CIM
REVISION CARDS
Marketing in Practice 04/05 PROFESSIONAL CERTIFICATE IN MARKETING 2004 –2005 SYLLABUS
Key concepts for revision ● ● ●
Relevant! Succinct! Compact! The Chartered Institute of Marketing
Helping you to pass your CIM exam
CIM REVISION CARDS Marketing in Practice John Williams
AMSTERDAM l BOSTON PARIS l SAN DIEGO l
HEIDELBERG SAN FRANCISCO
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LONDON l SINGAPORE
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NEW YORK SYDNEY
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OXFORD TOKYO
Elsevier Butterworth-Heinemann Linacre House, Jordan Hill, Oxford OX2 8DP 30, Corporate Drive, Burlington, MA 01803 First published 2004 Copyright ß 2004, Elsevier Ltd. All rights reserved No part of this publication may be reproduced in any material form (including photocopying or storing in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication) without the written permission of the copyright holder except in accordance with the provisions of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London, England W1T 4LP. Applications for the copyright holder’s written permission to reproduce any part of this publication should be addressed to the publisher. Permissions may be sought directly from Elsevier’s Science & Technology Rights Department in Oxford, UK: phone: (+44) 1865 843830, fax: (+44) 1865 853333, e-mail:
[email protected]. You may also complete your request on-line via the Elseiver homepage (http://www.elsevier.com), by selecting ‘Customer Support’ and then ‘Obtaining Permissions’ British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalogue record for this book is available from the Library of Congress ISBN 07506 62840 For information on all Elsevier Butterworth-Heinemann publications visit our website at http://books.elsevier.com Printed and bound in Great Britain
TABLE OF CONTENTS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Preface ........................................................................... iv The marketing function......................................................... 1 Context of marketing ........................................................... 26 Integrated marketing mix: product ............................................ 44 The marketing mix: price ...................................................... 58 The marketing mix: place ...................................................... 64 The marketing mix: promotion ................................................ 70 The integrated marketing mix – service extension (people, physical evidence and process) ..................................... 91 The management of marketing information ................................. 95 Skills for the marketer ......................................................... 106 Bringing it all together: the marketing plan.................................. 112
PREFACE Welcome to the CIM Revision Cards from Elsevier/Butterworth–Heinemann. We hope you will find these useful for your CIM exam. The cards are designed to be used in conjunction with the CIM Coursebooks from Elsevier/ Butterworth–Heinemann, and have been written specifically with revision in mind. They also serve as invaluable reviews of the complete modules, perfect for those studying via the assignment route. n Learning outcomes at the start of each chapter identify the main points n Key topics are summarized, helping you to commit the information to memory quickly and easily n Examination and revision tips are provided to give extra guidance when preparing for the exam n Key diagrams are featured to aid the learning process n The compact size ensures the cards are easily transportable, so you can revise any time, anywhere To get the most of your revision cards, try to look over them as frequently as you can when taking your CIM course. When read alongside the Coursebook, they serve as the ideal companion to the main text. Good luck – we wish you every success with your CIM qualification!
THE MARKETING FUNCTION
Unit 1
Syllabus Reference: 2.1, 2.2, 2.8, 2.9 n Explain the structure of marketing departments in both small and large organizations n Discuss the different roles and responsibilities of marketing personnel n Understand how the marketing function needs to interact with other organizational departments and external agencies n Appreciate how to work effectively with others, including your manager n Understand what is meant by effective e-relationships
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KEY DEFINITIONS n Decision-making unit: The group of people who may be involved in the purchase of an item; the buyer may well not be the decider. n Gap analysis: A model for evaluating strategies for moving a company from where it is with its existing strategies to where it desires to be. n Macroenvironment: The general external environment of a company that is explored by a model such as STEEPLE. n Marketing Information System: ‘A Marketing Information System (MkIS) is a structure of people, equipment, and procedures to gather, sort, analyze, evaluate and distribute information for use by marketing decision-makers. n Microenvironment: The environment immediately surrounding the organization, including the competition. n PESTLE: The analysis of the political, economic, social, technical and legal environment within which the company operates. n Porter Value Chain: A model for the internal examination of the organization and how it interacts with its environment. n Porter 5 forces of competition: A method for the analysis of competitive forces on a company. n Segmentation: The division of a large, heterogeneous market area into homogeneous sections to allow more effective marketing.
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The Competitive Environment n Techniques for analyzing the competitive environment are Porter’s Five Forces (Customer Power, Supplier Power, Barriers to Entry, Substitute Products and Competitive Intensity) and PEST Factors analysis (political, economic, social and technological). PEST looks at the big changes driving society, whilst Five Forces looks at industry specific factors. n Porter also devised Value Chain Analysis, which can be done from an internal or external perspective. VCA considers how value is added at each stage in a supply chain and seeks to find ways of removing steps that add cost faster than value. n The value chain categorizes the generic value-adding activities of an organization. The main activities are: outbound logistics, production, inbound logistics, sales and marketing, maintenance. These activities are supported by: administrative infrastructure management, human resources management, R&D, and procurement. The costs and value drivers are identified for each value activity. The value chain framework quickly made its way to the forefront of management as a powerful analysis tool for strategic planning. Its ultimate goal is to maximize value creation while minimizing costs. The concept has been extended beyond individual organizations. It can be applied to whole supply chains and distribution networks.
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Marketing Function n The structure of the marketing function varies according to the size of the organization. In small organizations individuals will be responsible for a number of roles, whereas large organizations will have people in role-specific jobs. n Marketers interact with a large number of people, internal and external to their organization, so need to develop skills that will help them build effective working relationships with others, including their manager. n In effective organizations the marketing function communicates with other functions to ensure consistent and coherent implementation of business objectives and company policies and procedures. n When selecting external agencies, determine selection criteria that include screening, shortlisting and sampling to make the right decision. n The use of E-mail and other electronic forms of communication have increased the speed and availability of information and contact, but reduced personal contact which may have a negative impact on the development of close working relationships. Dibb, Simkin, Pride and Ferrell: Marketing – Concepts and Strategies (4th Edition).
Marketplace n The marketplace consists of the buyers and users of the organization’s products and services and the immediate microenvironment in which the purchase and use takes place. n The behavior of the market place is influenced by the microenvironment; in particular, the competition and their competitive marketing mix offerings. In turn, the microenvironment is influenced by the macroenvironment. n The organization responds to the environment by continually adapting its internal environment. Porter’s Value Chain and the McKinsey 7s model provide a framework for evaluating the internal environment of the organization. n The data from the internal environment, the microenvironment and the macroenvironment is collected and analyzed, using tools such as a SWOT analysis. n The management team defines the broad mission, aims and objectives and decides the strategic stance to be adopted (e.g. to be a market leader or a market follower). n When broad initiatives are decided the detailed issues of the marketing mix need to be developed. n The financial implications of marketing plans are critical. Plans need to be integrated with all the other business plans, e.g. logistics, financial management and organizational development.
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Stakeholders n Stakeholders are individuals or groups with an interest in the success of an organization in delivering intended results and maintaining the viability of the organization’s products and services. It is essential to satisfy or at least manage stakeholder expectations. n Internal stakeholders are vital and staff motivation and commitment are characteristics of successful organizations. Internal stakeholders can be segmented by features such as job level or job function. n In internal marketing initiatives, such as during the management of change, attitude segmentation variables, e.g. positive, negative and apathetic, may be useful.
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Stakeholder Audience As well as customers there are other important relationships. Stakeholders include: n Internal markets – If employees are treated as customers it should be possible to improve levels of customer service and quality throughout the organization. n Influence markets – Bodies or groups that influence, or have the potential to influence, the organization’s operations. This includes government and regulatory bodies. n Employee markets – The recruitment, retention and succession of skilled staff are important to the continuing success of the organization and companies need HR strategies to address this. n Supplier markets – In recent years there has been more emphasis on partnerships and alliances, and the synergy that is created from different forms of cooperative relationship.
Relationship Marketing n This is where ongoing customer loyalty is at the core of its customer relationship marketing strategy. The key aims are to ensure existing customers continue to purchase from them on a life-long basis, i.e. achieving lifetime value to both the customer and the organization, rather than just one-off transactions.
The nature of the market n There are a number of techniques for analyzing markets. Ansoff’s Matrix looks at (existing and new) customers and (existing and new) products to characterize growth strategies. n The Product Lifecycle and the Boston Matrix (aka Product Portfolio Matrix) look at an organization’s portfolio of products and the stages of each product’s life. n Achieving the business plan by life extensions, new product introductions, end of life decisions can be illustrated with the Boston Grid. n SWOT is a tool for listing an organization’s strengths, weaknesses, opportunities and threats. It conveniently encompasses many of the other techniques, as well as provoking thought about the future.
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Strategy Formulation n Generic strategies are useful in providing the basis of strategic options. Porter believed that market leadership arose from two choices – the size of market chosen and the nature of your competitive advantage. Porter strongly believes in the value of economies of scale and the benefits of the experience curve. For Porter there are three best strategies – they are cost leadership, differentiation, and market segmentation (or focus). Market segmentation is narrow in scope, while both cost leadership and differentiation are relatively broad in market scope. n Market segmentation describes the division of a market into homogeneous groups, each of which will respond differently to marketing initiatives. It is a useful tool for understanding what distinct groups of customers want. Each group, or segment, can then be targeted individually. n Emergent strategies arise unexpectedly. They can appear from anywhere in the organization and it is important that they are not suppressed, because they often represent a new market need that the company is meeting. n Performance measures have a profound effect on behavior and so it is vital that measures are aligned with strategy. A cost-focused measure (e.g. calls per hour) will not allow a call centre agent to spend time relationship building, whatever an organization claims about customer loyalty.
Porter’s Generic Strategy Model See the diagram on page 12 n Focus strategy Appropriate when the market consists of diverse segments – concentrate on distinct and profitable segments n Cost leadership Maintain high profitability and share through economies and efficiencies, innovation and technology, achieving growth in business n Product differentiation strategy Viable when the market desires important product features that the organization can deliver, or if significant differences can be maintained vs. competitor(s)
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Marketing Function n CIM’s definition of marketing is ‘The management process which identifies, anticipates and satisfies customer requirements profitability. n This process varies depending on factors such as the size of the organization, the sector in which it is located, the type of work role performed by the manager and the career experience that the marketing manager brings with them. n Generally speaking, the smaller the organization the more multifaceted are the roles of the marketing manager. n Marketing titles and positions vary considerably, along with the particular responsibilities that accompany them. They span a range of positions, including marketing director, marketing manager, sales manager, advertising manager, promotion manager and public relations manager. n A marketing director is responsible for directing overall marketing policy. Marketing managers work with service or product development, market research and others to develop detailed marketing strategies. n Sometimes Sales and Marketing are combined in one department, section or job description, so as to avoid the damaging splits that can sometimes occur when they are separate. n Sales and marketing teams should work together creating opportunities for new business, identifying new markets and gathering competitive intelligence. However, they may work quite differently. MARKETING IN PRACTICE
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Marketing Function n The marketing function is organized in different ways in different organizations, depending on factors such as size, geographical spread, management philosophy, and type of business. n A matrix structure is suited for collaborative working, focused on projects that cross normal departmental boundaries. n Product management involves monitoring the performance of a specific product or service group in the market place. This makes it possible to avoid having a marketing department that focuses only on a few favoured products or services. The product manager needs to coordinate all activities relating to the product and service. n This cross-departmental role means that a product or service manager often needs to work by persuasion, rather than through direct authority, to champion the product internally as well as externally.
Marketing Who’s Who
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Skills n People working in front line roles are company representatives, so need to have skills that enable them to project the right image of the organization, in addition to carrying out their main tasks – appearance, body language, behavior and telephone manners all contribute to the impression gained by visitors and others about the company. n When dealing with visitors from overseas, marketers need to be aware of cultural differences and implications for looking after such visitors. n Marketers need to be able to develop effective working relationships when working up and down the supply chain. n Negotiation requires marketers to understand how to apply their interpersonal skills effectively when putting forward proposals and counter arguments. n Marketers require an understanding of the principles of entering into a contract and must get legal advice before agreeing to contractual obligations, as these are absolute. n Marketers need to be able to network effectively to develop useful business contacts.
Competition Within the Marketplace n Porter’s Five forces of competition model is one tool for analyzing this aspect of the market place. n ‘In-segment’ competition is competition between close competitors. n The power of the buyers is twofold. If a company does not stock a product customers are not able to buy it, but customers are also able to select another brand as better value for money. n To address these two influences, brand manufacturers use marketing strategies directed at both the retail channels (push strategy) and at consumers (pull strategy). n Suppliers exert influence. For example, in theory, a company may have a lot of choice over choosing a computer supplier but still have to purchase a Microsoft operating system. n New entrants are also a major potential source of competitive pressure. For example, the air travel industry has been influenced by the entry of the aggressive, low-cost airlines. The STEEPLE model Table 1.1 provides a framework for analyzing the major influences that impact on the marketplace.
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Table 1.1
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General Overview of Selected Key STEEPLE Issues
STEEPLE element
Selected key issues
Social/cultural Technological innovation Economic issues
Demographics, society, culture Inventions, discoveries, information technologies
Education/Training Political Legal Environmental protection
Business cycle, inflation rates, interest rates, disposable income, wealth distribution, consumer spending patterns, credit availability, employment levels, exchange rates, taxation Educated consumers, educated channels, education of staff, lifelong training Stability, attitudes to industry attitudes to competition, climate for ‘free trade’, attitudes to foreign investors Monopolies and mergers, competition, consumer legislation, health and safety, consumer safety (e.g. labelling), codes of conduct, self-regulation Consumer pressure, volatlle organic compounds (VOC), Persistent Organic Pollutants (POP), Ozone depletion/CFC’s, genetic engineering issues, environment fate, laws, global warming, sustainable development, life cycle analysis
The Internal Environment The Marketing-oriented organization is effective and offers goods and services to its customers, that have appropriate market valuation and are affordable. To be profitable, the organization needs to be efficient and to make and market products and services in the most economic way, consistent with the required product quality and standard of service. The value chain provides the Marketer with a tool to appraise the internal efficiency and effectiveness of the organization. Figure 1.1 shows an adapted version of Porter’s value chain.
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Hints and Tips n When you are completing a SWOT analysis, do not do it on paper but use a spreadsheet. Leave column one blank and make column two wide enough for your SWOT point. Use four tables, one for each element of the SWOT. n Do not make any attempt to consider how important an issue is when you enter the points in column two. Then come back to your list and enter into column one a score of 1 – ‘critically important’, to 10 – ‘of very little importance’. You can then use the sort function to classify the issues with the key ones grouped at the top of the list. Having a computer-based copy also allows you to update the analysis as the environment changes. n A key skill in marketing is to ensure that every element (e.g. a press release) forms part of an integrated activity. Whenever you answer an exam question, or work on a specific activity in a marketing project, take a little time to review how the detailed strategy integrates into the overall plans. This is particularly important for this integrative paper.
Hints and Tips Continued Marketers work in a wide variety of contexts. The CIM examination requires you to address issues in case study contexts. In your day-to-day professional activity and when you read the press, make a mental note of interesting examples from different marketing contexts (e.g. not-for-profit, etc.). The next unit examines some of the contextual issues within which marketing plans are formulated and implemented.
Hints and tips for ‘examiner friendly’ actions are as follows: n Show them that you understand the basis of the question, by answering precisely the question asked, and not including just about everything you can remember about the subject area. n Read their needs – how many points is the question asking you to address? n Respond to the question appropriately. Is the question asking you to take on a role? If so, take on the role and answer the question in respect of the role. For example, you could be positioned as follows: ‘You are working as a Marketing Assistant at Nike UK’ or ‘You are a Marketing Manager for an Engineering Company’ or ‘As Marketing Manager write a report to the Managing Partner’.
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Hints and Tips Continued n Ensure the examiner has something to mark: give them substance, relevance, definitions, illustration and demonstration of your knowledge and understanding of the subject area. See the examiner as your potential employer, or ultimate consumer/customer. The whole purpose and culture of marketing is about meeting customers’ needs. Provide a strong sense of enthusiasm and professionalism in your answers; support it with relevant up-to-date examples and apply them where appropriate. n Try to do something that will make your exam paper a little bit different – make it stand out in the crowd. Within the assignment there are several types of questions that may be asked, including: l A report – the question requires a formal report to be completed, detailing an answer to the specific question set. This will often be reporting on a specific issue to an individual. l A briefing paper or notes – preparing a briefing paper or a series of notes which may be used for a presentation. l A presentation – you may be required to either prepare the presentation only or to deliver the presentation in addition to its preparation. The audience for the presentation should be considered carefully and ICT used where possible. l A discussion paper – the question requires an academic discussion paper to be prepared. You should show a range of sources and concepts within the paper. You may also be required to present the discussion paper as part of a question.
Hints and Tips Continued n A project plan or action plan – some questions ask for planning techniques to be demonstrated. As such, the plan must be for the timescale given and costs shown. n Planning a research project – whilst market research may be required, questions are often asked simply for a research plan in a given situation. This would normally include timescales, the type(s) of research to be gathered, sampling, data collection and analysis. n Conducting research – following on from a research plan, a question can require student(s) to undertake a research gathering exercise. A research question can be either an individual or a group activity, depending upon the question. This will usually result in a report of the findings of the exercise plus any recommendations arising from your findings. n Gathering of information and reporting – within many questions information will need gathering. It is advisable to detail the types of information utilized, their sources and report on any findings. Such a question will often ask for recommendations for the organization – these should be drawn from the data and not simply personal opinion. n An advisory document – a question here will require you to evaluate a situation and present advice and recommendations drawn from findings and theory. Again, any advice should be backed up with evidence and not a personal perspective only. MARKETING IN PRACTICE
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Characteristics of a Good Candidate’s Work The characteristics of a good candidate’s work in the integrative project are: n Selection of good relevant examples to illustrate points n Selection of relevant aspects of theory n Not only demonstrating knowledge of theory but also understanding n Understanding of the practical aspects of implementing theory, including overcoming problems n Good, well-structured reports within 20 percent of indicative word count n Small but relevant appendices, but only where necessary n Understanding of text book theory and evidence of reading around the subject to find the latest developments n Appropriate referencing for sources n Use of an appropriate range of sources, including original research articles, current textbooks, marketing and general press and appropriate use of Internet sources n Focus on the specific aspects demanded by the integrative project tasks.
Characteristics of Poor Work The characteristics of less good submissions for the integrative project are: n Poor selection of examples and a failure to use them in the illustration of points. n Theory ‘dump’ of all the notes that the candidate has acquired in and around the topic area, with little understanding of what was relevant demonstrated. n Listing of theory rather than a demonstration of understanding. n Little understanding of problem-solving issues and the use and interpretation of theory. n Long, rambling reports, much in excess of 20 percent of indicative word count, with little structure and focus on the key aspects. n Long and often numerous appendices, including printouts of websites and material such as complete brochures and annual reports. Only strictly relevant material should be appended. The inclusion of appendices without relevance just wastes candidates’ and examiners’ time without gaining additional credit. Go to www.cimvirtualinstitute.com and www.marketingonline.co.uk for additional support and guidance.
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CONTEXT OF MARKETING
Unit 2
Syllabus Reference: 2.1–2.3, 2.5–2.8, 3.2, 3.3, 3.6, 4.8 n Understand the forces of consumerism and their impact on marketing plans n Be able to consider how a marketing mix should be adapted to respond to environmental (green) forces and describe the elements of such a mix n Understand how marketing mixes and plans need to be adapted for Business to Business (B2B) marketing n Be able to outline the key features of relationship marketing n Be capable of listing the differences between the marketing of services and products n Appreciate the value of internal marketing in the successful implementation of marketing plans n Understand the additional complexity of marketing in an international, multi-cultural context n Appreciate the different objective sets in not-for-profit and social marketing n Appreciate the specific differences in marketing the performing arts and sports n Be able to explore how to adapt the marketing mix for modest budgets
n The CIM examination involves a case study. These case studies cover a range of contexts, including service, international and working with limited budgets. This unit provides some necessary contexts to develop tailored, context specific answers that gain higher marks n The message of segmentation is that the marketing mix needs to be adapted to meet specific market conditions and target particular customer benefit needs and wants. Forces such as consumerism shape this process n Marketing theory has evolved to meet the challenges of a dynamic marketplace. Relationship Marketing is one theory and some of its core concepts are presented here. Not all marketing is about major branded consumer products
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The Relationship Ladder
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Relationship Marketing n This is building a relationship between the client, the staff at the local distributorship and the manufacturer’s brand. Viewed in this context, the 18,000-mile service is not only seen to be a chance to make a sale (the income from the service), but a marketing opportunity to maintain and develop the relationship. Thus, the reception team and the motor technicians are involved in building the relationship through their contact with the customer. n Another key concept of relationship marketing is the part-time marketer. Much of the relationship building does not take part with the full-time marketers. In supermarkets, the full-time marketers may be comparatively remote. How the shopping experience feels will be greatly affected for better or worse by the interaction between customers and frontline staff at the checkout and others in customer contact roles – the ‘part-time Marketers’. n With media fragmentation (e.g. cable TV) and the ability to micro market (e-commerce), it is now possible to consider such segmentation variables. One of the key skills of a Marketer is to be sympathetic to the needs of target market segments.
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Hofstede In Geert Hofstede’s work the attitudes of societies to ‘male’ and ‘female’ roles was explored. In some societies there is considerable difference in how the roles are perceived. In the UK very few women study engineering yet this is not so in other countries. Hofstede developed four different axes for measuring cultural factors and found considerable differences from one nation to the next. n Individualism dimension – Individualism and the collectivist approach. Whether or not a culture allows scope for individual or group-centred issues to be addressed n Power distance dimension – High or low power distance. Whether or not the culture encourages ‘superiors’ to dominate and exert power and authority n Uncertainty avoidance dimension – Strong uncertainty avoidance – Weak uncertainty avoidance. The ease with which the culture copes with novelty and change n Masculinity dimension – Are gender roles clearly differentiated, or is it an equal status country? Hofstede’s data revealed an Anglo culture of management based on high individualism, low to medium power distance between bosses and their subordinates, low to medium uncertainty avoidance and high masculinity. However there are also considerable differences within Anglo cultures.
The Terpstra model provides a framework for examining the impact of culture.
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Potential Cultural Barriers n Language n Food n Time n Religious customs n Different values and beliefs n Manners and etiquette n Non-verbal communications
Overcoming National Barriers n Information technology is improving speed and quality of the flow of information n Many countries recognize the benefits of co-operation n Many organizations manage diverse workforces n When dealing with visitors from overseas, marketers need to be aware of cultural differences and implications for looking after such visitors.
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Supply Chain Marketers need to be able to develop effective working relationships when working up and down the supply chain.
Consumer Products Supply Chain Producer Agents or Brokers Wholesalers Retailers Consumers
Industrial Products Supply Chain Producer Agents Industrial Distributors Industrial DMUs
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Negotiation Negotiation requires marketers to understand how to apply their interpersonal skills effectively when putting forward proposals and counter arguments.
The Negotiation Process Setting the scene Opening negotiations Negotiation Closing the negotiation Follow-up
Skills and Qualities Communication – questioning and listening Assertiveness Influencing Persuading Patience Sense of humour!
n Marketers require an understanding of the principles of entering into a contract and must get legal advice before agreeing to contractual obligations, as these are absolute. n Once a target market has been identified the precise method of entry has to be decided. n The first aspect is to decide if it is best to export or manufacture abroad. If the product is heavy and of relatively low value (e.g. soft drinks) then local manufacture is required. If the product is light, high-value and has to be made in high volumes, then exporting from a relatively few global manufacturing locations is indicated (e.g. consumer electronics). Companies are increasingly seeking global solutions to sourcing products. n Once the decision is made about location of manufacture (home or destination market) the key factor is the level of commitment and risk that the organization wishes to make. So indirect exporting involves relatively little management effort and expense. However, this comes at the cost of control. If more control is required then direct exporting is required. This can be affected with partners (agents or distributors) or, for maximum control, by establishing a local sales and marketing subsidiary.
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n With some products, production in the market can be achieved with little capital investment. An owner of intellectual property (e.g. patent, brand or copyright) may license the production rights to a local manufacturing organization. If more control is required with addition costs, franchising may be an appropriate option. n Increasingly, companies are reaping the benefits of flexible, international production with close control by working with an alliance of contract manufacturing partners. Where part of the product is high value and other parts lower value and more bulky, local assembly may be the best solution. Where direct ownership may not be possible (e.g. legal reasons), strategic alliances may provide an option. n In developing the strategy, the marketing mix and other business aspects, such as logistics, need to be addressed. The precise entry strategy selected will depend on issues such as profitability, the amount of capital required, the relative cost structures and levels of risk. n If risk is high, then exporting via agents is a possibility. A large, stable, growing market may indicate the building of new production plants (so-called green field development).
Methods of Entry into Overseas Markets
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Gap Analysis
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The Seven Ps
The four traditional Ps enable the Marketer to formulate plans for pure products. However, many products have substantial elements of service (e.g. product maintenance for a photocopier) and increasingly, in the postindustrial society, much of the expenditure is on services. Services are intangible and have other characteristics and to maximize the offering to the customer, three additional elements have to be introduced, the service extension to the marketing mix.
The first stage is to develop the segmentation variables of the given marketplace and offering. The starting point for this should be textbook lists of potential variables, but it is essential to be highly selective, as lots of very small segments, the result of using too many variables, are unlikely to produce a practical segmentation structure. Creative segmentation can identify a new market and give an organization a competitive advantage. See the diagram on page 42
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Hints and Tips The CIM examinations take questions and case studies from all areas of marketing and so it is essential to be able to consider not-for-profit and service, etc., case studies, as well as more traditional product-based contexts. Increasingly, marketing crosses international and cultural boundaries. It is important to be aware of the kinds of issues that need to be taken into account when marketing outside a context with which you are very familiar. Being sensitive to and respectful of differences is essential. Go to www.cimvirtualinstitute.com and www.marketingonline.co.uk for additional support and guidance.
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INTEGRATED MARKETING MIX: PRODUCT
Unit 3
Syllabus Reference: 1.5, 3.5, 3.6, 4.6, 4.7, 5.3, 5.5, 5.6
By the end of this unit you will: n Understand the product life cycle (PLC) concept and the need for a balanced portfolio, using BCG matrix concepts n Understand the different levels of product n Be able to use a structured approach to analyze product benefits n Understand the process of new product development n Appreciate the role of branding in adding to product value n Set the product mix element in the context of an integrated marketing mix n Understand the need for adaptation in the international context
Product Life Cycle and the Product Portfolio Products go through stages; see Figure 3.1, the product life cycle (PLC). In the standard PLC, products go through an introductory phase, then, if successful, grow. Here care must be taken; people can think that growth will continue forever. If it does not; the market becomes saturated and the product enters the maturity phase. The product may then decline and may become obsolete, unmarketable and unavailable.
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Product Life Cycle Stages n Introduction: This is when a new product is launched and the goal at this stage is to create awareness and communicate the product’s benefits to the consumers n Growth: This is where most products enter the market and there is less product distinctiveness n Maturity: This is where most products are situated. Profitability carries on growing but at a reduced rate n Decline: This is where consumer preferences may have changed or innovative new products may have displaced existing products
Characteristics of Life Cycle Changes
Growth
Development
– Early adopter purchasers
High R&D costs
– Increasing competition
– Test marketing
– Rapidly rising sales
– No sales
– Rising profits
Introduction
Maturity
– Innovator purchasers
– Middle majority customers
– Little competition
– Competition begins to decline
– Low sales
– High sales
– Negative profits
– High profits
Decline – Laggard customers – Fewer competitors – Declining sales and profits
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The Boston Matrix This provides a framework for considering the portfolio of products (Figure 3.2). The axes of the matrix are market growth per year as a percentage and relative market share for the product under consideration.
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n High growth and low market share (often a PLC introduction situation), a question mark Question marks: These can cause problems for management. While market growth prospects are good, they have a relatively low market share. Substantial investment may be needed to increase their market share and increase profitability. n High growth and high market share (PLC growth situation), a rising star Stars are those products that have a promising future. Significant investments of cash are required to develop their full potential. If managed properly they will develop into a valuable source of revenue as the market evolves. n Low growth and high market share (PLC maturity situation), a cash cow Cash cow: Cash cows have developed a high market share in a mature market. They deserve the company’s full attention as the revenue can be invested in newer market areas with high growth potential. n Low growth and low market share (PLC decline situation), a dead dog Dogs show no growth and have relatively low market share. Although they may not be a drain on the company’s resources, they are unable to make a positive contribution to profits.
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n Intangible benefits: Benefits that cannot be measured (e.g. love, security, passion, etc.) that a user may gain from the product or service. For example, mobile phones can create a sense of security for the lone female traveller. n Tangible benefits: They are physical benefits the user gains from the ownership or use of the product or service. n Feature attributes: These are the features that make up the product. Using the example of a car, this could be low profile tyres, fast acceleration, aerodynamic design, quality of materials from which the car is made. n Signal attributes: These are the properties or attributes of the product which convey the message that it has other attributes that the buyer or consumer considers desirable. n Environmental/life cycle: Not to be confused with product life cycle. Analysis of the impact of the product from cradle to grave (manufacture, distribution, use, disposal and recycling). n Complementary products: Many products are part of a system, e.g. pre-recorded DVDs are essential to the enjoyment of an entertainment centre, but are not made by the same company.
Levels of Product. Source: Adapted from Kotler
Figure 3.3 shows the customer value hierarchy framework. At lower levels customers are provided with what they expect; all providers must supply this. To gain a competitive edge, something of benefit and value to the customer, above and beyond the expected benefit set, must be provided. This is not static since customers’ expectations grow; the ultimate product is that which satisfies the dream needs of the customer. MARKETING IN PRACTICE
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Type of Product n Potential product: This form of the product is the ‘potential product’, which encompasses all the augmentations and transformations that the product might ultimately undergo in the future. These could be improvements in order to keep the product competitive within the market. n Augmented product: The augmented products are those aspects or elements of a product which support the core and actual features, e.g. customer service, after sales service and delivery. n Expected product: This level of product is a set of attributes that the buyers normally accept and agree to when they purchase the product. When they exceed the buyers’ expectations we have satisfied customers, when they do not we have dissatisfied customers. n Core benefit: The main benefit that a product provides; using the example of a car, this would be ‘transport’.
Affordable products are needed which provide value, with benefits that surprise and delight the target customers more than the competition’s ranges. The Plymouth model of attribute analysis provides such a framework. MARKETING IN PRACTICE
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Kotler’s eight-stage new product development process is shown in Figure 3.4. As products go through the screening process some will be eliminated and so, for every hundred ideas originally considered, only one or two may be finally commercialized. It is important that each stage of the process is conducted as well as possible. Generating ideas is not cost free but the sums are relatively modest. The cost of a failed launch is high.
Types of Branding
Branding helps consumers recognize the product and identify it in a competitive marketplace (Figure 3.5). The brand conveys values which the consumer is invited to share. It is a sign of recognized quality and thus branding can increase the customers’ perceived value of the product, at the same time decreasing the level of perceived risk in the purchase MARKETING IN PRACTICE
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Personalized Marketing n Personalized marketing (also called personalization, and sometimes called one-to-one marketing) is an extreme form of product differentiation. Whereas product differentiation tries to differentiate a product from competitors, personalization tries to make a unique product offering for each customer. n Personalized marketing is most practical in interactive media such as the Internet. A web site can track the interests and make suggestions for the future. Many sites help customers make choices by organizing information and prioritizing it, based on the individuals’ preferences. In some cases the product itself can be customized.
Hints and Tips n The key to successful marketing is to identify the segments and the benefits demanded by the target. This primary information then allows the positioning strategy to be formulated and then the communications plan. Without this stage the communications plan will lack a firm foundation. n Relevant benefits needs to be communicated, which requires an intimate understanding of both the product/ service and the target customers. n Marketing is a skill and skills are improved by practice. So apply the concepts to typical products/services that are relevant to you to develop your personal skills and insights. The 4 Ps need to be coordinated effectively by organizations to take advantage of the strengths offered by each element and their ability to support each other. n New product development is essential as products become obsolete and consumer needs change or develop, but it holds a high-risk factor. n Being the first to market with an innovative product that meets consumer expectations is key to gaining market share and high sales. n Products need to be promoted in different ways during each stage of the PLC. Go to www.cimvirtualinstitute.com and www.marketingonline.co.uk for additional support and guidance.
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Unit 4
Syllabus Reference: 3.4, 5.1–5.3, 5.5, 5.7 n Identify factors that contribute to customers’ perception of value and ability to pay (affordability). n Identify what factors contribute to costs and appreciate the architecture of costs. n Appreciate the legal factors affecting pricing. n Explain how organizations approach price setting. n Describe the systems needed to deliver the pricing strategy and collect the revenues. n Understand the importance of budgets (a multidisciplinary activity between marketing and finance) as control and communication tools. n Review the issues of feedback and control, along with the role of variance analysis in this. n Appreciate the management of pricing in an international context. n Pricing decisions for products and services are influenced by many internal and external factors, including Product Life Cycle stage.
KEY DEFINITIONS
Cost-based price: Method of pricing based on taking a percentage of costs and ‘marking up’. Cost drivers: Expenses that account for a substantial proportion of the company’s expenses. Depreciation: Items of capital equipment have a productive life of a number of years. Depreciation is the accountancy process where only part of the value is assigned to a given production period. Depreciation affects profits but is a non-cash expense and so it does not affect cash flow and thus does not enter discounted cash flow calculations. Elasticity of demand: The way in which consumer demand varies with price. For example, fuel prices are elastic; motorists continue to use fuel even if the price rises by a significant amount. On the other hand, other goods, such as restaurant meals, are relatively inelastic. Fixed and variable costs: Fixed costs are those such as rent and insurance, tending not to vary with the level of sales. Variable costs are those that vary with the level of sales, such as the cost of raw materials and components. Learning curve effect: This is the impact that research and product development can have on price. In the mid-twentieth century, computers cost hundreds of thousands of pounds; improvements in manufacture and design now give the availability of more powerful computers for a few hundred pounds. Penetration pricing: A strategy of low prices to buy market share from competitors. Contd. MARKETING IN PRACTICE
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Profit contribution: The sales revenue of a unit less the variable cost of production of the unit. This ignores fixed costs, including depreciation, and is used in the calculation of the break-even point. Sequential skimming strategy: This is a process where several markets of different benefit and value are skimmed in turn. For example, advanced breaking systems were first introduced into luxury cars; now they are standard in all production cars. This is an example of both sequential skimming and learning curve effect. Skimming strategy: A strategy of entering the market with a high unit price to maximize the profit per unit. This is typical for luxury products during the introduction phase. Sunk cost: In some textbooks, advertising is given as a variable expense; however, this is not so. A perfume company may spend many millions of pounds launching a new perfume; this money is committed or ‘sunk’ before any perfume is sold and thus is entirely independent of sales achieved. Value: This is the amount of money people are prepared to pay for an object or service. This need not have any relationship to the physical costs of delivering of product or service.
Marketing Mix: Price
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Any aspect of the price mix may need adaptation. Pricing in the international dimension is more complex.
Budgets n A budget is an estimate of planned expenditure and should be as accurate as possible. n Use different methods, such as historical, percentage of sales and activity/cost method to set budgets. n When estimating costs, marketers should review previous expenditure and look for cost savings, such as negotiating discounts from suppliers and reducing the number of activities undertaken. n Add contingency to the budget figure to cover unexpected expenditure. n The cost of marketing services should be spread across all activities and there are various ways of apportioning or splitting these costs – according to the nature of the activity. n Using techniques such as break-even analysis and cost benefit to assess the viability of and make decisions about competing options. n Reviewing actual against estimated spend to identify the reason for variances. n Reviewing previous expenditure to identify where future cost savings can be made. n When presenting the budget the marketer must be able to articulate what the money will be spent on, what the result will be and how costs will be covered. n When justifying budget decisions, the marketer should be able to present a reasoned argument about what options have been considered and why the final decision was made.
Hints and Tips n It is essential for a marketer to have a sound grasp of costs and cost drivers. Control of costs is fundamental to long-term success; neglect of cash flow is a major cause of business failure. n When looking at the marketing aspect of developing value it is also essential to maintain control of expenses. Cash flows and breakeven calculations often feature in CIM exams and practice will develop your skills. Go to www.cimvirtualinstitute.com and www.marketingonline.co.uk for additional support and guidance.
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Unit 5
Syllabus Reference: 2.5, 2.6, 2.8, 3.1, 4.5, 5.6 n Be able to analyze the issues of convenience from the customers’ perspective. n Understand the options available for the physical delivery of the product or service. n Be able to adapt concepts such as ‘inventory’, which are developed in product distribution, for service delivery situations. n Appreciate the legal, safety and environmental issues in distribution. n Be able to evaluate the range of channel outlets that might be appropriate for a given product or service. n Understand the control issues in maintaining customer satisfaction in distribution. n Appreciate the need for the integration of distribution into the overall marketing mix. KEY DEFINITIONS JIT: Just in time delivery, where goods are delivered within a narrow time window (goods not accepted if they are either too early or too late).
Channels n Figure 5.1 shows some patterns of distribution for consumer goods. The blocks represent stages where stock is held. This may be short term in a distribution centre or longer term for a distributor of imported goods. n The arrows represent the physical transport process: in general, taking goods from the stock area, loading the goods, transportation, unloading the goods and storage. Each arrow and block represents costs and the strategic pricing gap is being eroded unless the costs add customer value. n The top distribution layer represents the distribution of an imported product sold through small retail outlets. n The next shows the situation typical for a supermarket: manufacturers deliver products to a logistics centre; the assorted products for a given store are loaded into a vehicle and are delivered to the store.
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Figure 5.1
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Objectives n The objective process follows the model given in Figure 5.2. Having determined what the customer needs is gauged in terms of convenience (this is parallel to benefit needs analysis for product) and determined by what the constraints are; it can be decided what service levels are required and what the appropriate methods are to physically deliver the products and/or services. n Distribution may be a major cost driver and marketing needs to work closely with other functions to ensure that the levels of service are physically deliverable at economic costs.
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Figure 5.2
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Hints and Tips n As always in marketing observe distribution issues as you shop. Much of physical distribution is outside the normal management scope of the marketing department. In addition to reading about the topic in marketing textbooks, more depth is given to the topic of Supply Chain Management and Logistics in textbooks on Operations Management. n In the CIM exams specific focus on distribution is less common, but a common type of question is ‘. . .how can the full marketing mix be used to ensure the success of the new venture?’ (December 2002). If products are in the wrong outlets with many stock-outs then the launch will be a failure. n The ability to formulate an integrated marketing mix for a given situation is an important skill that is often tested in CIM exams. n Products need to be promoted in different ways during each stage of the PLC. n The rapid pace of the development of new technologies, including digital technologies, has opened up many opportunities for organizations to reach their customer and restructure existing distribution channels. n Go to www.cimvirtualinstitute.com and www.marketingonline.co.uk for additional support and guidance.
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Unit 6
Syllabus Reference: 2.2, 2.3, 2.7, 2.8, 3.5, 3.6, 4.1–4.3, 4.8 LEARNING OBJECTIVES Understand the communications tasks required to convey messages to key stakeholders. Appreciate some of the restrictions imposed by self-regulation and law on communications. Understand the difference between the available elements of the communications mix, including advertising, publicity, public relations, person selling, point of sale, sales systems, sales promotion, direct marketing, e-communications and sponsorship. Appreciate the different characteristics of various media such as TV and posters. Be able to frame objectives for a given media/stakeholder context and consider how the achievement of these objectives might be measured.
KEY DEFINITIONS BOGOF: Buy one get one free, a form of sales promotion. FMCG: Fast moving consumer goods; the day to day products we fill our shopping trolley with, such as detergent, etc.
Who is the target audience? Communication should be tailored to meet the needs and interests of a given audience. Is the audience potential buyers, current users, deciders or influencers, individuals, groups, or the general public?
What are the aims and objectives of the campaign? Try to devise both quantitative (measurable) and qualitative objectives. The campaign may be trying to elicit a cognitive (attention), affective (feeling) or behavioral (doing) response.
Designing the message This is concerned with what to say, how to say it and who should say it. The aim is to find a theme, idea, appeal or unique selling proposition. The message can try to appeal on moral, rational or emotional grounds. The credibility of the message source depends on expertise, trustworthiness and likeability.
Planning the Message l
List product features
l
Identify USP
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Identify features relevant to purpose
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Turn selling point into benefits for audience
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Highlight main selling points
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Select a theme or approach
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Select the channels The strategic aspects of media planning involve four steps: n selecting the target audience toward which all subsequent efforts will be directed n specifying media objectives; for example, in terms of reach, frequency n selecting general media categories and specific vehicles within each medium buying media Using the elements of the communications mix in a coordinated way so as to achieve the objectives of a promotion. The role of marketing communications is to: n differentiate a product/brand (to make it different to a competitor’s brand or seem different through effective positioning) n remind and reassure a target audience with regard to benefits (to encourage (re)purchase) n inform a target audience by providing new information (e.g. of a new brand or flavor)
Marketing Communications: Aims Advertising Measuring advertising effectiveness is important for understanding how well ads are performing and what changes need to be made to improve performance. Promotion research consists of media and message research. Media research measures audience composition and size for media vehicles as a basis for determining ratings.
Sales promotions Sales promotions often complement advertising, and may be planned and executed in parallel with associated advertising and possible public relations campaigns. They are used to encourage customers to trial products and services, and then to purchase them. Sales promotions can be a highly targeted and flexible form of communications and evaluation of their effectiveness is usually an integral part of the communication through, for instance, coupon redemption, money-off vouchers/coupons, buy one get one free, discounts, trial-sized products, etc.
Direct marketing This may take the form of direct mail, telemarketing, electronic marketing, and online marketing. It is immediate, customizable to individual consumers or groups of consumers, and interactive. Generally, direct marketing allows for easy measurement of effectiveness.
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Consumer Sales Promotions l
More for less/More for same price
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Money-off
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Free sample
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Cash refund
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Loyalty reward
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Competition
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Point-of-Sale
Trade promotions Those that are highly incentivized, backed up by appropriate merchandising and appropriate advertising, may be advantageous. Specific methods might include, for example, allowances and discounts, free merchandize, selling and marketing assistance, co-operative advertising, merchandising allowances, market information and product training.
Promotional mix n Sales promotion n Advertising n Public Relations n Sponsorship n Personal selling n Direct mail
AIDA n Attention n Interest n Desire n Action
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Hierarchy of Effects Model n Awareness n Knowledge n Liking n Preference n Conviction n Purchase
DAGMAR (Defining Advertising Goals for Measuring Advertising Results) n Unawareness n Awareness n Comprehension n Conviction n Action
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Communication Model
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PURPOSE What is the purpose? (This is what you hope to accomplish in the communication situation. Stating the purpose outright can help you to figure out what strategies you must take to achieve the purpose.)
Audience n What kind of communication is appropriate in this situation? (Types of communication that share features of structure, style and delivery). n What is the typical structure of this type of communication? n What is the typical style of this type of communication? n What level of formality is appropriate to this type of communication? n The web is used for a variety of purposes, with varying degrees of success. Its strength is that it allows information to be shared quickly, cheaply and easily; essentially it’s a publishing medium. n Around 80% of readers scan web pages, rather than read them in their entirety. n Reading from a monitor screen is about 25% slower than from paper. n Most web browsing is task driven.
n It is not just about providing worthwhile information; it’s about how you organize and structure it. You may provide everything your audience would wish to know about something, but if they cannot find it then it may as well not be there. n Readers have short attention spans. They tend to leave a site if they don’t find what they want within a few clicks due to: – – – –
Easily accessible competition Desire for answers quickly Information overload Slow downloads
Writing web content: Audience focus Be clear in your mind who you are writing for. A document should have a primary audience to whom the content is geared. Make each reader feel like the content was written especially for them.
Style You should aim to present a consistent voice throughout your content. When several people contribute information, it is possible for different writing styles to be presented to the reader. MARKETING IN PRACTICE
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Structure The headline gives the reader an indication of the story to come. The opening paragraph summarizes the key points, the second paragraph provides a little more detail and so on. Try to structure content for a range of levels of interest: l Title only l One sentence summary l One paragraph summary l Major points l Minor points l Desire for further information – external links?
Advertising copy Simple Factual Self-contained Instructive Positive
Brief Honest Interesting Emphatic Original
Barriers to Effective Communication n Physical n Language – semantics n Cultural n Structural – organization n Incorrect medium n Personal n Emotional n Political
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E-Relationships E-marketing can be defined as Achieving marketing objectives through use of electronic communications technology. Smith and Chaffey (2001) note that Internet technology can be used to support these aims as follows: n Identifying – the Internet can be used for marketing research to find out customers’ needs and wants; n Anticipating – the Internet provides an additional channel by which customers can access information and make purchases – understanding this demand is key to governing resource allocation to e-marketing. n Satisfying – a key success factor in e-marketing is achieving customer satisfaction through the electronic channel. This raises issues such as is the site easy to use, does it perform adequately, what is the standard of associated customer service and how are physical products dispatched?
Smith and Chaffey (2001) provide ’the 5Ss’ for how the Internet can be applied. For example, for an e-newsletter, the 5Ss are: n Sell – Grow sales (the e-newsletter often acts as both a customer acquisition tool and a retention tool – the lastminute.com e-newsletter has this dual role). n Serve – Add value (give customers extra benefits online, such as an online exclusive offer or more in-depth information about your products or the industry sector). n Speak – Get closer to customers by creating a dialogue, asking questions through online research surveys and learning about customers’ preferences through tracking – which content are people most interested in. n Save – Save costs (of print and post; if you have a traditional offline e-newsletter can you reduce print runs or extend it to those customers you can’t afford to communicate with). n Sizzle – Extend the brand online. A newsletter keeps the brand ’front-of-mind’ and helps reinforce brand values. Added value can also be delivered by the e-newsletter by informing and entertaining customers. n E-mail is convenient for both parties but lack of non verbal cues can be a significant barrier to effectiveness. n E-shopping gives 24/7 access to the customer, but many dotcoms fail to deliver on service, leading to low levels of loyalty and poor customer relationships.
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Public Relations
Tools
Uses
n Corporate stationery, log, uniform and printed materials (reports, handbooks, etc.)
n To create awareness n To maintain visibility n To promote a positive image n To assist with crisis management n To communicate with publics!
n Community events n Facility visits n Speeches and interviews n Audio visual materials n Internet n Sponsorship
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Personal Selling n Prospecting and planning n Establishing rapport with customers and clients n Information gathering n Making the sales presentation n Asking for objections n Closing the sale n Actioning following-up n Advantage of one-to-one n Effective means of selling industrial and complex retail products and missionary selling n High costs compared to other promotional tools n Other examples include telesales, although automation and new channel opportunities have led to decline in personal selling
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Service Marketing Aspect
Problem
n Intangibility
Cannot be stored, displayed or protected through patents. Pricing and promotion can be difficult
n Perishability
Cannot be stockpiled – consumers have temporary ‘ownership’
n Inseparability
Consumer involved in production. Centralized mass production difficult
n Heterogeneity
Lack standardization, difficult to control quality
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Sponsorship Three different forms of sponsorship: l
Patronage
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Endorsement
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Direct sponsorship
Consider: l
Sponsor’s objectives and expectations
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Measurement criteria
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Communication channels
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Costs
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Hints and Tips n The elements of the promotional mix each offer different opportunities for organizations to communicate with customers and consumers, so should be coordinated to support and enhance the message. Consistency of communication is essential in order to build and develop brand and company image and reputation. n Sponsorship and publicity can be used to raise awareness of brand and organization. n Organizing events that are to attract maximum publicity need to be creative and innovative. n When organizing events, it is important to brief staff that will be acting as hosts on what needs to be achieved, so they can contribute effectively. Outdoor events may need contingency built in to cater for alternative arrangements in case the weather leads to cancellation. It is important to evaluate events to determine how well objectives were met and provide information for future organizers. n Managing press relationships is important and properly organized press conferences can enhance the organization’s ability to communicate via the media. n When selecting media consider factors such as: l Geographic location of target groups l Industry or product specific l Broad/specific coverage l Lifestyle focus
l l l
Credibility factor Potential for creativity Competitor’s use of media
Will it be ‘seen’? Will it reach the target audience? How specific is the coverage? l What is the budget? n You should be able to prepare a creative brief to designers that includes purpose and message, but also information about the organization and its brands and values n International events must cater for the needs of a multi-cultural audience and the venue needs to be conveniently located for long distance travellers n Evaluating Events – The main reasons for evaluating events: To determine whether objectives were met To evaluate cost effectiveness To learn from the experience To inform future decision-making l l
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Methods of evaluation n n n n n n
Survey at the close or post event Telephone Postal or face-to-face questionnaire Interview Report Observation
When organizing and hosting multicultural events, consider: n n n n n n Go
Traditions and rituals Festivals and public holidays Time zone differences Language differences Greetings and personal space Other special requirements to www.cimvirtualinstitute.com and www.marketingonline.co.uk for additional support and guidance
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THE INTEGRATED MARKETING MIX – SERVICE EXTENSION (PEOPLE, PHYSICAL EVIDENCE AND PROCESS)
Unit 7
Syllabus Reference: 2.1–2.3, 2.9, 3.6 n Understand how the service model can be adapted to provide insight into the detailed structure of service. n Appreciate the difficulty of measuring service quality. n Understand the map of the people mix at the organizational and individual levels. n Comprehend the role of physical evidence in signalling service quality. n Appreciate the nature of process in service delivery and how this must be tailored for different segments.
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The extended mix is used for marketing services – people, process and physical evidence. In many cases the person is the service which has significant implications for advertising and promotion – it is their knowledge, skills, qualifications and experience that enable them to produce the service. The physical evidence includes the environment in which the service is delivered and paperwork that accompanies the service. A structure for analyzing the people element of the marketing mix is given in Figure 7.1 overleaf
Structure for Physical Evidence
Figure 7.1 Structure for Process
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Hints and Tips n As with other sections, use the models to evaluate your experience of services. Consider what, if the experience was not as good as it should be, you might do as a Marketing Manager to make the experience better. Given the wide range of marketing contexts, simple models need to be adapted and interpreted to provide the appropriate insight. n Marketing models do not work like spreadsheets, just needing numbers to plug in. Marketing cannot be reduced to a simple equation; skill in interpretation is required and this needs practice. n In the CIM examination, case studies are often set in a service marketing context. The ability to develop a relevant service extended marketing mix is a key skill for professional life and for passing the CIM exams. Go to www.cimvirtualinstitute.com and www.marketingonline.co.uk for additional support and guidance.
THE MANAGEMENT OF MARKETING INFORMATION
Unit 8
Syllabus Reference: 1.1–1.7, 4.2, 4.6 n Appreciate the areas from which data needs to be collected. n Appreciate the need to check the validity of data for specific applications. n Understand the difference between data and information. n Appreciate the different types of data such as quantitative and qualitative. n Understand the more important approaches to market research. n Appreciate the role of market intelligence in formulating marketing plans. n Understand internal data and how it can be integrated to provide valuable information. n Understand how to use database systems to manage raw data. n Understand how systems are used to convert raw data into useful information. n Understand the role information plays in the business decisions an organization makes.
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KEY DEFINITIONS Quantitative data: Information that is conveyed in numbers, e.g. how many people buy a product and how much they use. Qualitative data: Involves more difficult but key questions such as ‘why?’ and ‘how do people view the brand?’
Marketing Information System (Dibb Simkin and Ferrell 2000)
Market Information System (MkIS) Information underpins successful marketing and can be of strategic importance, as well as contributing to tactical and operational decision making. Kotler defines an MkIS as ‘. . . consisting of people, equipment and procedures to gather, sort, analyze, evaluate and distribute information to marketing decision makers’. MARKETING IN PRACTICE
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A typical MkIS This comprises: n The Marketing Research System – System used for gathering information about specific issues that are of interest to a marketer, such as testing products and evaluating the success of communications. It is an important element of the MkIS and is concerned with the provision of information about markets and customers and how they may or do react to different marketing strategies. n Marketing Intelligence System – For example, published data, including government statistics, research reports, the national and trade press. This gathers and processes critical business information, transforming it into intelligence to support marketing decisions. Marketing intelligence is concerned with information available from the marketing environment and may be less focused on immediate decision making. n Decision Support System – The tools needed to make sense of data, statistical packages, the intranet and other tools that help marketers make decisions. n Internal Records are sales records, account records and other information that is available in the company.
n A MkIS can contain many different sources and types of information and, for example, it has a role in support of information gathering, evaluation, processing, dissemination, analysis, and control. n A good MkIS should encourage people throughout the organization to focus externally and provide quick, efficient and cost-effective information that is easily accessible. n It can serve a number of purposes – it can help sales and service personnel in the field who want pricing information; marketers and planners who want to know about market and product trends, so as to be able to develop marketing plans and adjust the marketing mix and directors and senior managers who are interested in market developments that affect investment and other strategic decisions.
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n Information needs to be collected on the environment, the marketplace and an organization’s own performance. Different types of data require different methods of collection (e.g. focus groups for some types of qualitative data).
Potential barriers to collecting information internationally include: Language Time zone differences Cost of communication Cost of research Identification of the right source of information – overseas equivalent, etc. Cultural communication differences Different management and leadership styles Having decided what the information will be used for and just what data will be required, it is then appropriate to devise ongoing systems or special research projects to gather the data. Data often needs sorting and analyzing to yield information. Often some mathematical process may be required. n To look at how sales are progressing a business analyst will want to compare like with like, removing the effects of seasonality and price changes. n n n n n n n n
n Marketers need to be able to analyze and interpret data and information to make informed decisions. MARKETING IN PRACTICE
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n Marketing Information Systems should enable the right people to access the right information at the right time. n Sources of secondary data including government statistics and records, marketing and market research reports, business directories, main newspapers online and the Internet. n Use the Internet and other information sources to find out information about competitors and their activities. n Presenting information in the right format enhances interpretation – use of tables, graphs and charts. n Markets are segmented to aid accurate targeting and can be segmented using many different criteria, including age, geographical location and frequency of product use.
n Quantitative data Tends to be on large numbers of people. Findings are expressed numerically. Concerned with ‘how many’, ‘how often’ and ‘what’ rather than ‘why’? Quantitative research problem: How many consumers buy the company’s shampoo? n Qualitative data Fewer people, and deals with data difficult to quantify – concerned with ‘why’ rather than ‘how many’, or ‘how often’? Concerned with attitudes and motivations. Qualitative research problem: What shape of bottle do consumers find appropriate for the brand values we are trying to communicate?
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THE MANAGEMENT OF MARKETING INFORMATION
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Databases n Organizations create customer databases to store data on customer profiles, purchase decisions, preferences, etc. Sophisticated database technology means that marketers can identify specific groups of customers and use this information to target more accurately and identify promotional activities. The Data Protection Act 1998 has tightened up on the way organizations can store and use personal data, so marketers need to be aware of the legal implications of using personal data
Database uses include: Identifying the best prospects Matching offers to customers Strengthening customer loyalty Reactivating customer purchasing n Customer Relationship Management is an area of marketing that has been influenced considerably by the availability of IT solutions, particularly large interactive databases to enable companies to gather and maintain large amounts of data about individual customers and enable more individualized marketing. Customer databases and database marketing are the key to effective CRM
Hints and Tips n As always relate the theory to your own marketing experience. Do not go into deciding what research you will do until you have considered what the information is required for. Without a sense of direction it is easy to waste effort on researching factors that will have little impact on the organization. It is also easy to miss key aspects. Good research starts by knowing what are the right questions. Typical questions for the CIM exams are: What information is required? How might the information be obtained? How can the information be used to develop marketing plans? n The question will be presented in the context of a specific case study and for good marks the answer should not be a list but should discuss the issues with context specific development. Such questions have appeared in the 2002 and 2003 CIM papers. Go to www.cimvirtualinstitute.com and www.marketingonline.co.uk for additional support and guidance.
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SKILLS FOR THE MARKETER
Unit 9
Syllabus Reference: 1.2, 1.3, 1.5, 2.2, 2.3, 2.7, 2.9, 3.1, 3.4, 5.2 n Select an appropriate way to communicate numerical information. n Formulate copy for written communications and understand housekeeping conventions for business processes. n Write a press release copy that is appropriate for journalists and understand how to support the copy with images, etc. n Appraise the value of an exhibition within a communications plan and appreciate the key issues in planning and running an exhibition stand. n Appreciate from a management perspective the key issues of database management. n Understand the basis of person-to-person communication, the building block of networks, the heart of relationship marketing. n Prepare presentations that appear professional and achieve their objectives. n Understand some of the key basic rules of project management. n Appreciate the way to formulate an effective brief and select a company for contract work.
Design Elements of good design: l
Appropriate and suitable
l
Consistent
l
Considers balance or tension
l
Creates unity
l
Creates continuity
l
Makes good use of white space
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Drawing up a Brief Often, as part of a project, you will involve outside contractors such as an advertising agency. A framework for a simple brief: n Current situation: a focused overview of the current marketing situation and context, so the agency can see how their input will ‘plug in’ to the overall integrated marketing mix. n Some cover of the competition issues should be included. n Promotional objectives: what are the objectives (SMART) for the activity? n Definition of the target markets, audiences and other key stakeholders. n Budget issues. n Time scales: schedule of deadlines for the project such as day for submission for the brief response, etc. n Deliverables: What will need to be provided on completion of the brief? Remember good housekeeping; tie up loose ends such as who owns the copyright for artwork, etc. n Contacts: Who should be contacted to answer questions? This can be more than one person for complicated assignments, with several diverse skills involved. n Framework for de-briefs and reviews after completion: Remember, even if you do not select the organization this time, you may want to work with them some time in the future.
Selecting an Agency On receipt of the brief submission, and with other background, the desired contractor can be selected. Key issues include: n Does the company fully understand the needs of the brief? n Is the company imaginative and creative and able to make an original contribution? n Are the people professional and business like? The best creative work is of no value if it is delivered weeks after the deadline. n Is the team balanced and able to cover all aspects of the brief? n Is what you see what you get? Sometimes the experts make the pitch and then leave the actual work to trainees. Make certain you get the level of skills you are paying for. n If relevant, can the organization support the project on an international basis? n Is the company fully competent in new areas such as e-commerce?
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n Has the organization got a sound attitude to costs? The best artwork is of no value if the project comes in way over the planned budget. n How important will the work be to them? If the company is too small they may not have the capabilities. A very large company will not provide real resources to a modest bit of business and you might be left with some creative crumbs rather than the ‘A’ team. n Possibly the most important one of all, can you work with them over the time period of the project? These people will become part of the extended part-time team and need to fit into the team or conflict could possibly arise.
Hints and Tips n In particular, this unit requires you to move from reading to developing skills. You do this, in part by practising yourself, but also by observing how others work; learn from best practice. n A significant number of the CIM exam papers pose questions for you, to either demonstrate that you understand these skills issues (e.g. in December 2003 ‘What are your key contacts in your new role, and how can you build effective working relationships with them?’), or to use them (e.g. ‘Write a letter to the Advertising and Promotions Manager of a local newspaper company suggesting ways you can work together and run joint promotions.’ June 2003). Go to www.cimvirtualinstitute.com and www.marketingonline.co.uk for additional support and guidance.
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BRINGING IT ALL TOGETHER: THE MARKETING PLAN
Unit 10
Syllabus Reference: 2.6, 3.2–3.4, 4.1, 4.2, 4.6–4.8, 5.3, 5.5, 5.6 n Appreciate that plans are developed from basic outlines with continual refinement. Further research provides the required information to fill in the gaps and working assumptions. n Understand that organizations do not have just one grand plan, but a whole family of interlocking plans, which increase in detail the closer they get to the implementation of all the various objectives and development of the various operations. n Appreciate the difference between missions, aims and objectives and the role they play in shaping marketing plans. n Understand the process of evaluating the marketing environment and situation analysis: where is the organization? n Understand that segmentation variables and strategies need to be continually reappraised. n Appreciate the need for formulating strategic alternatives and the selection of appropriate options.
n Appreciate that, after formulating the overall SMART objectives, it is necessary to formulate more detailed operational objectives, e.g. for all the individual elements of the marketing mix. n Understand that, to formulate outline plans, working assumptions need to be made. These highlight to the marketer the information gaps that need to be researched. n Appreciate the need for control and feedback systems for the management of marketing plans. n Understand the need for some contingency reserve and strategies to be built into plans that will have to operate in an uncertain trading environment.
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BRINGING IT ALL TOGETHER: THE MARKETING PLAN
Stages in the Marketing Plan
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The Planning Process
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Ansoff Matrix
Contd.
Nine Cell Matrix
With the use of the Ansoff matrix, there will almost always be more opportunities than the organization can pursue. So a selection process is required.
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The figure above shows the adapted version of the GE nine-cell matrix. Having profiled the sectors, each product group to sector match is a potential business. The GE approach is flexible. It is essential to have an understanding of what is attractive to the organization and have a framework to rate it. If market attraction is measured as market growth and competitive advantage as market share, the GE matrix gives us the same type of results as the Boston matrix. The Boston version tends to work best with FMCG branded products and not so well with B2B products, where competitive advantage may come from such elements of the mix as field service and technological superiority.
Porter Within a segment, an organization may pursue a number of potential strategies. Porter suggested three important alternatives: 1. Cost leadership strategies (everyday low prices – sustained by having the lowest cost base in the sector) 2. Differentiation strategies (a distinctive differentiated offering) 3. Focus strategies (niche-type marketing with a specialist targeted offering)
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