the opportunity to be prof- itable.10 Other key rights and responsibilities include:
Once the company has identi?ed its major channel alternatives, it must evaluate each alternative against appropriate economic, control, and adaptive criteria.
Marketing communications are also referred as Promotion, the fourth P of marketing mix. This promotion can be said as to communicate with the target customers by using four promotional or communication tools also known as Promotion Mix.
It is a concept of marketing communications planning that recognizes the added value of a comprehensive plan that evaluates the strategic roles of a variety of communications disciplines—for example, general advertising, direct response, sales promotion and public relations—and combines these disciplines to provide clarity, consistency, and maximum communications’ impact through the seamless integration of discrete messages.
Properly implemented, IMC will improve the company’s ability to reach the right customers with the right messages at the right time and in the right place.
Warner-Lambert, maker of Benadryl, has creatively used IMC to promote its antihistamine drug. The company used advertising and public relations to increase brand awareness among allergy sufferers and to promote a toll-free number that provided people with the pollen count in their area. People who called the number more than once received free product samples, coupons, and materials describing the product’s benefits. These people also received a newsletter with advice about coping with allergies.
In simple words, Integrated Marketing Communications (IMC) is the coordination and integration of all marketing communication tools, avenues, and sources within a company into a seamless program, which maximizes the impact on consumers and other end users at a minimal cost. This integration affects all of a firm’s business-to-business, marketing channel, customer-focused, and internally directed communications.
It may be defined as any paid form of non personal presentation and promotion of ideas, goods, or services by an identified sponsor.
In simple words, advertising is a promotional tool by which marketer can position or promote the idea, goods or services to its target customers.In simple words, advertising is a promotional tool by which marketer can position or promote the idea, goods or services to its target customers.
While advertising firms must make five critical decisions, known as the five Ms:
Mission: What are the advertising objectives? Objectives may be:
Money: How much can be spent? What should be the advertising budget?
Message: What message should be sent? What should be the message to be communicated?
Media: What media should be used? The media can be TV, Radio, Newspaper, Magazine, Direct mail, Outdoor advertising (like Hoardings, Billboards, electronic displays, etc), and other advertising media (like painting on buses and trains, bus stop shelter & benches, telephone booths, cinema halls, etc).
Measurement: How should the results be evaluated? There are two ways to measure effective-ness of advertisement campaign:
Sales promotions are non-personal promotional efforts that are designed to have an immediate impact on sales. Media and non-media marketing communications are employed for a pre-determined limited time to increase consumer demand, stimulate market demand or improve product availability. In simple words, sales promotions can be defined as activities or efforts to increase the sales volume for a specific short period of time.
Sales promotions can be directed at the customer, sales staff, or distribution channel members (such as retailers). Sales promotions targeted at the consumer are called consumer sales promotions.
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