PRINCIPLES OF MARKETING
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SINGAPORE INSTUTITE OF
MANAGEMENT
PRINCIPLES OF MARKETING
STUDY GUIDE
BUS0119 Copyright by SIM GE, 2021 Principles of Marketing Version 1.0, Restricted
STUDY GUIDE
PRINCIPLES OF MARKETING
Study Guide Developers: Perlyn Sim
Edwin Ng
Production: SIM Global Education
All rights reserved.
No parts of this publication may be reproduced in any form or by any means without the prior written permission of SIM Global Education
BUS0119 Copyright by SIM GE, 2021 Principles of Marketing Version 1.0, Restricted
Table of Contents
Course Outline Page Number
Content and Module Aims 6
Learning Outcomes 7
Module and Lesson Plan 8
Teaching and Learning Methods 11
Indicative Readings 11
Assessment Components 13
Session 1 Marketing Fundamentals
1.1 Marketing Process 16
1.1.1 The Marketing Environment
1.1.2 What is a need, want and a market
1.1.3 Determining marketing strategy
1.1.4 Designing a marketing plan
1.1.5 Building long-term relationships
1.2 Business Orientations 20
1.3 Top Marketing Trends 21
Self-Practice Questions 22
Reflective Exercises 24
Session 2 Scanning the Marketing Environment
2.1 Importance of Marketing Environment 25
2.2 Political/Regulatory Environment 25
2.3 Economic Environment 26
2.4 Socio-cultural/Demographic Environment 27
2.5 Technological Environment 28
2.6 Competitive Environment 29
2.7 Collecting Information Through Online Databases 30
Self-Practice Questions 31
Reflective Exercises 34
Session 3 Understanding of Consumer Behaviour
3.1 Importance of Understanding Consumer Behaviour 35
3.2 Consumer Decision Making Process 36
3.3 The Role of Marketing in Consumerism 38
3.4 Influences on Consumer Behaviour 39
3.4.1 Cultural Influences
3.4.2 Social Influences
3.4.3 Personal Influences
3.4.4 Psychological Influences
Self-Practice Questions 46
Reflective Exercises 49
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Table of Contents
Session 4 Market Segmentation, Targeting and Positioning Page Number
4.1 Market Segmentation 50 4.1.1 Criteria for Market Segmentation
4.1.2 Bases/Variables for Segmentation
4.2 Market Targeting 53 4.2.1 Criteria for Market Targeting
4.2.2 Market Targeting Strategies
4.3 Market Positioning 55 4.3.1 Value Proposition and Differentiation
4.3.2 Perceptual Mapping
4.3.3 Positioning Statement
Self-Practice Questions 58
Reflective Exercises 60
Session 5 Product Strategy
5.1 Goods as Product 61 5.1.1 Kotler 5 Levels of Product
5.1.2 Consumer Product Classification
5.1.3 Degree of Innovation on Product Strategy
5.2 Services 64 5.2.1 Services Characteristics
5.2.2 3 Aspects of Services Marketing
5.2.3 Service Profit Chain
5.3 Branding 66 5.3.1 Brand Positioning
5.3.2 Selecting a Good Brand Name
5.3.3 Brand Sponsorship
5.3.4 Brand Development Strategies
Self-Practice Questions 71
Reflective Exercises 73
Session 6 New Product Development
6.1 Product Life Cycle (PLC) 74 6.1.1 PLC and Marketing Strategies
6.1.2 Buyers in the PLC
6.1.3 Alternative PLC curves.
6.1.4 PLC Extensions
6.2 New Product Development Process (NPD) 77
6.3 Packaging, Labelling and Reasons Why Products Fail 80
Self-Practice Questions 82
Reflective Exercises 84
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Table of Contents
Session 7 Pricing Considerations and Strategies
7.1 Pricing Considerations 85 7.2 The Pricing Process 88
7.2.1 Identify Pricing Objectives
7.2.2 Demand and Supply Factors
7.3 New Product Pricing 90
7.4 Demand-Based Pricing Techniques 90
7.5 Cost-Based Pricing Techniques 91
7.6 Profit-Based Pricing Techniques 92
7.7 Competition-Based Pricing Techniques 92
7.8 Pricing Adjustment Pricing 93
Self-Practice Questions 95
Reflective Exercises 97
Session 8 Placing Strategies
8.1 Channel of Distribution 98 8.1.1 Functions of Intermediaries
8.1.2 Marketing Intermediaries
8.1.3 Channel Structures
8.1.4 Channel Conflicts
8.1.5 Conventional VS V Vertical Marketing System
8.1.6 Vertical Marketing Systems
8.1.7 Steps In Channel Design
8.2 Physical Distribution 103
8.3 Retailing 103
8.4 The Wheel of Retailing 105
Self-Practice Questions 107
Reflective Exercises 109
Session 9 Advertising and Public Relations
9.1 Marketing Communication Process 110
9.2 Steps in Developing Advertising 112 Communication
9.3 Public Relations 115
9.4 Importance of Digital Media in the 118 New Marketing World
Self-Practice Questions 122
Reflective Exercises 124
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Table of Contents
Session 10 Sales Promotion, Personal Selling
& Direct Marketing
10.1 Importance of Sales Promotion 125
10.2 Sales Promotion Objectives & 126 Tools
10.3 Personal Selling Process 129
10.4 Importance of Direct Marketing 131
Self-Practice Questions 134
Reflective Exercises 137
Session 11 Integrated Marketing Communications
11.1 Why the Need for IMC 138 11.2 Nature of IMC Tools 139
11.2.1 Strengths & Weaknesses of Advertising
11.2.2. Strengths & Weaknesses of Public
Relations
11.2.3. Strengths & Weaknesses of Sales
Promotion
11.2.4 Strengths & Weaknesses of Personal
Selling
11.2.5 Strengths & Weaknesses of Direct
Marketing
11.3 Factors that Influence IMC Strategies 143
Self-Practice Questions 147
Reflective Exercises 149
Session 12 Market Research
12.1 Five-Step Marketing Research Approach 150
12.2 Define the Problem 151
12.3 Develop the Research Plan 152
12.4 Collecting Relevant Information 153 12.5 Collecting Primary Data 156
12.6 Develop Findings 159
12.7 Information Technology 159
Self-Practice Questions 161
Reflective Exercises 163
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Course Outline
PRINCIPLES OF MARKETING
Content
This module provides an overview of the concepts and techniques of the marketing process in
today ‗s dynamic environment and its interrelationship with other business functions. It also studies the execution of the marketing function and the use of the marketing mix to help
businesses successfully reach their customers and sustain competitive advantage.
Module Aims
The aims of this module are to:
1. Provide participants with a fundamental understanding of the marketing management
practice in competitive situations and marketing environments.
2. Assist participants to appreciate and make a case for the role of marketing in strategic
planning and identify the functions of marketing management.
3. Enable participants to formulate alternative decisions using elements of the marketing
mix and determine the criteria by which choices can be made.
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Learning Outcomes
On completion of this module, a participant will be able to:
1. Show a detailed knowledge and understanding of:
i) Basic marketing concepts and describe its key elements. ii) Environmental forces and their impact on a company‘s marketing efforts.
iii) Consumer buyer behaviour.
iv) Market segmentation, targeting and positioning.
v) Product/service strategies.
vi) Price considerations and strategies.
vii) Place and supply chain strategies.
viii) Integrated marketing communication mixes and campaigns.
ix) Processes involved in conducting market research and distinguishing primary and secondary data.
2. Demonstrate module specific skills with respect to:
i) Studying marketing strategies to position and differentiate products/services and brands.
ii) Applying, in specific industries, the elements of the marketing mix to products and services.
iii) Learning to communicate effectively with customers through integrated marketing communications.
3. Show cognitive skills pertaining to:
i) Analyzing business and marketing information in order to draw conclusions.
ii) Analyzing customers and competition relative to the product life cycle concept.
iii) Understanding the usefulness of the strategies of differentiation in marketing.
iv) Understanding new product development and supporting marketing strategies that are aligned with an organization ‗s mission and objectives.
4. Demonstrate transferable skills in:
i) Analytical reasoning. ii) Self-management.
iii) ―First principles‖ of foundation marketing in a given context.
iv) Working with others.
Delivery of Module and Lesson Plan
Session
Title
Learning Outcomes Prescribed
Readings
At the completion of this topic, participants &/or
will be able to: Activities
Session Marketing 1. Define marketing and outline the steps in Module 1 Fundamentals the marketing process. Book
2. Explain the importance of understanding Topic 1 customers and the marketplace and
identify the five core marketplace
concepts.
3. Identify the key elements of a customer-
driven marketing strategy and describe
how today‘s customer relationship era
differs from prior eras.
4. Discuss customer relationship
management and strategies for building
lasting customer relationships.
Session Scanning the 1. Describe the environmental forces that Module 2 Marketing affect the company‘s ability to serve its Book
Environment customers. Topic 2 2. Explain how changes in the
demographic and economic
environments affect marketing
decisions.
3. Identify the major trends in the firm ‗s
natural and technological
environments.
4. Explain the key changes in the
political and cultural environments.
5. Discuss how companies can react to
the marketing environment.
Session Understanding 1. Identify and discuss the stages in the Module 3 Consumer buyer decision process. Book
Behaviour – Part I: 2. Describe and apply the three types of Topic 3 Consumer Decision decision-making process for
Process and purchase decisions.
Consumerism 3. Describe and understand the influence
of situational and cultural factors on
consumer buying behaviour.
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Delivery of Module and Lesson Plan
Session
Title
Learning Outcomes Prescribed
Readings
At the completion of this topic, participants &/or
will be able to: Activities
Understanding 1. Describe and understand the
Consumer influences of sociocultural factors
Behaviour – Part II: like reference groups, family on
Cultural, Social, consumer buying behaviour.
Personal and 2. Discuss the influences of
Psychological psychological factors like motivation,
Influence on Buyer perception, lifestyles, and personality
Behaviour traits on consumer buyer behaviour
Session Market 1. Define the major steps in designing a Module 4 Segmentation, customer-driven marketing strategy: Book
Targeting and market segmentation, market Topic 4 Positioning targeting, and market positioning.
2. List and discuss the major bases for
segmenting consumer and business
markets.
3. Explain how companies identify
attractive market segments and choose
a target marketing strategy.
4. Discuss how companies position their
products for maximum competitive
advantage in the marketplace.
Session Product 1. Describe the stages of the product-life- Module 5 Strategies-Part I: cycle. Book
Product, Services, 2. Describe how marketing strategies Topic 5 Branding & change during the product ‗s life cycle.
Product Life Cycle 3. Discuss branding strategy – the
decisions companies make in building
and managing their brands.
4. Describe the role of packaging,
labelling and warranties in marketing
a product.
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Delivery of Module and Lesson Plan
Session
Title
Learning Outcomes Prescribed
Readings
1. Upon completion of this topic, &/or
participants will be able to:
Activities
Session Product 2. Define product and the major Module 6 Strategies -Part classifications of products and Book
II: New Product services. Topic 6 Development 3. Describe the factors that contribute to
Process the success and failure of new products.
4. Explain each step in the new product
development process.
Session Price 1. Discuss the importance of understanding Module 7 Considerations and customer-value perceptions and company Book
Strategies costs when setting prices. Topic 7 2. Identify and describing important internal
and external factors affecting a firm ‗s
pricing decisions.
3. Describe the major strategies for pricing
products.
4. Discuss how companies adjust their
prices to take into account different types
of customers and situations.
Session Placing Strategies 1. Explain why companies use marketing Module 8 (Distribution) channels and discuss the functions these Book
channels perform. Topic 8 2. Identify the major channel alternatives
open to a company.
3. Discuss the nature and importance of
marketing logistics and integrated supply
chain management.
4. Identify and classify store and non-store
retailers.
5. Explain changes in retailing with the
wheel of retailing.
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Delivery of Module and Lesson Plan
Session
Title
Learning Outcomes
1. At the completion of this topic, participants will be able to:
Prescribed
Readings
&/or
Activities
Session 9
Promotion Mix Strategies: IMC and
Advertising
Public Relations;
Online Marketing
2. Describe and discuss the major decisions involved in developing an advertising program.
3. Explain how companies use public
relations to communicate with their
publics
4. Identify the 4 major social networks and
how brand managers integrate them into
marketing actions.
5. Discuss how companies go about
conducting online marketing to
profitably deliver more value to
customers.
Module Book
Topic 9
Session 10
Promotion Mix Strategies: Sales Promotion,
Personal Selling
and Direct
Marketing
1. Explain how sales promotion campaigns are developed and implemented.
2. Discuss the strengths and weakness of
consumer-oriented and trade-oriented
sales promotion.
3. Discuss the seven steps of the personal
selling process.
4. Describe the use of Direct Marketing in
customizing messages to customers.
Module Book
Topic 10
Session 11
Promotion Mix
Strategies: Integrated
Marketing
Communications
1. Discuss the process and advantages of integrated marketing communications.
2. Define the five promotion tools and
discuss the factors that must be
considered in shaping the overall
promotion mix.
3. Define interactive marketing and discuss its benefits to customers and companies
Module Book
Topic 11
Session 12
Marketing Research
1. Explain the importance of information to the company and its understanding of the
marketplace.
2. Define the marketing information system
and discuss its parts.
3. Outline the steps in the marketing
research process.
4. Explain how companies analyse and distribute marketing information.
Module Book
Topic 12
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Indicative Readings
Textbook Principles of Marketing Module Book, SIM Global Education, 2021 required
Supplementary Kerin, R A., Hartley, S.W. & Rudelius, W. (2021), Marketing, 15 th
Edition,
reading NY: McGraw Hill, ISBN:9781260260366
Online Sources Use of online databases like EBSCO and references to: Journal of Marketing, Journal of Marketing Research, Journal of
Consumer Research, International Journal of Research in Marketing and
Harvard Business Review.
Assessment/coursework
To satisfy module requirements, students must attain a minimal overall mark of 50 percent in the module. Students are also required to comply with other examination and continuous assessment policies stipulated in the programme handbook.
Specific for this module are the following requirements:
Weighting between components A and B - A: 40% B: 60%
Element Description % of Assessment
Component A (Controlled Conditions)
Test (120 minutes) 40%
Component B (CA: Continuous Assessment)
CAs
60%
Total (Component A + B) 100%
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Delivery comprises:
Lectures to highlight concepts and principles with the use of practical examples and illustrations to provide practical insights into the topics taught.
Tutorial style interactions where participants apply various principles in business case studies and participate actively in class discussions and presentations.
Participants are expected to learn independently through additional self-paced reading and directed study beyond the taught classes.
Teaching and Learning Methods
SESSION 1
MARKETING FUNDAMENTALS
At the end of this session, students should be able to:
Define marketing and outline the steps in the marketing process.
Identify the key elements of a customer-driven marketing strategy and describe how today ‗s customer relationship era differs from prior eras.
Discuss customer relationship management and strategies for building lasting customer relationships.
Explain the importance of understanding customers and the marketplace and identify the five core marketplace concepts.
1. MARKETING FUNDAMENTALS
In this chapter, the meaning and purpose of marketing will be established. An overview of all concepts in the other chapters of this Study Guide will be covered.
There are many definitions of marketing. Dr Philip Kotler, one of the most respected authorities of the Marketing discipline defines marketing in the following:
―Marketing is the science and art of exploring, creating, and delivering value to
satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs
and desires. It defines, measures and quantifies the size of the identified market and
the profit potential. It pinpoints which segments the company is capable of serving
best and it designs and promotes the appropriate products and services.”
Yet another authority, the American Marketing Association (AMA) Board of Directors,
define Marketing as:
―… the activity, set of institutions, and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”
The definitions of marketing may be many, but the common themes are:
1. Activities and/or processes
2. A focus on customer/consumer needs
3. Exchange and Relationship
4. Creating value
5. Communicating value
6. Delivering value
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The first sub-topic to be covered in this chapter is the fundamental concepts of Marketing. A discussion on the marketing process will include what it means to be customer/consumer
needs focused. In discussing the marketing process, the concepts of the marketing environment, consumer need, want and demand are introduced. This will then be followed by
an overview of how to formulate a marketing strategy and on how to create perceived value
in the context of marketing.
The second sub-topic of this chapter is about the five business orientations (or marketing management philosophies) - different ways in which businesses approach the work of marketing.
Towards the end of this chapter, ethical issues and latest developments in marketing are presented.
1.1 MARKETING PROCESS
Figure 1.1: The Marketing Process
Figure 1.1 describes the marketing process. The process begins with a focus on customer before creating the market offering and ends in establishing long-term customer relationship.
The four steps in the marketing process are:
1. Understand the environment and the consumers.
2. Develop a marketing strategy.
3. Integrate the activities needed in a marketing plan.
4. Build a long-term relationship.
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In the first step, the marketer takes deliberate action to scan the environment. The purpose is
to discover opportunities and/or mitigate threats that will affect the business in the
foreseeable future. Effort is also exerted to learn about consumer needs in the designated
marketplace and to understand the consumer profile to be able to transform the needs of
these consumers to a ―want‖.
In the second step, the long-term marketing plan is developed. This is called the ―Marketing
Strategy.‖
In the third step, the marketing strategy is translated in marketing activities. The set of
marketing activities needs be managed and executed in a systematic way. These activities
will be group under four categories known as the 4Ps of marketing, Product, Price, Place and
Promotions. The 4Ps are integrated in a manner that is aligned to the targeted consumers.
In the last step, marketing aims to establish a long-term relationship between the
brand/company and the customer by providing good service and ensuring customer
satisfaction. With customer satisfaction and continuing efforts to create customer loyalty,
brand/company relationships can be further developed. Hence, over-time, these relationships
will result in long term profitability for the business.
1.1.1 THE MARKETING ENVIRONMENT
Marketing Environment comprise of forces which affect the company's ability to establish a
relationship and serve its customers. The forces are uncontrollable in nature and the changes in marketing environment maybe positive or negative to the business. With a proactive
stance, marketers can be first-movers to take advantage of opportunities created by these forces and be able to mitigate its effects of any threats posed by the environment before it is
too late. Chapter 2 - Scanning the Marketing Environment discusses this in detail.
1.1.2 WHAT IS A NEED, WANT AND A MARKET?
Marketing is often referred to as a consumer driven business idea, where the key to success is about how well the marketer can best satisfy the needs of its consumers. Needs are states of
felt deprivation. However, consumers usually buy what is wanted and not what is needed.
Hence the role of marketers is to discover and identify the needs of the consumers and stimulate consumers to desire them such that they become ―Wants‖. Examples of basic needs
are water, food, air, and safety while social ones are need for love and to connect and belong. Another type of need is to satisfy our intellect by learning, creating our personal identity
through customisation and engaging in hobbies we enjoy.
Wants are things desired by the consumers to satisfy their needs. It is often shaped by psychological, situational, and socio-cultural factors. A marketer‘s role is to develop a
marketing offering by creating a product or service to satisfy a want from a known need. For example, a person needs transport, but wants a Mercedes and not just any car for his
transport. A person needs shelter but desires a condominium not just any apartment.
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For the business to succeed, there must be enough consumers wanting its market offerings.
This is referred to as Demand. More specifically, it is wants backed by purchasing power.
Whereas ―Market‖ refers to both actual and potential consumers of a market offering. Potential consumers are people with both the desire and the ability to buy a specific product.
The challenge of businesses is that consumers are sometimes unaware or unsure of their
needs. In such cases, the product will have to be first created and marketing has to
communicate the value proposition to them. For example, no one needed an iPad ten years
ago because many consumers have no idea what value it gives them. Consumers sometimes
are also not aware of the available market offerings that can satisfy their needs and/or want.
The role of marketers is to communicate value, help create awareness of the consumers‘
needs and to stimulate their wants. Finally, consumers are sometimes not able to differentiate
a need from a want. Marketers very often must guide consumers to discern and differentiate
the need from a want. For example, the consumer needs transportation, but would it not be
better to travel in comfort in a Mercedes than simply any car.
These concepts will be fully discussed in Chapter 3- Consumer Behaviour.
1.1.3 DETERMINING MARKETING STRATEGY
Marketing Strategy is the long-term marketing plan. To develop this strategy, much consideration is involved, the most fundamental steps would be to select right consumers for the marketing effort, and how to create value for these selected consumers.
To select the consumer to serve, marketers first divide the market into smaller groups called segments. Marketers would then select the group or groups to serve, these are called targets.
Targeting segment/s is essential as resources in a business is always finite, and the key to be
successful is to have these resources directed to the right customers. By focusing on specific groups, marketers would be able to serve them better than the competition by giving them a
unique value proposition than the competition. Value proposition is a set of benefits superior to that offered by the competition. Very often, it is this value proposition that differentiates
the business from the competition. It creates a unique position in the mind of the consumers. These concepts will be fully discussed in Chapter 4 – Segmenting, Targeting, and
Positioning.
1.1.4 DESIGNING A MARKETING PLAN
In the marketing plan the marketer will develop and manage the 4Ps of marketing, Product, Price, Place and Promotions. The marketing mix of the 4Ps is also referred to as the integrated marketing plan.
In the marketing plan, the activities relating to the market offering are broadly grouped under
―Product‖. These concepts will be more fully discussed in Chapter 5 and 6 – Product.
The marketer must be able to get paid in exchange of creating value for the customer. This
could be in form of money or otherwise, upfront charges or fees. The marketer determines what the customer is both able and willing to pay for. These activities are broadly grouped
under ―Pricing‖ in the marketing plan and will be fully discussed in Chapter 7 – Pricing.
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Next, the market offering must be presented to the customer at the right time and in the right
place to the customer. These activities are broadly group as ―Place‖ in the marketing plan.
These concepts will be more fully discussed in Chapter 8 – Place.
Finally, there is Promotion to ensure that the customer is informed, persuaded, and reminded of the product so that he knows the product exist and desires to buy it. The concepts for Promotion activities in the marketing plan will be fully discussed in Chapters 9 to 11 – Integrated Marketing Communications.
1.1.5 BUILDING LONG TERM RELATIONSHIP
Business that are successful is the result of not only one successful transaction by a customer, but by constant and regular purchases made by a customer over a lifetime. Hence, the
successful marketer needs to be effective in creating long-term relationships with customers. Relationships do not happen by chance, but through deliberate planning and nurturing.
Marketers must first have a plan to create value that result in customer satisfaction. Next marketers need to engage in activities that build loyalty. Only with loyal customers over time
will a profitable relationship develop.
Customer satisfaction refer to customer‘s perceived value – has the market offering
met/exceeded expectation. The perceived value is the difference between all benefits and all costs of a marketing offering relative to that of the competition. To achieve satisfaction,
setting the right expectation is key. If marketers set the expectations too low, customers will not buy the product. If marketers set expectations too high, buyers will be disappointed.
Communicating the right expectation and achieving it will effectively create value, and hence, satisfaction in the eyes of the consumer.
To develop loyalty, customer satisfaction must be consistently maintained. The quality of the
consumer experience can be enhanced when marketers actively engage them to build stronger relationships. This can be done through:
1. Loyalty and retention programs to build relationships include the following:
a. Marketing programs which reward customer for frequency of consumption like flying miles by airlines.
b. VIP programs like priority banking offered by banks for high-net-worth customers. These include membership clubs that offer exclusive privileges.
2. Use of Customer Analytics in CRM Apps to execute marketing communications that are customised to individuals making them more relevant and personalised.
By consistently delivering superior customer satisfaction and taking deliberate marketing
actions to build and manage relationships, the business will move from transactional exchanges to long-term relationships which benefits all parties. Hence an exchange, the act of
obtaining a desired object from someone by offering something in return, will over time be developed in a relationship, which is a state of being emotionally connected.
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1.2 BUSINESS ORIENTATIONS
There are five ways which business can orientate the way they manage their businesses in the marketplace. The reason for the different orientations is that different customers and products
are more effectively engaged or served by the different orientations. Having the right
orientation would result in the business being more able to serve their customer, and hence, more successful. The five ways of orientating the businesses are production, product, selling,
marketing, and societal marketing orientations.
For some products, consumers do not see much differentiation among the competition.
Products in this group is seen mostly as a commodity. As the result consumers would
purchase the product among the competition that is most cost effective. For such businesses, the recommended orientation is the ―Production Concept Orientation‖, where the business is
focused in having a best production possible. Having the latest technology, most effective production method, will result in the lowest cost. Having the lowest cost provides the
company with the ability to set the lowest price and as the result makes the business more competitive. E.g., the electricity businesses.
For some products, it is the uniqueness of the product that is the driving force that motivates
the consumers to buy. In this case it is essential that the business must always keep the product special. For such businesses, it is recommended that they adopt the product
orientation. By having the ―Product Concept Orientation‖ they will be able to maintain their
position in the market and provide that unique value proposition that will make their products non substitutable by the competition. E.g., the ostentatious good businesses.
There are also products that are not desired much by the consumers largely because it is seen as taboo, or an undesirable topic. Such business needs to maintain much of its focus in sales
and promotions. For such businesses, it is recommended that they have a ―Selling Concept Orientation‖. In this orientation, the business that have the best method of selling and
promotion are usually the most successful. E.g., insurance businesses.
For most products, it is the ability to address the customers wants best that results in sales
taking place. As such many businesses would focus on the needs of the customers, focusing to best satisfy the customer in the product that it offers in relation to the competition. Such
business adopts a customer centric business orientation also known as ―Marketing Concept
Orientation‖. The key to achieving marketing objectives consists of determining the needs and wants of customers and delivering these satisfactions more effectively than a firm ‗s
competitors. Under this customer focus concept, an integrated marketing effort and customer value are sound strategies to sales and profits. E.g., fast fashion businesses.
In the last orientation, the customers desire to be engaged with societal issues and prefers to
purchase from companies that contribute back to the society in some form. Companies, as a
result, attempt to differentiate from the competition by being socially responsible, in the hope that
they can attract customers to them. This form of orientation is called ―Societal Marketing
Concept Orientation‖ and can be seen in many forms of businesses. Social responsibility and
environmental movements have led forward-looking firms to preserve or contain any harm to the
environment and to be both fiscally responsible and humanitarian. Firms that observe high ethical
and social responsibilities may enhance their brand reputation. Most importantly, observing these
responsibilities does not necessarily incur higher costs.
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1.3 TOP MARKETING TRENDS
Covid19 has resulted in economic uncertainties that significantly impacted all businesses. In particular, the global supply chain has been affected and every country has suffered to some degree.
Growth in Social Media Marketing like Facebook, Twitter, etc. has resulted in businesses adopting distinctive style of marketing. Social Media has significant impact in how
businesses collect information and engage with consumers in contrast to traditional marketing.
The use of Artificial Intelligence has increased throughputs in marketing activities such as product development, merchandising, pricing to direct marketing campaigns. Specific
contributions are in the implementation of dynamic pricing and micro-marketing exemplified by push notifications to personal devices recommending products and services frequently
searched by individuals.
Rapid globalization has fuelled the growth of ecommerce. This in turn has made it possible for small businesses to easily transact with customer all around the world with little difficulty.
Sustainable marketing is gaining prominence as managing climate change is becoming an
unavoidable issue in most countries. This has resulted in significant changes in supply chains, productions, distribution, and packaging of products. New laws and regulations are now
being introduced in many countries around the world to address this.
Non-profit organisations are becoming more marketing orientated. These organisations are now more open to using 21
st century tools of marketing to acquire support from members in
society. E.g., the use of special event or use of advertising to solicit for funding.
Increasing awareness of and requirement for ethical and social responsibility in marketing is driven by consumers sophistication and governments calling for businesses to include non- financial performance indicators such as managing the corporation‘s carbon footprint, protection of workers‘ rights and wages, and restricting marketing to minors.
REFERENCES
Figure 1.1 The Marketing Process: Ng E., (2021), Singapore, Singapore Institute of Management Pte Ltd.
Kotler, P., Armstrong, G., Ang, S. H., Leong, S.-M., Tan, C. T., & Yau, O. H.-M. (2012).
Principles of marketing: An Asian perspective (3rd Ed.). Singapore, Singapore: Pearson Education Centre.
Kerin, R., & Hartley, S. (2019). Loose Leaf for Marketing (14th Ed.). McGraw-Hill Education.
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1. To serve both buyers and sellers, marketing seeks to and satisfy the needs and wants of prospective customers.
(A) change
(B) create
(C) discover
(D) manipulate
2. All markets ultimately are composed of .
(A) people
(B) brands
(C) products
(D) organizations
3. Ryan attempts to deliver customer satisfaction every day in his installation business, Audio Expressions. The key to achieving this goal is to match the customer-perceived performance of his product with .
(A) customer expectations
(B) customer values
(C) company projections
(D) customer relationship levels
4. The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction is called .
(A) database marketing
(B) societal marketing
(C) customer lifetime management
(D) customer relationship management
Self-Practice Exercise:
MCQ and True/False
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5. Henry Ford's philosophy was to perfect the Model-T so that its cost could be reduced further for increased consumer affordability. This reflects the .
(A) product concept (B) marketing concept
(C) production concept
(D) societal marketing concept
6. Production is one of the elements in the marketing mix.
True/False
7. The selling concept is also referred as consumer-driven concept.
True/False
8. If marketers set consumer expectations too low, they may satisfy those who buy but fail to attract enough buyers.
True/False
9. In the last step, the company reaps the rewards of its strong customer relationships by capturing value from customers.
True/False
10. The selling concept holds that consumers will not buy enough of the firm's products unless it undertakes a large-scale selling and promotion effort.
True/False
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.10 T
.9 T
.8 T
.7 F
.6 F
.5 C
.4 D
.3 A
.2 A
.1 C
Questions:
Answers to Self-Practice
1. What is the definition of marketing according to the American Marketing Association? How does this differ from your previous notion of marketing before reading this chapter?
2. Explain the difference between a market and a target segment. Provide a specific example of each.
3. Who benefits from marketing in Singapore, and how?
4. Marketing creates unnecessary consumption. Is this comment fair and justifiable? Why yes? Why not?
5. Explain how the Internet has transformed the way in which we do business today, and how it will transform the market in the future.
REFLECTIVE EXERCISES
SESSION 2
SCANNING THE MARKETING ENVIRONMENT
At the end of this session, students should be able to:
• Describe the importance of scanning the marketing environment to keep up with the latest trends affecting consumers and businesses.
• Understand the PEST model for analysing the marketing environment
• Appreciate the importance of competitive analysis.
• Appreciate how to use online databases for secondary research
2.1 IMPORTANCE OF ENVIRONMENTAL SCANNING
The marketing environment consists of external forces that impact the company‘s ability to
meet customers‗ needs and stay profitable. Thus, an organization must conduct ―marketing
environment analysis‖ or environmental scanning to identify prominent trends, recognize the
opportunities that the company can take advantage of and identify threats that may adversely affect the firm. It is only with detailed collection of information and careful analysis that the
company can develop appropriate strategies to best respond to these external market forces.
With the fast-changing environment, the firm must monitor five major environmental forces namely socio-cultural / demographic; economic; technological; political/regulatory and competitive environment.
To help remember each of these environment forces, the PEST model, which was created by Harvard professor Francis Aguilar in 1967, is a useful model to use. PEST is an acronym for political, economic, social, and technological.
The other model that is relevant is known as the Porter's Five Forces model that help explains
the different levels of competition in the various industries. The model was published in Michael E. Porter's book, "Competitive Strategy: Techniques for Analyzing Industries and
Competitors" in 1980.
.
2.2 POLITCAL / REGULATORY ENVIRONMENT
Marketing decisions are often affected by developments in the political and regulatory environment in the country the firm operates in. The environment is composed of laws, government agencies and pressure groups.
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In response to the Covid-19 pandemic in 2020, many governments were forced to enforce legislations that led to partial or total lockdowns that led to many businesses shutting down
with only essential services allowed to continue operations. Travel and tourism industry was among the sectors that was hit most hard as international travel comes to a complete halt as
government had no choice but to limit majority of international travel and closed their
borders to contain the virus. As restaurants, bars and cafes are forced to close down, many consumers turned to online shopping to get their groceries, food as well as clothing delivered
to their homes. Supermarkets who are equipped with online platforms experienced jump in sales while many businesses started offering their products and services on online retail stores
to find an alternative sales avenue.
Recognizing the impact of the pandemic on businesses, the government in many countries
have introduced various economic support packages to offer timely support to affected workers and to reduce unemployment. Thus government ‗s regulations can pose threats as
well as offer opportunities – monitoring of these changes in the political environment
Besides the latest legislations, marketers must also be familiar with the major laws governing their industry especially those that are implemented to protect consumer ‗s interests and prevent unfair practices.
Public or private consumer groups and self-regulatory organizations are also part of the
political/regulatory environment too. Examples include PETA (People for the Ethical Treatment of Animals) are influential in forcing companies to stop using animals for testing.
In Singapore, CASE (Consumer Association of Singapore) educates consumers and helps them to settle purchase disputes and lobbies the government for enforcement of consumer
rights and promotion of ethical practices among firms.
2.3 ECONOMIC ENVIRONMENT
Marketers must pay close attention to how the purchasing power of their consumers has been affected by changes in employment rates, income, and prices. The economic performance in
a country influences how much a typical consumer spends and what products and services they decide to purchase.
The coronavirus pandemic, which was first detected at the end of 2019, has infected people in
188 countries. Its spread has hurt many businesses around the world and led to many people losing their employment or seen their incomes greatly reduced due to the coronavirus crisis.
Unemployment rates have increased across most economies because of the global economic
crisis. Many economists warned that it may take years before employment rates can return to the level before the pandemic.
By studying income statistics and trends, marketers can then be able to estimate how their
sales will be affected by the changing purchasing patterns of their customer segments. In an economic recession, luxury goods like branded shoes, bags and clothes take a hit as
consumers trade down for more affordable items and prioritize necessities and save more to hedge against the uncertainty.
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As consumers grapple with uncertainty during bad economic times, they will usually reduce
spending on all non-essential products and services. Globally, consumers are shifting their spending to necessities like groceries and household supplies. Due to changes in their
purchasing patterns, consumers are spending more on at-home entertainment and indoor gym accessories and equipment.
As restrictions starts to relax in some countries, some categories such electronics, wellness,
and pet-care services appear to show a recovery in sales volume, which could be a positive sign for marketers. Thus, it is important to track the income and purchasing patterns to be
able to analyse what are the products consumers are prepared to spend on and anticipating
how spending on other categories will decline.
2.4 SOCIO-CULTURAL/DEMOGRAPHIC ENVIRONMENT
To stay competitive, marketers need to be sensitive to the changes in the demographic
environment and the shifts in values among the various groups in the population. These trends are classified under socio-cultural environment as it relates to the relationship of
marketing with society and its culture.
When operating in any country, marketers usually pay close attention to the following demographic trends like:
Size and growth rate of population
Population age structure
Ethnic mix
Gender mix
Income patterns of various age groups
The world's population growth has slowed markedly. At the same time, the global working- age has also declined with serious implications for many businesses. Even though population trends vary widely among regions, there are many common trends across countries namely:
The global population is aging rapidly as data shows that those aged above 55
years and above (often known as baby boomers) are steadily increasing in numbers. Their active participation in the workforce during the first and second industrial revolution has made this demographic group the segment with the greatest wealth. This age group treasure security and stability – thus many companies targeting this segment include healthcare services, insurance, financial planning as well as cruises as these consumers move into retirement.
The baby-boomer generation is followed by Generation X aged 40 to 55 years of age. This segment value self-reliance and is generally thrifty and pragmatic. They are more educated than their parents and seeks honest and useful products. Thus, they tend to conduct extensive research before purchasing. They tend to choose branded products that are trustworthy and proven in terms of quality.
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The generation labelled Millennial or Generation Y usually falls in the age group of 18 – 39 years old. This generation are born into the era of the internet and thus are known to be multi-device savvy. It is common to see Millennials switching between several types of tech devices daily – thus this demographic segment is the most avid online shoppers. Millennials seek brands that engage them on social media and based their decisions on getting the best value for their purchases. Thus, this segment is likely to switch brands and be less brand loyal.
The youngest age segment is called Generation Z, consumers between the ages of 2 to 17 years old. Marketers recognize that children ‗s desires highly influence their parents ‗purchase decisions. This segment is known to spend majority of their energy and attention on their mobile phones, chatting with their friends on social media, following social influencers, posting stories on Instagram, and catching the latest trends on YouTube.
According to Euromonitor International, global consumer trends in 2020 includes prioritizing
both mental and physical health, learning to get everything done from home as more stayed
indoors, supporting environmental causes, enjoying the convenience of using artificial intelligence. Companies, whether big or small, are narrowing their product range and focusing
on products and services that matters to consumers in response to these cultural trends.
2.5 TECHNOLOGICAL ENVIRONMENT
After several months of partial or total lockdowns and the need for social distancing to prevent
the spread of COVID–19, consumers have learned to shop differently — many have reduced their visits to brick and mortar stores as they realized the benefits and convenience that comes
with online shopping. E-commerce around the world, across sectors, has surged in 2020 as consumers sought hand sanitizer and groceries to skincare products and cleaning supplies online.
Thus, it is expected that this ecommerce growth is here to stay for the long term.
Covid-19 has increased the rate of adoption of digital technology especially video conferencing apps as employees were forced to work from home on a scale never seen before in many
countries. Microsoft Teams and Google Hangouts Meet both jumped in the rankings, with Zoom Cloud Meetings the most popularly used app.
There has also been a rise in the use of social messaging apps by brands to connect with consumers online. It is now possible for consumers to go online to see a doctor, order food and groceries using a mobile app and chat with companies virtually.
Thus, marketers must monitor the specific technological trends in terms of pace of change,
potential of introduction of innovative new features in their products, use of technology to analyze data to understand their consumers more deeply and providing faster solutions to
customers.
2.6 COMPETITIVE ENVIRONMENT
In a marketing environment, it is essential to carry out competitor analysis as it allows the company to evaluate its overall strategy against the strengths, weaknesses, opportunities and threats of its direct and indirect competitors.
Porter ‗s model identified five forces that determine the intensity of competition in an industry
and helps evaluate the attractiveness of entering a market. Marketers must be aware that there is
always a threat of entry as long as their market remains profitable. A competitive firm can often
decide to enter a market because the area is under-served, or the profit margins looks attractive.
Porter also alert companies to assess the power of their suppliers. If there are only a few sources
of supply but many buyers, the company may find it challenging to operate in this industry as
their suppliers can command a greater share of their profits. On the other hand, where there are
only a few buyers and many suppliers, the buyer holds more power and can bring down prices
leading to low profit margins. Another competitive threat comes from the availability of
substitutes for a company's existing product. For example, electric vehicles are predicted to
seriously threaten the car industry in the next decade. To validate this prediction, Porter‘s 5
forces can be used to evaluate the nature of competitive rivalry and allow firms to assess the
attractiveness of eV market.
The other factor that determines the nature of competition is the type of market structure that the business operates in. In a perfect-competition market, there are many sellers in the market
selling very similar products, the intensity of competition is likely to be very high. This is the
case especially for products that are considered homogeneous in the eyes of consumers (e.g., Bubble Tea). Fortunately, most products fall today compete in monopolistic competition, where
the many sellers in the market differentiate their products and services based on product features, pricing, distribution, and promotion methods. Given low barriers to entry, the threat of
new competition exists for both perfect competition and monopolistic competition market structure.
If the industry happens to fall into either monopoly or oligopoly structure, there are usually
barriers to entry that limit the entry of new competitors. This is especially the case for monopoly
as it usually operates alone in the market due to government legislation or it possess unique access to resources that makes it a natural monopoly. Thus, it need not worry about competition
at all.
The oligopoly market structure may not face many sellers but the few sellers that operates in this
market are usually big firms competing for a share of the market pie. It is not surprising to note that these oligopolists will choose not to compete on price but uses non-price competition as
they know that a price war among the sellers will only hurt their profit margin more.
It is thus critical for most firms to monitor the marketing actions of their direct competitors, each
business must learn to be on the alert that competition can come from anywhere, anytime. Ignoring emerging competition or potential substitutes that may serve similar needs are
necessary to ensure the survival of the business.
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2.7 COLLECTING INFORMATION USING ONLINE DATABASES
To effectively scan the marketing environment, marketers need timely, accurate and relevant information on consumers, competition, government regulations as well as the latest
technological trends to help them develop appropriate strategies to survive and succeed in its business.
Many large companies have their own market research departments to systematically design, collect and analyse information to distribute to its employees for wise decision-making. In
smaller companies, marketing research using secondary information from research bodies like Euromonitor and AC Nielsen are used to gather preliminary information before entering a new
geographical or market segment. These companies also often tapped on free statistical data from
government bodies to track demographic and economic information to appreciate the impact of these trends on consumer spending patterns. Constant monitoring of the latest news reports is
useful for tracking the latest changes in government legislation and support which companies can tap on to help them innovate and introduce new services.
Thus, it is a useful skill to learn to use online databases to search for useful, relevant country reports, consumer lifestyle research studies, industry information that highlight the market share
of various brands as well as gain insights into the strengths and weaknesses of these brands in their company reports.
REFERENCES
Kotler, P., Armstrong, G., Ang, S. H., Leong, S.-M., Tan, C. T., & Yau, O. H.-M. (2012).
Principles of marketing: An Asian perspective (3rd Ed.). Singapore, Singapore: Pearson Education Centre.
Kerin, R., & Hartley, S. (2019). Loose Leaf for Marketing (14th Ed.). McGraw-Hill Education.
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1. The Lemon Tree is a high-fashion boutique selling top-of-the-line women's clothing and
accessories. The key to its success lies in its ability to track consumer ‗s changing tastes
and offering products that are distinctive from other retailers. In addition, because of the high value of the merchandise, The Lemon Tree's management is exploring the use of
computerized inventory controls and sales order processing. From this description, one can infer that the environmental category of least importance to The Lemon Tree, at this
point of time, would be
(E) Economic.
(F) Regulatory.
(G) Technological.
(H) Social.
2. In a recent announcement, the Singapore government is increasing the amount of funding
to support start-ups in high-tech farming industry. Which two environmental trends contributed to the growth in this industry?
(A) Economic; socio-demographic.
(B) Regulatory; technological.
(C) Socio-demographic; regulatory.
(D) Competitive; regulatory.
3. Many companies are beginning to sponsor "women-only" events. This is an example of what type of environmental force?
(A) Social-Demographic
(B) Economic
(C) Technological
(D) Competitive
Self-Practice Exercise:
MCQ and True/False
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4. You are the Director of Marketing for Thompson Children ‗s Hospital. You are doing an environmental scan to help create a five-year marketing plan for the hospital. Which of the following is a demographic trend that is relevant to your hospital?
(E) The number of babies born in your geographic area is predicted to decline
over the next five years.
(F) By the year 2025, baby boomers will control more than 50 percent of all consumer expenditures.
(G) The community has seen a rise in dual-income couples who has chosen not to have kids.
(H) By the year 2025, robotics will play a major role in society.
5. With the convenience of mobile wallets, more consumers are switching to online stores
for their grocery shopping. This change in environmental force is likely to have a/an impact on wet markets.
(A) competitive; positive
(B) socio-cultural; negative
(C) economic; negative
(D) technological; negative
6. In marketing, not all environmental forces are uncontrollable and entirely outside the influence of companies.
True/False
7. Although many consider environmental forces a negative impact on a firm's marketing
plans, some environmental forces can enhance a firm's marketing opportunities.
True/False
8. Environmental forces do not affect marketing activities as long as a firm closely monitors its environment through rigorous market research.
True/False
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9. With today's cell phones, you can watch the news, shoot videos, check the Internet, take
pictures, and listen to music. Because of these new features, consumers are constantly
replacing their existing phone with newer models. This increase in demand is in part due to changes in technology, an environmental force.
True/False
10. The popularity of food programs on television, dyed hair among teenagers and healthy food choices among Singaporeans are all part of the social-cultural environment.
True/False
1. Scan the internet to identify the top ten products that are gaining in popularity in your
country. Determine which trend in the marketing environment is responsible for this
increase.
2. Polaroid and Kodak used to dominate the film industry at the beginning of the 20 th
century. Determine which trend in the marketing environment these two firms failed to monitor that caused these companies to lose their dominant position.
3. Pick one sector in your country that was badly hit by the economic performance in the last 6 months. Examine how the firms in this sector respond to the negative impact of economic environment on their business.
4. List five changes in the spending patterns in your behaviour or those of your family members that has resulted because of the Covid pandemic. How would you classify these changes in terms of the marketing environmental trends?
5. How would you classify the mobile phone market in your country in terms of intensity of competition? Conduct secondary research to determine which brand has the largest market share; number of brands and the marketing strategies adopted.
.10 T .9 T
.8 F
.7 T
.6 T
.5 D
.4 A
.3 A
.2 B
.1 B
Practice Questions:
Answers to Self-
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REFLECTIVE EXERCISES
SESSION 3
CONSUMER BEHAVIOUR
At the end of this session, students should be able to:
• Describe the importance of understanding consumer behaviour in the marketing process.
• Describe the consumer decision-making model and distinguish the different types of consumer involvement that will impact the purchase of various products.
• Discuss the role marketing plays in consumerism.
• Explain and discuss the cultural, social, personal, and psychological factors that influence consumer behaviour.
3.1 IMPORTANCE OF UNDERSTANDING CONSUMER BEHAVIOUR
Big organizations spend billions of dollars on consumer behaviour research so they can answer the following basic questions:
What do consumers buy? This will influence the product features and benefits they want in their shopping cart.
Why do they buy what they buy? Understanding the reasons for their purchases will help determine how to promote effectively to their customers
When and Where do they prefer to buy? This will influence whether they choose to shop online or go to physical stores to purchase their items.
How often do consumers buy? Useful information on their frequency of purchase helps companies determine how to gain customer loyalty.
Thus, to be effective in marketing to their customers, it is essential the firm understand
consumer needs and the actions of their consumers that drive them to buy certain products. It enables marketers to predict the kind of products that will be sought after by their consumers
and design their marketing mix namely product, price, place, and promotion that meets the
expectations of their consumers.
As mentioned in Topic 2, due to the changing fashion and lifestyles (socio-cultural trends),
rapid introduction of new products (technological trends), disposable income (economic
trends) and new laws and regulation (regulatory trends), consumer behaviour also changes. A firm that pays close attention to these factors that keep changing so that they can align their
marketing efforts to stay ahead of competition.
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3.2 CONSUMER DECISION-MAKING PROCESS
The Consumer or Buyer Decision Making Process is the model used to identify and track the
buying process of a customer journey from start to finish. It is broken down into five individual steps namely need recognition, information search, alternative evaluation,
purchase decision and post-purchase behaviour.
Step 1: Need recognition:
This is the first stage of the Consumer Decision Process in which the consumer recognizes a problem or need and begins identifying what product would be able to meet the need. It is the
most crucial step in the process since unless the consumer perceives a need, he will not undertake the entire decision-making process towards a purchase.
A need can be triggered by internal stimuli (triggered by own personal perception like hunger, thirst, boredom etc.) or external stimuli (exposure to advertising messages or
influenced by friends).
Marketers thus can often activate problem recognition by emphasizing the benefits of products through advertising, personal selling, and sales promotion activities, causing them to recognize problems.
Step 2: Information Search:
To identify the right products that can meet the need. Info search can be both internal and external. The consumer searches for available options that serve to meet the identified needs.
It is most likely that internal research is carried out first by recollecting from own experience of products which have served this need well in the past. For products like snacks and drinks,
their experience with a favourite brand of snacks or drink may be enough to move the customer directly to purchase stage. This type of purchase is known as routine problem-
solving as the consumer considered only one option, using minimal effort or time in making the purchase decision. The level of involvement in the decision-making is low as this
purchase is considered inexpensive and low-risk.
External research is usually conducted if the consumer is purchasing a product which he has not much experience with. Thus, to make a wise decision, he will seek information from
friends or family members (known as personal sources) check out online reviews and consumer reports (classified as public sources) check out news reports and advertising
messages (categorized under marketer dominated sources) to single out several products that
are worth considering. Such search efforts are applied extensively in extensive problem- solving situations like purchasing a car, high-technology products, online games and products
or services that are expensive and have considerable high-risk attached to the purchase.
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Wherever the consumers search for information, a marketer should identify the key sources where their target customers find information and ensure they place sufficient attention- getting and useful information though these sources to get their brands selected for consideration.
Step 3: Alternative evaluation:
Having identified several product options that are under consideration from their information
search, at this step, the consumers evaluate the product choices on a scale of attributes which
the consumer felt is important. For example, in choosing a laptop, the consumer may commit a fair amount of time to compare the various brands and models in terms of product features
(size, storage capacity and weight) besides checking which offer the most competitive prices. In order for the salesperson at the store to increase the likelihood of purchase, the sales
personnel need to be able to understand what benefits the customers seek and recommend the right model to them. This will be based on which are the key attributes that matters most to
the consumer.
During this step, if consumer have been using ASUS brand of laptops and determined that
this is the brand he likes, he may use features; price and weight to evaluate the three models he sees at the store and can evaluate fairly quickly which model suits him. He is thus
adopting limited problem-solving.
However if the consumer is purchasing a high-end computer for his university studies and
knew there are several brands and models that are listed in the recommended list, he may take some time evaluating the many models as he may have to consider storage capacity, length of
warranty, types of software offered as part of the price packages etc. in trying to assess the value of the products under consideration. In such a situation, he will be carrying out
extensive problem-solving. To help consumers evaluate these choices, marketers present side-by-side brand or product comparisons on their brochures and websites.
It is not uncommon for a consumer to choose to visit an electronic store to seek help from the
sales staff rather than go through the evaluative process himself. An experienced salesperson will thus start off by asking the consumer which key attributes matters most to him and the
budget he is prepared to pay for. This helps the sales staff select the brands and models that fits these set of criteria and provide expert advice as to which model will suit his needs best.
If evaluation of the various models is carried out using a limited set of criteria, this consumer
is likely to be adopting limited problem-solving.
Step 4: Purchase decision:
During this step, the consumer has already evaluated all his product choices and identified the
most preferred model that meets his criteria best. This does not mean that he will jump
straight into purchase. For example, if the consumer received negative feedback from a friend when he mentioned the brand he has identified – he may re-evaluate his decision. Sometimes
the loss of income of his father may cause the consumer to delay the purchase of the new computer in favour of a refurbished one. However, if none of these factors interfered with his
purchase decision, he will likely proceed to purchase the model he identified.
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In extensive problem-solving decisions, the marketer needs to provide a good deal of
information about the positive consequences of buying. The sales staff may need to be trained
to highlight again the key attributes of the selected model and how it fits the criteria set by the consumer, compare the superior features vs the competitive models; and maybe even
offer a promotional discount in the hope of securing the sale.
Step 5: Post-Purchase behaviour:
At this last step of the consumer decision process, the customer assesses whether he is
satisfied or dissatisfied with a purchase. If the customer finds that the product has matched
his expectations, he can give good reviews to his friends or post positive online reviews which may influence other potential customers. This will boost the chances of the product
being purchased again. The same can be said for negative feedback which may hinder the purchase of this product by other consumers.
3.3 THE ROLE OF MARKETING IN CONSUMERISM
From the discussion on the consumer decision-making process, it would seem that consumers are continuously undertaking this process to fulfil their many needs, most of it influenced by
external stimuli (advertising, personal selling, and sales promotion activities) as they are
exposed to online media and market-dominated sources of information. As one stroll into a shopping mall or search online shopping sites, it is hard to miss large signs that enticingly
announce: "Sale of up to 70 per cent" or "Clearance sale. Everything must go!" Advertising messages shout loud and clear that one should upgrade to the latest model of mobile phones
or electronic devices with added features that promise a better life. Fashion magazines are full of the latest fashion trends one should keep up with to stay trendy and look cool.
All these lead to the criticism that marketing play a key role in promoting consumerism among consumers. Consumerism is the idea that to pursue happiness and well-being,
consumers should seek to purchase more consumer goods and material possessions. As consumers spend, marketers argue that consumerism allows consumers to benefit from the
never-ending introduction of new products that caters to the functional and emotional needs while businesses received increased sales, revenue, and profit.
With increased globalization, technological advancement and increased income, the consumerist culture meant consumers are spending more on luxury items like cars, gadgets,
and clothes. Consumers are enticed by promotional messages from marketers to replace these
items often to keep up with the latest trends, and constantly spending on new gadgets in their pursuit of higher-quality features and benefits.
The economic benefits of a consumerist culture are clear. As more consumers buy goods and services more than their needs, they consume more, they spend more, and that can create a
vicious cycle of higher production and better employment opportunities, which then leads to even more spending.
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Critics highlight that the rise of consumerism has a negative impact on consumer well-being. Psychological studies revealed that consumers swayed by values based on wealth, status, and
material possessions often suffer greater anxiety and depression. This is because some consumers are spending beyond their means and incurring debts on their credit cards and
taking out personal loans to pay for the luxury items to maintain upper-class lifestyles, Others
are working longer hours just to ―keep up with the Jones‖. Anxiety and stress that result in less time spent with family, friends, and even led to loss of sleep.
The over-production of consumer goods is also detrimental to our planet. This is simply
because the production of clothes and apparel uses vast amounts of water, energy, chemicals, and raw materials, all of which place heavy demands on Earth's already limited resources.
With growing awareness of the impact of consumerism, several companies have sought to
play a role in educating consumers on how to decrease their carbon footprint and reduce wastage through recycling used clothes and rental of products (also known as sharing
economy) instead of ownership. Companies like Levi‘s have been encouraging consumers to trade-in or donate their used clothing instead of throwing it away. In Singapore, companies
like Style Theory, Rent-A-Dress, Style Lease and Runway Rent are seeing more consumers choosing to rent branded clothes rather than accumulate an expensive wardrobe of clothes
which they often only wear once or twice. Grab private-car and Blue-SG rental services for
cars offer a less stressful alternative to car-ownerships.
3.4 INFLUENCES ON CONSUMER BEHAVIOUR
As discussed in the five steps of the decision-making process, consumer behaviour is
influenced by both internal and external stimuli, advice from friends and families as well as marketing influences from businesses. Marketers are always monitoring the latest marketing
trends to determine how they can reach their consumer segment in the most effective way possible. Businesses often try to influence a consumer ‗s behaviour by manipulating the
elements of their marketing like the features of products, pricing, placing and promotional messages. Marketers must understand which of these influences are temporary or long lasting
in the hope of getting customers to repurchase and gain customer loyalty. Let us now examine in detail the cultural, social, personal, and psychological influences on consumer
behaviour.
3.4.1 CULTURAL FACTORS
Culture exerts a strong influence on a person ‗s needs and wants because it is through culture that we learn how to live, what to value, and how to conduct ourselves in society.
For example, people in Asia value family ties and relationships (also known as collectivism).
Thus, it is customary for children to stay with their parents until they get married. In contrast,
in the Western countries, individualism is valued thus children are expected to leave their
parents when they start work so they can be independent.
The culture the consumer live in prescribes the way in which he or she should live and has a
huge effect on the clothes the consumer will see as appropriate to wear. For example, in
western countries, it is common to see women wearing shorts and miniskirts. If the consumers live in a conservative culture where women are expected to cover from top to toe,
the fashion and trends will be distinctly different. Customs and traditions also play a role in dressing. The colour red and ladies donning ―cheongsams‖ are popular during Lunar New
Year as it is considered auspicious and stylish. Marketers have thus introduced variety of red
―cheongsums‖ that come in many styles, cuts, and fabrics to suit consumers of different shapes and ages for this customary tradition carried out by Chinese all over the world.
Marketers continuously monitor cultural changes in values to discover new products and
services that might become popular among consumers. It was observed that there is a cultural shift toward greater concern about health and fitness. As a result, demand for exercise
equipment and clothing, lower-fat and organic foods, and health and fitness services have
increased. The increased value placed on achieving better work-life balance has fuelled the demand for convenience foods like instant noodles and microwave meals and food delivery
services.
3.4.2 SOCIAL FACTORS
Consumers are social creatures who often seek others around them for information,
discussion, or advice as was examined when we describe the decision-making process carried
out in buying behaviour. They are influenced by the groups whom the individual especially membership reference groups like family, friends, colleagues, sports groups. church groups
or online social network groups. The groups they have close and regular contact with are known as primary associative groups while the groups whose contact are less frequent are
known as secondary associative groups. Individuals may be influenced by the groups they idolize and hope to belong to – these are called aspirational groups.
Reference Groups affect consumer choice because of following factors:
Normative Influence: when reference groups affect behaviour and attitudes through
pressures to conform to the acceptable standards or norms defined by the group. This especially occurs for products that are visible to the group like the type of shoes, handbags, clothes, and type of hairstyle one wears. For example- fashion conscious teenager receives clear signals from her peers regarding which product to buy so that her choices are socially accepted. Marketers convey this type of influence by showing group approval in advertising. These can also apply in advertising shampoos that results in glorious and shiny hair noticed by others as simulation of social approval.
Informational influence: Consumers often seek information or advice for products they have little knowledge or experience with. This is especially important for products they perceive has high social or financial risks like the purchases of cars, computers, mobile devices, or high-technology products. They will accept information from a group they consider a credible source of expertise and is convinced that the information provided will result in making better product choices. The information can be collected directly from these individuals known as opinion leaders or by
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observing their behaviour. These opinion leaders may be social media influencers with many followers who post frequently on various social media, and even people
who write lots of online reviews. Thus, marketers may often send free products to these influencers to give their online reviews - the more the social influencer ―like‖
your product and publish favourable reviews or comments on their blogs, the greater
the likelihood their followers will consider that brand.
Identification influence: Individual looks forward to enhancing his/her self-concept by associating with groups that they seek to identify with like a successful entrepreneur, a popular celebrity, an accomplished athlete etc. Thus, marketers often use celebrity endorsement for their products to tap on this type of influence.
Being a key membership group for most individuals, the family is the most important consumer buying organization in society. Thus, marketers must examine the roles and
influence of the husband, wife, and children on the purchase of various products and services
in a family unit. Despite the changes in the role of women in society, the wife remains the key decision maker regarding purchases of brands for food and household items. With more
women contributing to the household income, joint decision by both husband and wife is typical for purchases involving a larger sum of money, such as choice of holiday destinations,
type of cars and houses to buy etc. Teenagers may exercise a lot of influence for the purchases of the latest digital devices while children often dictate the type of snacks and
drinks bought by the household.
3.4.3 PERSONAL FACTORS
Personal or individual characteristics have a considerable influence on a buyer decision.
These characteristics include the age and life-cycle stage of the consumer and the lifestyle he chooses to lead which suits his personality and self-concept.
Age and lifecycle stage: consumers purchase different types of goods and services
during different periods of their lives as their priorities change as they move from single and carefree teenage to courting 20s then full-nest and finally to empty-nest stage.
Stage Priorities Major Purchases
Teens & Early 20s Self, socialising, Clothing, hobbies,
education recreation
Courting 20s Pair-bonding, career Entertainment,
furnishing
Full Nest: 30s – 50s Children, family Children’s food, clothing,
education
Empty Nest: 50s – 70s Self and others, Investments, travel,
relaxation hobbies
Sole Survivor: 70s – 90s Self, health, loneliness Health-care services,
diet, TV, books
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A consumer in the single and carefree stage will likely spend most of his income on
his own hobbies and entertainment and thus will happily spend more than half of his
or her income on beer, bikes, music, clothes, parties, club membership and so on.
However, as he or she moves into the courting 20s and decided to get married,
priorities will be shifted to purchasing a house, car, insurance policies and investment
to plan for a future with their chosen spouse. When the individual moves into full nest
stage (age 30s to 50s), the shift in spending will be mostly on children ‗s education
and clothes and products which will benefit his family and make their future secure.
Empty nest stage occurs when the children have grown up and left the nest. This is
when the individual will be able to shift focus back on himself and take time to travel,
invest his hard-earned money in financial services and hobbies he did not have time to
take up when he has taking care of his family and children. At the sole-survivor stage,
the consumer is typically in the age group of 70 – 90s where health will weaken.
Thus, spending on health-care products and services will increase. Being a sole
survivor, he will also seek products and services to help reduce the feeling of
loneliness in his life.
Lifestyle: This refers to the consumer ‗s preferred pattern of living – it reveals what consumers care about, how they spend their time, what they are likely to spend money on, and how they view themselves. To simplify what lifestyle entail, it is examining the A (activities) I (interests) and O (opinions) – the VALs framework below provides a useful classification based on lifestyle:
M
Figure 3.1: VALS Typology
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3.4.4 PSYCHOLOG ICAL FACTORS
Every consumer is different, and each consumer views herself in a unique way. The way that
consumers view themselves, coupled with their inner motives, will determine which products and services they prefer. We will examine the motivation and perceptions that influence
consumer behaviour.
Motivation: Motivation starts with an unmet need, as seen in Step 1 of the consumer
decision-process with need recognition. One of most popularly used theory of motivation is the work of A. H. Maslow, known as the Maslow ‗s Hierarchy of Needs. Maslow developed a model that lays out five levels of in a ―need hierarchy‖ with basic needs at the lower levels of the hierarchy, then moving up to higher emotional needs associated with love, self-esteem, and finally to self-actualization.
The Maslow ‗s Hierarchy of Needs is shown in the figure below:
Figure 3.2: Maslow ‗s Hierarchy of Needs
Physiological needs are at the first level and is the most basic level of needs that includes hunger, thirst, comfort, exercise, sleep, and entertainment. Foods, beverages, sports drinks, and exercise equipment fulfil this level of needs.
Safety and security are at the second level in Maslow ‗s hierarchy. Health and physical well-being and protection from accidents are also associated with this level of need. Smoke detectors, preventive medicines, insurance, and retirement investments services fulfil this need to feel safe and protected.
Love and belonging are third in Maslow ‗s hierarchy of needs. Thus, products and services that enable the consumer to feel loved, sense of belonging and intimacy meets social needs like enjoying movies together, enjoying high tea with old friends at a hotel, joining a fun escape game with friends.
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Self-esteem is the higher level of needs which includes the need to feel good about oneself and to seek respect from others. Consumers who choose to purchase branded clothes, high-end leather furniture, luxury cars and expensive wine are seeking to fulfil esteem needs.
Self-actualization (also known as self-fulfilment) is the fifth and highest level in Maslow ‗s needs hierarchy. This is when consumers seek to reach their full potential and to accomplish their dream perhaps in the form of musical or artistic pursuits or seek athletic achievement.
Perception: Consumers with the same motive may act quite differently because they perceive the situation differently as each consumer often receives, organizes, and interprets the sensory information like advertising messages individually. There are four processes in selective perception processes that explains why there is a difference in perception:
Selective Exposure: Consumers are selective as to which YouTube channels they choose to subscribe to, which newspapers they prefer to read and which websites they choose to visit. Thus, not all advertising messages reaches out to the consumers as is intended.
Selective Attention – Consumers often select which information to pay attention to. With numerous exposures to many messages, he will only notice those which are relevant to him at that point in time. Until he decides to get married, he will then start paying attention to advertisements on new homes and properties. Marketers must design eye-catching messages using size, colour, contrast, and position to stand out from so many messages competing for the consumer ‗s attention.
Selective Comprehension - Consumers tend to interpret what they see that is in line with their beliefs and values. A consumer, who has been brought up by parents who are strongly against consumption of meat, will be swayed by communication messages in support of vegan lifestyle while refusing to accept messages that promotes healthy meat choices. This consumer will also tend to associate white packaging as pure, wholesome, and nutritional and consciously avoid package food that uses bright colours – which to them signify high calories and fat rather than tasty and delicious.
Selective Retention – Consumers also have selective memory and tends to only remember information which would be useful to them. Unless the advertising message appeals to them, most of these messages may be forgotten and thus have no lasting impact on sales or customer loyalty.
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REFERENCES
1. Figure 3.1: VALs Typology (9 Nov 2017) Barilliance.com Retrieved May 27, 2021, from https://www.barilliance.com/psychographic-segmentation/vals/
2. Figure 3.2: Maslow‘s Hierarchy of Needs (n.d.) from Taughnee ‗Identifying
Customer Needs To Create Bullseye Offers‗ endeavourcreative.com Retrieved May 27, 2021, from https://endeavorcreative.com/customer-needs/
1. Which of the following levels of consumer problem-solving behaviour would apply to a consumer signing up for a driving school to get his driving license?
(E) Routinized problem-solving
(F) Rational problem-solving
(G) Limited problem-solving
(H) Extensive problem-solving
2. Sam managed to get rare spare parts for his 30-old year-old vintage Harley Davidson motorcycle from an online store vintagemotor.com. He shared this information with his group of friends at the Harley owners club. Sam is acting as a _ source?
(A) experiential source
(B) personal source
(C) public source
(D) market-dominated source
3. Property developers in Taiwan ensure they incorporate ―feng shui‖ elements into the interior design of their offices to appeal to Chinese businesspeople. This is an example of
influence on consumer behaviour?
(E) cultural
(F) social
(G) personal
(H) psychological
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Self-Practice Exercise:
MCQ and True/False
4. Many marketers use Korean actors and actresses to promote beauty products to
Singaporean consumers. These marketers hope that consumers will these celebrities
as members of their reference groups and purchased the endorsed products due to influence.
(I) membership; normative.
(J) non-membership; informational
(K) primary associative group; identification
(L) aspirational reference group; identification
5. Which type of manufacturer would find reference groups to be the most useful for
understand product and brand choices?
(E) Pet food
(F) Underwear
(G) Luxury watches
(H) Stationary
6. Consumers will undertake the five steps of the buying decision-process in extensive problem-solving decisions.
True/False
7. When a consumer learns about a new product for the first time and decides to find out
more about the product, he is engaging in the first step of the decision-making process.
True/False
8. Friends and family are perceived to be more credible than advertisements as they are likely to give both negative as well as positive opinions. This explains the importance of social factors on consumer buying behaviour.
True/False
9. Tommy is looking for a present for his mother for her birthday. She has hinted that she
would like a watch. Tommy starts noticing advertisements on watches that appears on television, posters, and magazines. He also realizes that their neighbourhood mall has
several shops with nice watch displays which he cannot recall seeing before. Tommy is
engaging in selective comprehension.
True/False
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10. The advertising message of a household vacuum cleaner states: ―No matter how well
you clean, dust mites and allergens are still clinging to your rug and mattresses‖ It
contains a photograph of a dust mite magnified a hundred times to convince consumers
that his home is dirty and is life-threatening to someone with breathing issues. This
advertising message is appealing to the esteem needs in the consumer ‗s Maslow
Hierarchy of Needs.
True/False
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F .
Questions:
1. Scan your favourite online store for a new product category you are unfamiliar with.
Select three brands that catches your attention and undertake the five steps in the
decision-process in determining how you would go about choosing one brand you would consider purchasing.
2. At the end of this course, you are considering which university degree to pursue. Who
will you approach for advice? Why is this person or group selected? Which type of
influence do this personal source exert on your buying behaviour? What type of decision-making (routine; limited or extensive problem-solving) did you carry out?
3. List five cultural trends that are unique to the food culture in your country. How has this affected your preferred choice of food and beverages?
4. Click on this link: http://www.strategicbusinessinsights.com/vals/ustypes.shtml to complete the VALs survey to determine which VALs type you belong to. Reflect on how accurately this VALs typology describes your lifestyle preference.
5. Walk into a furniture store in a shopping mall near your home. Choose five furniture
items at this store and determine which level of needs in the Maslow ‗s Hierarchy of
Needs are met by these items. Do these products meet the lower level of needs or the higher level of needs more effectively?
10 .9 F .8 T .7 F .6 T .5 C .4 D .3 A .2 B .1 D
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Answers to Self-Practice
REFLECTIVE EXERCISES
SESSION 4
MARKET SEGMENTATION, TARGETING AND POSITIONING
At the end of this session, students should be able to:
Define the major steps in designing a customer-driven marketing strategy: market segmentation, market targeting, and market positioning.
List and discuss the major bases for segmenting consumer and business markets.
Explain how companies identify attractive market segments and choose a target marketing strategy.
Discuss how companies position their products for maximum competitive advantage in the marketplace.
4 MARKET SEGMENTATION, TARGETING AND POSITIONING
In this chapter the coverage will be on the most fundamental aspects of developing a marketing strategy, Segmentation, Targeting and Positioning. This involves dividing the
market into segments of customers (segmentation) and then selecting one or more segments to cultivate (targeting), and finally to influence how the customers will perceive the product
or brand in their mind (positioning).
4.1 MARKET SEGMENTATION
To select the customers to serve, the market must first be divided into groupings called segment. Segmenting is defined as the process in which the marketer divides the market into
smaller groups so as to identify one or more groups that can be better served by its market offerings. By doing so, businesses can better reach the consumer segment that fits them best.
Every business has its unique competitive advantage, and this advantage means that they can serve some customers better than others. For example, fish-ball noodle seller serves hawker-
food consumer better than fast-food consumer segment.
Segmentation also helps business to better address consumer needs and wants. Instead of using resources to satisfy all customers, they now focus on only the segment/s that they want to serve. As a result, they will be able use resources more effectively.
Segmenting also allows for businesses to focus on long-term (strategic) marketing decisions. For example, Tesla focuses on customers who want high-end, high-tech electric vehicles. Therefore, the company‘s strategy focuses on the mission to design best in-class eVs.
There are two important aspects of segmentation:
Criteria for good segmenting: the conditions that make for good segment
Segmentation bases and variables
Both will be covered in the sub-topics coming up next.
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4.1.1 CRITERIA FOR MARKET SEGMENTATION
Businesses usually segment the market because it is more profitable. However, this is not
always the case. In the case of segmentation, there are rules that should be followed to ensure that in the process of segmenting the market, each market segments itself has the potential to
be profitable.
The following are the criteria that should be adopted when segmenting:
1. Each segment should be profitable
2. Similarity within the segment
3. Significantly different from the other segments
4. Marketing action possibility for the segment
Each segment should be profitable. A few things will determine this. Firstly, it needs to be
substantial enough. If by dividing the market into smaller segments, makes each segment on its own too small to be profitable, it is way too small. Secondly, the segment should be
measurable. Measurability is the information needed to determine if there are enough customers, demand, and potential in the segments.
There must be similarity within the segment. The segment must be relatively homogenous in
its needs and wants so that businesses can develop a unique market offering that will satisfy
everyone of the customers within the segment. The cost to satisfy such a segment is lower than to serve a whole market of differing needs and wants. When the customers within the
segment differ, the business would need to have a large variation of offerings to satisfy all the
customers in that segment. This would increase the overall cost and make any marketing action less effective.
Segments should be significantly different from the other segment. When two segments are too similar, it is usually better for marketer to combine these segments. When the segments
are combined, there will be greater economies of scale, resulting in lower cost and greater
profitability. By having one segment instead of two, one set of marketing mix is needed. Hence, only one supply chain is needed for the product, one advertising campaign is need,
one group of marketing intermediaries are used for distribution and one set of pricing needs to be maintained. Overall effect, lower cost, and higher profitability. Therefore, if the
segments are significantly different such that it is not feasible to combine, segments should be kept as segments. However, if segments are similar, combine the segments.
Marketing action should be a possibility. The reason segmentation may result in greater
profitability is because the customer‗s need is better served after segmentation as some unique marketing action can be done for the segments. However, not all segments permit
market action after segmentation have taken place. For example, segmenting electricity user
by male and female users would be useless, because there is very little marketing action that can be done for both male and female users of electricity that can add sufficient value to each
of the segments to make a difference.
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4.1.2 BASE/VARIABLES USED IN SEGMENTATION
The base and variables used in segmentation are in a way the measures that is used to define the segment. There are four bases that is commonly used in market segmentation. They are
Geographic, Demographic, Behavioural and Psychographic. The variables are the measures
or components within the bases. For example, if customers are grouped by the countries, the segmentation base would be geographic, and the variable used would be countries.
Geographic segmentation
Geographic segmentation base is the grouping of customers by geographic boundaries. These geographical boundaries serve as the variables that are used. These boundaries could be
countries, counties, provinces, states, cities, towns, villages, etc. Geographic segmentation is useful under some situations. Cultural and physical requirements can sometimes be
determined geographically. The media coverage used for marketing communication like the television channels, new papers and magazines are also usually determined geographically.
Demographic segmentation
Demographic segmentation is when demographic data like age, race, and occupation are used
as variables for segmentation. The beauty of using demographic segmentation is that it is usually the most readily available measures that the marketers have access to. For example,
age, race, and gender distributions are all readily accessible via census bureau in many countries. In Singapore, demographic data can easily and readily be access from Singapore
Department of Statistics website.
Behavioural segmentation
Behavioural segmentation uses some form of behavioural characteristics as variables used as measures for segmentation. There are many variables used, but the most often used are
occasions, usage frequency, brand loyalty and benefit sought. In general, any form of behavioural characteristics can be used but for the purpose of discussion in this module the
focus will be on the common four stated above.
Occasions like life ‗s major events like weddings or festivities like Christmas are often used by marketers. Events like weddings will have demands for certain product that will be present
like dinners, and cakes. Special festivities will have special goods or services that are needed,
e.g., Christmas Trees for Christmas. All these present business opportunities that some business use for segmentation.
Usage frequency will result in different requirements for different the customers. Telco providers for example are aware that customers have different network requirements and
have created different plans to cater to the different usage frequency.
Benefit sought is frequently used by marketers of fast-moving consumer goods, like
shampoos, detergents, toothpaste. The different hair types for example requires different types of shampoos and conditioners. Hence, by focusing on the benefits, the markets are best
able to direct to the most important criteria of the customer that are buying their product.
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Brand loyalty can be useful when the loyalty of the customer helps in determining the marketing plan. For example, the needs of loyal existing customers with an internet service
provider may be different from a potential new customer. An existing customer may be more interested in getting discounts when re-contracting, while a new customer would be more
interested in the internet service provider being able to facilitate setting up the network at
their location for them.
Psychographic segmentation
Psychographics are traits of humans on psychological attributes. Psychographics have been
applied to the study of personality, values, opinions, attitudes, interests, and lifestyles. In
marketing, lifestyle is a variable used a lot in position of products and communication.
Lifestyle is particularly useful in these situations because many of the communication tools
like magazines, television and radio channels are very much lifestyle motivated. For example,
a car enthusiast is likely subscribing to motoring magazines, and watch auto-related events
like Formula-One. These present opportunities to reach these customers via their
psychographics. The other psychographics elements like personality, values, attitudes may
sometimes also be used, but most of the time, they are already present in the lifestyle of the
customers.
4.2 MARKET TARGETING
Targeting is the process of selecting the segment or segments to focus the business marketing effort on. This would also involve adopting the best method or approach in selecting the customers and adopt appropriate criteria for the selection.
4.2.1 CRITERIA FOR MARKET TARGETING
Business may choose a segment to target, or a few segments to target. Selecting the right segments will result in greater profitability. Hence, when selecting the segments target market, business should apply the principles that make good criteria for targeting.
Segments that are chosen should be easily identifiable by some characteristics that would
help marketer define the value proposition for the segment later in the differentiation and positioning process. By having it clearly established allows the marketing effort to be more
surgical and specific. For example, to be able to be specific in identifying the customer as those with split-ends hair, the marketer will be better able to formulate a product that
provides the best value proposition, communicate in the best media like lady ‗s magazines, and place the product in the best places like pharmacies.
Market should have the most appropriate market size. During segmenting, each segment
should be sufficiently large. When targeting, it is important to select the segment of appropriate sizing. Large segments offer attractive volume but attract greater competition. A
small start-up may be better off selecting a niche market with little competition then a larger one that is saturated with competitors or one that has a large dominant competitor.
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Stability of demand in the segment would be needed, and stability in growth is preferred.
Growth of the segment is important criteria because you would always want a market that
will be bigger tomorrow to accommodate your growing business. It would be pointless to select a segment which is shrinking as the market would be too small to be sustainable in the
future.
A good targeting requirement is to select one that the business has competitive advantage in. Having competitive advantage will result in the business gaining better accessibility to the
segment then the competitor. This means is that there is a way to reach these customers more efficiently than the competition. For example, the chicken rice segment may not be very
accessible to Kentucky Fried Chicken (KFC) even if it desires to target those customers because KFC accessibility to the hawker customers is just not there. Instead, KFC is likely to
succeed in the fast-food segment. Hence, selecting fried chicken fast food segment instead of
the chicken rice segment is a better fit for KFC where its market offering is aligned to the customer needs.
Finally, the last criteria is the compatibility to companies ‗objectives and the availability of
resources. The healthcare industry may yield much revenue from health-related problems from smoking clients. However, if a healthcare provider should participate in the marketing
of tobacco products to the smoking segment to improved profitability of the business, it would obviously be negatively received by the general population. In general, businesses
would select segments that best fit the objective of the organization, and appropriate for its
available resource.
4.2.2 MARKET TARGETING STRATEGIES
When it comes to selecting which method should be adopted for targeting, it is important to note that the main objective is to maximise the business profitability, not just revenue. Some
methods will yield better revenue than others, but it will be at the expense of greater cost incurred. Hence, it is important to balance both to select the right approach.
There are four methods that can be used, Undifferentiated Marketing aka Mass Marketing, Differentiated Marketing aka Segmented Marketing, Concentrated Marketing aka Niche Marketing, and Micromarketing.
In undifferentiated marketing or mass marketing, all customers are group in one big
market. No segments existing in this method. The benefit of this is that cost to market is
lowest as there is only one set of product, price, place, and promotion. This form of targeting
is used largely when there is little benefit in segmenting the market because there is little
opportunity for incremental revenue from segmenting. This is largely because there is little
opportunity to provide the additional value in the marketing activities to segments that can be
created. It is like marketing consumer water utility, there is little room to differentiate even if
the market is segmented. Even if it were able to effectively segment the consumer water
utility market, all the additional cost involved in marketing to a segmented market does not
bring enough revenue to justify segmenting the market. Most commodities would adopt this
form of targeting.
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In differentiated marketing or segmented marketing, the market is divided into segments. For each of the segments, there is a unique value proposition communicated using an
appropriate marketing mix. Marketing expenses will be higher because of more product variation and implementing the different marketing mix for each variation. The cost and
effort made to segment and differentiate the segment enables the business to better satisfy the
various consumers segments resulting in higher revenue as compared to without segmentation. Most importantly, the segmentation and targeting of additional segments must
produce incremental revenue that exceeds incremental cost, otherwise it is better not to target the additional segments - incremental profitability criteria. Most consumer goods marketers
adopt this approach as it to better serve the needs of the consumer while generating incremental profits.
Concentrated marketing is often referred to as niche marketing. In this form of targeting,
the business selects a specific and unique group of customers to market to, hence, ―concentrated‖. The selected segment of customers is not large, and usually feature unique
needs. Examples of niche segments are like the segment of skydivers in the recreation sports
market. Start-ups and small businesses tend to opt for niche marketing to dodge fierce competition since the segment is usually too small to attract the attention of market players.
Micromarketing is sometimes known as ―a market of one‖. As the term market-of-one
suggest, there is only one in this market. In general, there are two forms: Local marketing,
and Individual marketing. Local marketing is a very personalized marketing from neighbourhood businesses like the hairstylist located around the corner. Individual Marketing
is where every customer is given a unique marketing mix. It is often done through a process of mass customization. An example would be an Amazon.com customer, getting a selected
good of products with its corresponding prices, promoted to him via his email, placed directly at his doorstep via courier delivery. He gets a unique set of marketing mix, customised for
him, on the same day as millions of other of Amazon.com customers, but with a different market mix.
4.3 POSITIONING
A position in marketing refers to the place that a brand occupies in the minds of the customers and how it is distinguished from the products of the competitors. The marketing activity of Positioning is the process of creating that position in the mind of the consumer.
To do this, marketers would need to analyse the competition, market, and its consumers as well as, perform an internal analysis to understand its own strength, weakness, and capability.
This is done to establish the value propositions that it should adopt for the target segments. Positioning is established when the value proposition successfully influences consumer
perception to differentiate it from its competition.
4.3.1 VALUE PROPOSITION AND DIFFERENTIATION
The benefit that your product or brand offers to your customer that adds value and sets it apart from the competition is the value proposition. This is very often the point of differentiation that will distinguish the business from the other competition. Business would
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usually want this differentiation to be distinct in the minds of the consumers, and efforts will
be made in the marketing actions to create that position in the minds of the consumer. Hence,
very often, the value proposition is usually the differentiation and the position of the product. These are three different concepts in marketing but are linked such they are the same thing in
practice.
Marketers can create this value proposition using the nature of the product, benefits over its
competitors, customer experience, evidence of effectiveness, innovation, etc. The importance is that the difference must be sufficient to distinguish the product or brand from its
competition.
4.3.2 PERCEPTUAL MAPPING
The concept of a product or brands position is usually rather abstract and not easily visualised and communicated. The use of perceptual mapping enables visualisation of market
positioning of the market by mapping perceived placing of different brands on a graph. Figure 4.1 illustrates how a perceptual map appears.
Figure 4.1 Perceptual map of footwear brands
To develop the perceptual map, businesses would need to consider the attributes that are most
important to its product or brand that best communicate its intended value proposition. These
attributes will be used as the axis to compare the assortment of products or brands in the market which the business is competing in. All relevant brands or product including the
business‘s own brand is placed in the graph relative to other brands.
The process that happens next is to use the perceptual map for repositioning planning. Repositioning is to relocate the product or brand at another location in the mind of the
consumers. To begin, consider whether if the current position is ideal or intended by the business. If it is not, repositioning is needed. This entails developing marketing activities, like
advertising, or modification to product, packaging, etc. to get the consumer to see the product differently in the way that the business requires.
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4.3.3 POSITIONING STATEMENT
There will be many stakeholders in the development and marketing of the product or brand
that wants to understand the intended position for the product or brand. To facilitate this, marketers would use the positioning statement. A positioning statement is a short statement
that has the following details within that can be easily communicated:
1. Who the targeted consumers for the product are?
2. The brand and the market of the product should be stated
3. The benefit or value proposition of the product.
4. Convincing reasoning if any to select this product over the competition.
An example would be Starbucks positioning statement for its brand:
―Starbucks offers the best coffee and espresso drinks for consumers who want premium ingredients and perfection every time. Starbucks not only values every interaction, making each one unique, but the brand commits itself to the highest quality coffee in the world.‖
REFERENCES
Figure 4.1 Perceptual map of footwear brands: Perceptual Map Athletic Footwear. (n.d.). [Graph]. Perceptual Map. Retrieved 28 May 2021, from http://strategictoolkits.com/strategic- concepts/perceptual-map/.
Kotler, P., Armstrong, G., Ang, S. H., Leong, S.-M., Tan, C. T., & Yau, O. H.-M. (2012). Principles of marketing: An Asian perspective (3rd Ed.). Singapore, Singapore: Pearson Education Centre.
Kerin, R., & Hartley, S. (2019). Loose Leaf for Marketing (14th Ed.). McGraw-Hill Education.
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1. Which of the following is the right order of the four steps to design a customer-driven marketing strategy?
(A) positioning, market segmentation, and targeting
(B) market segmentation, positioning, and targeting
(C) market segmentation, targeting, and positioning
(D) market recognition, market preference, market targeting
2. When Burger King targets children, teens, adults, and seniors with different advertisement and media, it is practicing _ segmentation.
(A) behavioural.
(B) geographic.
(C) demographic.
(D) psychographic.
3. The markets you have chosen to serve in four western towns of Singapore because can be effectively reached and served. You would tell the marketing manager that these segments are .
(A) profitable
(B) actionable
(C) measurable
(D) accessible
4. By offering product and marketing variations to segments and developing a stronger position within several segments, companies hope to create more total sales through segmented marketing than marketing across all segments.
(A) undifferentiated
(B) differentiated
(C) niche
(D) micro
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5. The answer to the customer's question, "Why should I buy your brand?" is found in the brand's .
(A) pricing and promotion structure
(B) value proposition
(C) differentiation
(D) customer services
6. Your assignment at work is to divide buyers into different groups based on social class, lifestyle, and personality characteristics. After a planning session with the marketing
and sales staff, you must issue a memo to upper management recommending psychographic segmentation.
True/False
7. For simplicity's sake, most marketers generally limit their segmentation analysis to one variable.
True/False
8. Niche marketing offers smaller companies an opportunity to compete by focusing their limited resources on serving niches that may be unimportant to or overlooked by larger companies.
True/False
9. A product's position is the way the product is defined by retailers on important attributes—the place the product occupies in retailers' minds relative to competing products.
True/False
10. Even if a segment has the right size and growth and is structurally attractive, the company must consider its own objectives and resources.
True/False
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.10 T
.9 F
.8 T
.7 F
.6 T
.5 B
.4 A
.3 D
.2 C
.1 C
Answers to Self-Practice Questions:
1. Describe how marketers use multiple-segmenting bases to their advantage.
2. Summarize how companies identify attractive market segments and choose a target marketing strategy.
3. Compare and contrast local and individual marketing. Describe the advent of mass customization.
4. Explain the four major segmentation base and their variables for consumer markets.
5. Explain the three major steps in designing a customer-driven marketing strategy.
REFLECTIVE EXERCISES
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SESSION 5
PRODUCT STRATEGIES
At the end of this session, students should be able to:
Define product and the major classifications of products and services.
Discuss branding strategy – the decisions companies make in building and managing their brands.
5 PRODUCT
Product is the first of the 4Ps of marketing. It is the combination of all the components of the market offering made by a company. The concepts included under the product element of the
4P will involve developing the right product, and include concepts like services, labelling, packaging, branding, warranties, product life cycles, and new product development. All of
these will be covered in both Chapter 5 and 6, Product and New Product, respectively.
A product is much more than a physical good, it also includes services, events, persons,
places, organizations, ideas, or mixes of these. Hence, a product is anything that can be
offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. A good product concept is the first step in developing the marketing mix.
Figure 5.1 Goods and Service Continuum
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Services are usually present in many of the marketing offering. They are different in that it does not present itself as physical goods but is seen as an integral component of the offering.
Therefore, most of the product offering will usually involve some form of goods and service continuum. It can be note that at one extreme end, the marketing offer may consist of a pure
tangible good, like a can of soup. At the other extreme end are pure services, such as
consulting.
5.1 GOODS AS PRODUCT
One of the key components of a product is the physical goods itself. In this section, some concepts of this component of product, like the five levels of product, consumer product classification, degrees of innovation on product strategy will be discussed in greater detail.
5.1.1 KOTLER FIVE LEVELS OF PRODUCT
In his earlier publications, Philip Kotler theorised that there were three levels to a product,
Core, Actual and Augmented. However, in the 15 th
version of his book Marketing Management in 2014, he expanded it with two more levels to the product.
The five levels of product theorise that a single market offering has five levels of components
that is built into the product to form the final complete market offering. It serves as a scaffold
that marketer can use to itemise the components by level to develop a comprehensive market offering.
The core product or core customer value is the benefit that the customer is really buying. E.g., Communication when one buys an iPhone.
The generic product consists of the tangible or actual product that has multiple characteristics like features, styling, and quality level. E.g., the actual iPhone itself.
The expected product consists of the generic product and other attributes that the consumer desires like branding and nice packaging. E.g., the big visible logo and placement of the three lens that advertises to the world it is not any other phone but the iPhone 12 plus.
The augmented product, which is created around the core benefit and actual product by offering additional consumer services and benefits that sets itself apart from the competition.
E.g., good apple warrantee and aftersales service.
The potential product is the additional tangible and intangible features or services that can be
provided. E.g., AppleCare can be an option that can potentially be sold to customer, but itself is not a part of product augmentation.
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5.1.2 CONSUMER PRODUCT CLASSIFICATION
Consumer products are those bought by consumers for personal consumption. They are usually classified according to consumer shopping habits. These four are convenience, shopping, specialty, and unsought goods.
Convenience goods are goods which are bought frequently and with little effort. Examples are staples, impulse goods, and emergency goods like soft drinks and snacks. For such
products it is important that the products are readily available and conveniently located. The consumer ‗s ability to have it when and where they want it is important.
For Shopping goods, consumers usually compare many aspects of the product (such as price and style) prior to purchase. Consumers spend effort shopping around because much information is needed to select the best alternatives among what is available in the market.
Specialty goods are goods which have some unique characteristics that customers are willing
to put in effort to obtain. They will be willing to pay a premium, travel to the central district, to get a Gucci bag as they feel there are no other acceptable substitute for it. E.g., Brand
products and sport cars.
Unsought goods are goods that are typically unknown to the customer or are goods that they
do not want to buy them without some form of motivation. Therefore, marketers must make much effort to promote and sell these products for it to be sold. E.g., Burial plots and
insurance.
5.1.3 DEGREE OF INNOVATION ON PRODUCT STRATEGY
New products may be classified according to the degree of innovation. This is related to different levels of learning required to adopt the new products. Given the different degrees of
innovation, the best strategy for successful adoption of new products will be different. Hence it is important to understand the three degrees of innovation, Continuous, Dynamically
Continuous and Discontinuous Innovations.
Continuous innovation occurs when the amount of innovation is progressive, and the amount of learning is little. In such situations, the best strategy to ensure success of the product is
simply to make the consumers aware of the improved product existence, and have the product
widely distributed for consumers to try them. An example would be the introduction of a new flavour of soft drink.
Dynamically continuous innovation occurs when the amount of innovation is significant
enough such that it motivates the consumers to want the product. However, the consumer does not require new learning to adopt this innovation. In such situations, marketers should
stress the improvements to the consumers in its communications. An example would be the significant improvement of the M-chip MacBook over the Intel-chip MacBook in terms of
battery life and performance. This is motivation for MacBook users to upgrade, where new learning to use the improved version is not needed.
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Discontinuous innovation occurs when the innovation is so significant, that it is disrupts the way the product is used, and learning is needed to adopt this innovation. In this situation,
stressing the improvement to the consumer will not be sufficient because the consumer must be trained to use the new product. Therefore, for the marketer to be more effective in
marketing this product he needs to educate the consumers on how to use the product. An
example of this would be the use of smart eBooks over traditional textbooks. The improvements are significant, but unless teachers and students know how to use smart
eBooks, the adoption of smart eBooks will not happen.
5.2 SERVICES
Compared to physical products, services differ significantly in that it is intangible - no physical form. Therefore, it requires additional marketing effort. In this section on services
marketing, the characteristics of services will be discussed, along with the three aspects of
how services are marketed to generate profitability.
5.2.1 SERVICE CHARACTERISTICS
Services have some key differences from physical product. These differences affect how services are managed and marketed successfully. The following are the six characteristics of a service:
1. Intangibility
2. Perishability
3. Variability
4. Inseparability
5. User participation
6. Lacks ownership
Services are intangible, it does not have a physical form. Making services tangible is sometimes necessary and preferred. An example would be a tourist desiring the service for
the bungee jumping. If it were not for the tangibility created by the photos taken, his friends would not be convinced that he has done the jump.
Services are perishable as services does not have physical form, hence it cannot be stored. This results in issues in managing services. For example, demand will fluctuate, and service
providers are not able to store services in low seasons to be sold in high seasons. Therefore, services usually will adopt yield management in pricing where seasonality of demand is
present.
Services provided will be variable because different service providers will provide the service
differently. Even the same service provider, at a different point of time will provide the service differently. Hence, variability is to be expected, but it should be managed. Businesses
manage this by having service standard clearly expressed and communicated to the service
providers. Therefore, given the same situation, different service providers know what is to be expected and all will provide the same service.
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The production of services, and its consumption is inseparable. This will result in quality
control being more difficult than the production of products where quality checks take place before consumption. Businesses in the service industry should have their staff trained well
before they are involved in providing service. This is so that when the service is being produced, the quality will not likely be bad.
The production of services will usually require some form of participation by the consumer.
Customers that are engaged usually experience much better service quality than those that refuse to participate. Hence, you will find many services soliciting the participation of the
clientele when providing the service. Consider the tour operator, the most successful
operators are those that can get the tourist to participate in the activities.
Services cannot be owned. Unlike product which can be owned and traded, service is but a
moment of experience. Service providers need to provide evidence of service consumption. Students may not be able to own the service consumed during their university days, but their
evidence of participation is recorded by the registrar of the universities and the evidence of accomplishment is presented in their transcripts.
5.2.2 THREE ASPECTS OF SERVICE MARKETING
For marketers to market the service well, they will have to manage three aspects of service marketing. These three aspects are:
1. External Marketing
2. Internal Marketing
3. Interactive Marketing
External marketing is the marketing done by the business to its customers. It is the managing of the marketing mix. In this respect, services marketing is no different from product marketing.
Internal Marketing is the marketing between the business and service providers. It is about
selling the concept of good service culture to the businesses ‗internal audience. It is also the motivation of employees of the business to work toward giving the best service possible. In a
business all contact moments between the customer and the organization affects the quality of experienced by the customer. In services, this is especially important. The quality of service
is defined by the customer by the worst of all the service moments that have been provided. Hence, be it the billing department, back office, or front office personnel that the customers
may be in contact with, all must be motivated to provide good service.
Interactive marketing is how the service providers interact with the customers. It is about
ensuring service providers knows how to provide good service. Employees may be motivated to provide good service because of good internal marketing, but they may not know how to
perform the services well. Having good and well-established standards and procedures is important. Training will provide employees with the skills needed to interact well with the
customers. Having the right tools like social media, call centres, front desk etc. will helps facilitate the interactions.
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5.2.3 SERVICE PROFIT CHAIN
The service profit chain is the sequence of event that leads a service provider from providing good service to profitability. The event follows the following sequence:
1. Internal Service Quality
2. Satisfied Service Employees
3. Greater Service Value
4. Satisfied Customers
5. Profits
It starts with having internal service quality. Having good support for service providers, good
working environment, clear and high standards of service expectation are some of the things that will lead to internal service quality. Having the right direction, conditions and
conditioning for good service quality will also result in satisfied service employees.
Satisfied service employees will result in more productive employees. A smile from a happy
service provider makes the service more pleasant. A happy employee is focused in servicing the customer and will result in greater efficiency as well. The result can only be greater
service value to its customers.
With greater service value, customers will naturally be not only satisfied but be possibly delighted.
Satisfied customers will repeat their purchases, they will be informal brand ambassadors
recommending the business services to their friends. Profits will naturally result as the brand equity is developed. FedEx founder and CEO Frederick Smith once said, "when people are
placed first, they will provide the highest possible service, and profits will follow".
5.3 BRANDING
Having a brand provides business with some advantages. For starters, branding creates visibility. A brand is a name, term, sign, symbol, design, or a combination of these, that identifies the maker or seller of a product or service.
Branding provides longevity to the business. Products will live and die, but the brand carries on in the new products. The brand name and trademark provide legal protection for unique product features. For example, Stella Artois, a popular beer brand, started in the year 1366.
Branding communicates superiority, it helps consumers identify products and its benefits. It says something about product quality and consistency. For example, Rolex defines quality watches.
Branding tells the story of the company. The brand name becomes the basis on which a
whole story can be built around its product. For example, NTUC FairPrice, the name says it started as part of the trade union (NTUC = National Trade Union Congress). It was a co-
operative providing affordable groceries to union members.
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Branding also helps the marketer segment its markets. Procter and Gamble has sixty-five brands to segment products that it markets in ten different product categories.
To manage a brand well there are four key areas that a business must consider. They are:
Brand Positioning
Brand Name Selection
Brand Sponsorship
Brand Development
5.3.1 BRAND POSITIONING
A brand position is like product position. A position in marketing is the location that brand stands in relation to other brands in the same market as perceived in the minds of the consumers. Marketers can position brands based on at any of these three levels:
Attributes of the product
Superiority of benefits offered
Brand‘s beliefs and values (what the brand stands for)
Brand positioning is important because it creates brand equity and the resulting brand value. Brand equity is the positive differential effect that the brand name has on customer‘s
response to the product or service. It is the measure of the brand ‗s ability to capture consumer preference and loyalty. In essence, it is the value of the customer relationships that
the brand has created. Brand valuation is the process of estimating the total financial value of a brand. The fundamental asset underlying brand value is brand equity.
High brand equity provides a company with an elevated level of consumer brand awareness and loyalty. This is used as leverage in bargaining with resellers. Products are more easily
launched with line and brand extensions (to be explained in later section of this chapter). It
protects against fierce price competition and is the basis for building strong and profitable customer relationships.
Brand equity does not just happen, it must be developed. It starts with creating Brand salience or awareness. The products of the brand will need to perform and/or provide the desired
imagery. Consumers that use the product must experience, judgement and feel the desired attributes that the brand wants to portray. Consistency of experience will result in the
consumers finally associating the brand to the positive attributes. This association is the brand equity that have been developed.
5.3.2 SELECTING A GOOD BRAND NAME
When selecting a brand name, there are some good principles that should be adopted. It should be:
Distinct
Short
Appropriate
Easy to spell and pronounce
Likable
Extendable
protectable
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The brand name needs to be distinct as it is the function of the brand to set the business apart from the competition.
The brand name should be short so that it is easy to remember yet be sufficiently long to be distinctive. Federal Express changed it branding to FedEx and Unite Parcel Services to UPS for this reason.
The brand should be appropriate for its business. For example, ―FairPrice‖ is a name that suggest to consumers that its price is fair, and important consideration for groceries that it
sells.
Easy to spell and pronounce. The brand will be used often by customers and the business,
ease of spelling and pronouncing not only make it easier to remember, but it also makes life easier for all that use it and promotes communication.
Brands should be likable. Positive sounding and feeling words are often used for this reason.
Pampers suggest that the baby ‗s bottom is pampered well.
Brands should be extendable. Brand extendibility is part of brand development. As
businesses grow, more products lines may be added, and brand names that can be extended
allows for more branding options.
Brand also need to be protectable. For example, the use of adjectives used as brands are often
not easy to protect legally. ―Good‖ is an adjective, but that is also noun, it is seldom used in
branding because even as it sounds positive, it is difficult to protect. Brand names are sometimes already registered for other products or in other geographic markets. Protecting
them is more challenging in such situations.
5.3.3 BRAND SPONSORSHIP
Brand Sponsorship is how the brand is managed and used in the market. There are four methods:
Manufacturer ‗s Brand or National Brand
Private Brand or House Brand
Co-Branding
License Branding
Manufacturers ‗brands aka national brands have long dominated the retail scene. They are the
brands that are name of the manufacturer and used across the country and even across borders. This branding method is good, but much management is needed to protect and
manage it especially in the international space to prevent abuse and counterfeits.
In recent times, an increasing number of retailers and wholesalers have created their own store brands aka private brands. Private brands are easier to manage and result in it often
priced lower than comparable national brands. It often yields higher profit margins for the
reseller. It also gives resellers exclusive products that cannot be bought from its competitors
Co-branding occurs when two established brand names of different companies are used on the same product. Co-branding create broader consumer appeal and greater brand equity. A
notebook from Dell may have the branding from Intel that provides the central processing unit and NVidia that provides the graphic processor, all brands adding value to the product. It
allows a company to expand its existing brand into a category it might otherwise have
difficulty entering alone.
Co-branding also has its limitations as such relationships involve complex legal contracts and
licenses. It will also require that partners carefully coordinate their advertising, sales promotion, and other marketing efforts. Finally, any bad publicity arising from Brand A is
likely to affect Brand B. Hence, partners in cobranding activity must ensure that their respective brands are managed professionally to attract only good publicity.
License branding is a way for business to earn from established brand equity by renting out
the rights to other manufacturers to manufacture its product and use its branding. Most of Coke ‗s bottles bottled worldwide are from bottlers that have licensed the rights from The
Coca Cola Company.
5.3.4 BRANDING DEVELOPMENT STRATEGIES
As the businesses grows, it needs to expand its product line. Decisions will be made how to
leverage and grow the brand value; this is brand development. A company has four choices when it comes to developing brands:
Product Line Extensions
Brand Extensions
Multi-branding
New Brands
Product line extension is to extend existing brand names to new forms, colours, sizes,
ingredients, or flavours in an existing product category or line. This is used to add a new variation to an existing product line and an extension to the product name is added to indicate
the variation within the line. For example, Twisties Original and Twisties Chicken
Brand Extensions extend a current brand name with a category name to add a completely new products line or category to the brand ‗s offerings. Virgins for example has Virgins Media for
its media business, Virgins Money for its banking business, Virgin Records for it recording
business, etc.
Multi-branding introduces an additional brand to the brands already existing in the same
product category. For example, Procter and Gamble has Head and Shoulder for anti-dandruff shampoo line, Pentene for normal hair shampoo line, and Herbal Essence to its natural herbs
shampoo line.
New Brands is when a complete unrelated new brand is created. For example, when Procter and Gamble went into a completely new product category, diapers, it created the Pampers brand.
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REFERENCES
Figure 5.1 Goods and Service Continuum: The Service Continuum. (n.d.). [Graph]. Kerin, R.,
& Hartley, S. (2019). Loose Leaf for Marketing (14th Ed.). McGraw-Hill Education. Chapter
12, Services Marketing, page335.
Kotler, P., Armstrong, G., Ang, S. H., Leong, S.-M., Tan, C. T., & Yau, O. H.-M. (2012). Principles of marketing: An Asian perspective (3rd Ed.). Singapore, Singapore: Pearson Education Centre.
Kerin, R., & Hartley, S. (2019). Loose Leaf for Marketing (14th Ed.). McGraw-Hill Education.
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1. Which of the following is a pure tangible good?
(A) financial advice
(B) a meal at a restaurant
(C) a spa treatment
(D) shampoo
2. The service profit chain consists of five links. Which of the following is one of these five links?
(A) increased service inseparability
(B) broader service mix
(C) increased service variability
(D) satisfied and loyal customers
3. Brand is the differential effect that knowing the brand name has on customer response to the product and its marketing.
(A) capital
(B) equity
(C) stake
(D) wealth
4. Store brands are also known as brands.
(A) private
(B) national
(C) licensed
(D) manufacturer's
Self-Practice Exercise:
MCQ and True/False
5. The range of Pokka offerings from the traditional Green Tea to the newly introduced no sugar range conveys the attitude of healthy drinks are all examples of a company's commitment to
(A) Dynamically continuous innovation.
(B) Discontinuous innovation.
(C) Continuous innovation.
(D) Symbiotic innovation.
6. A pre-planned funeral service is an example of an unsought product. True/False
7. Service inseparability means that the quality of services depends on who provides them as well as when, where, and how they are provided.
True/False
8. Orienting and motivating employees to work as a team to provide the best service experience possible to the customers is called social marketing.
True/False
9. A brand is a name, term, sign, symbol, or design, or a combination of these, that identifies the maker or seller of a product or service.
True/False
10. A brand extension gives a new product instant recognition and faster acceptance.
True/False
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.10 T
.9 T
.8 F
.7 F
.6 T
.5 C
.4 A
.3 B
.2 D
.1 D
Questions:
Answers to Self-Practice
1. What are the five levels of a product? Philip Kotler increased from three levels to five level, what would the benefit be in doing that?
2. How does a product become a specialty product? Why have many products ‗attempted
to attain specialty status failed?
3. Explain, with examples, the four characteristics of services that a company must
consider when designing marketing programs. How can you apply them to the business or McDonalds fast food?
4. Discuss the advantages of branding? What is the cost involved in branding? Would
Marketers sell products unbranded? Why?
5. Explain the concept of line extensions and brand extensions. How are they different
and how are they similar?
REFLECTIVE EXERCISES
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SESSION 6
NEW PRODUCT DEVELOPMENT
At the end of this session, students should be able to:
Describe the stages of the product life cycle.
Describe how marketing strategies change during the product ‗s life cycle.
Explain each step in the new product development process
Describe the role of packaging, labelling in marketing a product.
Describe the factors that contribute to the success and failure of new products.
6 NEW PRODUCT
Every business must develop new products besides managing them in the face of changing
tastes, technology, and competition. Every product seems to go through a life cycle – a product is born, goes through several phases and eventually dies as newer and better products
come along. This chapter provide an understanding of the product life cycle, of the processes
involved in developing, labelling, and packaging new products, and the mistakes to avoid in marketing of products.
6.1 PRODUCT LIFE CYCLE
Product life cycle (PLC) is the amount of time a product goes from being introduced into the
market until it has taken off the shelves. This life cycle is important, as all products eventually decline, the firm must find new products to replace them. The PLC also provides
guidance to marketers on how to market its product as it ages through the different stages. Figure 6.1. shows the PLC.
Figure 6.1 The Product Life Cycle
6.1.1 PLC and Marketing Strategies
Introduction is a period of slow sales growth as the product is introduced into the market. The
introduction Stage starts when the new product is launched. The marketing objective is to create product awareness and trial. Thus, only basic versions of the product are produced.
Distribution is limited due to supply. Penetration pricing and skimming pricing may be adopted at this stage, but alternative pricing is also possible. Profits are negative or low as the
promotion expenses are likely to be high.
Growth is a period of rapid market acceptance and increasing profits. At this stage, sales
begin to escalate, and profits increases as the enterprise takes advantage of the heavy consumer demand. However, more competition starts to enter the industry. The marketing
objective is to differentiate itself from the competition. Prices may fall from introduction as
competition provides alternative but will remain relatively stable. There will be an increase in the number of distribution outlets as supply increase and more intermediaries carry the
product. Both the business and the competitors will introduce new product features, and the market will expand.
Maturity is when sales growth slows down as the product achieves acceptance by most
potential buyers. Profits level falls off or decline because of increased marketing outlays to defend the product against competition. In this stage industry sales growth slows, and that
leads to intensified competition. The marketing objective is to keep customers loyal as to
maintain market share of customers. In this PLC stage, competitors begin to mark down prices, in price wars. Fierce competition includes regular sales promotions especially toward
the end of this stage. These include reminder advertising in preparation of replacement product as the current product approaches decline. Distribution channels are maximised to
compete at this stage of maturity.
In the decline stage, total sales of the industry start to fall as the product reaches end-of-life. Competition declines with only few strong players remaining if any. The marketing objective
at this stage is to harvest the product and halt all activities to maximise profit. Slow-moving products in the line are deleted while others are consolidated to maintain economies of scale.
All forms of promotion activities are avoided to cut cost. Marketing intermediaries are removed leaving only the few profitable ones. Pricing is adjusted to maximise profitability as
the business will manufacture the products only until it is no longer profitable to do so.
6.1.2 BUYERS IN THE PRODUCT LIFE CYCLE
As the product goes through the product life cycle, the characteristics of the buyer will also
change. The educational and income level, the ability to manage information and bear risk of
the buyers fall at each stage as buyers become increasingly more conservative. The buying
starts with the innovators and early adopters at the introduction stage and proceeds with the
early majority in the growth stage, late majority in the maturity stage, and ends with the
laggards in the decline stage. Refer to figure 6.2 below for the distribution and characteristics.
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Figure 6.2 Buyers in the product life cycle
6.1.3 ALTERNATIVE PRODUCT LIFE CYCLE CURVES
Figure 6.3 Alternative Product Life Cycle Curves
Most products will adopt the PLC of the generic PLC that was discussed earlier. However, there are products that may not follow the normal PLC curve, they are the style, fashion, and fad.
Styles are the basic and distinctive mode of expression; once invented it may last for a long time and cycle back in and out of interest.
Fashions is the prevailing combinations of styles in each industry, which tend to grow slowly, remain popular for a while, and then decline slowly.
Fads are products with intense growth and intense decline without any maturity. The temporary unusually high sale is driven by consumer enthusiasm and as the consumer interest wanes shortly result in rapid decline.
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6.1.4 PRODUCT LIFE CYCLE EXTENSIONS
At the maturity stage, marketer usually would consider modifying either the market, product, or marketing mix to extend the PLC.
In product modification, marketer looks for new customer segments to market to. It could be geographical regions, users, industry etc. By having an additional segment to sell to, the life cycle naturally extends itself.
In market modification, the marketer changes characteristics of the product such as quality, features, style, or packaging to attract buyers that previously would not buy.
For marketing mix, the enterprise tries to change any or some of the marketing mix elements, to attract new buyers. It may or may not involve the product but will involve the other marketing mix. Sometimes product changes are too costly to be feasible.
6.2 NEW PRODUCT DEVELOPMENT PROCESS
The New Product Development Process are seven processes that provides marketers with a
systematic sequence of processes to adopt in the development of new products. It provides the scaffolding to ensure thoroughness in the development process. The seven processes are
illustrated in Figure 6.4 New Product Development Process.
Figure 6.4 New Product Development Process.
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STEP 1: NEW PRODUCT STRATEGY DEVELOPMENT
The objective of this step is to identify markets, consumer needs and wants that can indicate business opportunities. It also defines the roles of the appointed team members.
Environmental scanning tools like SWOT and PEST analysis would usually be done at this stage.
STEP 2: IDEA GENERATION
Idea generation is the marketer systematically searching for new-product ideas. One of the
most important sources of new-product ideas is customers themselves. The purpose of idea generation is to collect as many suggestions as possible. While these suggestions will be
screened subsequently in the process of developing new products, care is taken to not screen off ideas at this stage to avoid potentially good ones from being prematurely removed.
A firm may find and develop new-product ideas from internal and external sources. Using
internal sources, the firm can find innovative ideas through formal research and development or pick the brains of employees - executives, scientists, engineers, manufacturing staff,
salespeople, etc. through suggestion box.
Alternatively, the firm can obtain good new-product ideas from external sources such as inventors, distributors, and suppliers or even competitors. Businesses may be required to buy the ideas from these external sources as it is not always given for free.
STEP 3: SCREENING & EVALUATION
Idea screening is the process to identify promising ideas and drop the poor ones. It is
important to distinguish between a product idea and a product concept. A product idea is an idea for a new product that the company can see itself offering to the market. A product
concept is a detailed version of the idea stated in meaningful consumer terms. If the idea is promising, it will be further developed into a concept for evaluation.
The promising ideas could be evaluated using a method like Customer experience
management (CEM) used at 3M. 3M would provide their key customers with sample of the product for testing. Feedback from these key customers will be used to evaluate this product.
This method may not always be applicable to most business as the samples to be used requires prototyping, and for many businesses prototyping is too costly to be done at this
stage of the new product development process.
More commonly, businesses use concept testing to evaluate the products. Concept testing
calls for testing new-product concepts with groups of target consumers. In concept testing, several descriptions of the product are generated to find out how attractive each concept is to
the customers. Amongst these, the best one is chosen.
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STEP 4: BUSINESS ANALYSIS
At the business analysis stage, an initial marketing strategy for the product is developed. It will provide a description of the target market; the planned value proposition; and the sales,
market share, and profit goals for the first few years. It also outlines the product ‗s planned price, distribution, and marketing budget for the first year. A detailed study of the planned
long-run sales, profit goals, and marketing mix strategy is also done.
Essentially, the purpose is to review the sales, costs, and profit projections for a new product
to find out whether they satisfy the company‘s objectives. To see if a business fit exists, and how it can be accommodated in the capacity management of the business. If everything is a
go, only then will it proceed to the development stage.
STEP 5: DEVELOPMENT
In the development stage the cost increases substantially as engineering develops the product
concept into prototype and a prototype to a final product. Product will be tested to prevent problems later. Services that are needed to compliment the product will also be developed at
this point.
STEP 6: MARKET TESTING
In market testing, the marketing mix are introduced into realistic market settings for testing of
the marketing mix. It tries to eliminate any potential problem with activities in any of the 4P‗s before commercialisation takes place to prevent costly marketing mistake. Market
testing is usually costly; hence, it is only done when the cost of marketing error is higher than
the cost of the test. For testing of innovative product is it usually not even possible for fear of releasing information of features of the product too early.
Marketers may do a standard test where only a portion of the market is isolated and tested, or a controlled test where a controlled environment is used in testing. Marketers may also do
simulated market testing which is usually a mathematical or computational simulation to estimate performance of the marketing mix.
In the event a standard market testing cannot be done, marketer usually may do a simulated market test as it does not expose the new product to the prying eyes of competition and is not costly.
STEP 7: COMMERCIALIZATION
Commercialization is when the final product is introduced to the market. Decisions must be made concerning when to launch, and where to launch.
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It is important to launch the product at the time most favourable. Has the competition recently launched a similar product? If so, is the market ready for a new product? Are there
any seasonal events or festivity that will impact the product acceptance either positively or negatively? These are just some important questions that marketers should ask in the decision
for commercialisation. For example, in Singapore, Chinese businesses seldom launch
products during the lunar seventh month for fear it will result in bad luck.
Higher end fashion products are usually launched in Paris, Milan, and New York.
Technological products like to use Silicon Valley as the location for commercialisation. The reason is that the location where it is launched may affect how the product is perceived and
affects its positioning and product success.
6.3 PACKAGING, LABELLING AND REASONS WHY PRODUCTS FAIL
The last part of this chapter, how packaging and labelling is managed for products, and the reasons that products fail, will be discussed.
6.3.1 PACKAGING AND LABELLING
Packaging involves designing and producing the container or wrapper for a product. Packages must perform many tasks, it protects, provide essential information, identifies the
product, attracts the attention of potential buyers, distinguishes the product from competition,
and is used to represents the brand.
Labels are the printing on the packaging and help to perform several marketing functions. It identifies the product or brand; the details help provide details of content and classify the
product. It helps promote the brand. It is also needed by law in some countries to provide unit pricing (stating the price per unit of standard measure), open dating (stating the expected
shelf life of the product), and nutritional labelling (stating the nutritional values in the
product).
6.3.2 NEW PRODUCT FAILURES
Marketers must also be familiar with reasons that result in some new products failing.
According to Quora ‗s research, eight reasons product fail is because of the following:
1. Weak segment analysis, this means that the businesses have wrongly selected their target customers resulting from bad analysis.
2. Poor portfolio management, it means that business have pursued businesses that they have no competitive advantage in.
3. Poor strategic planning, this is when management lack long-term foresight and failed to focus on strategic imperatives and fail to establish sustainable competitive advantage over the longer run.
4. Unskilled marketing management, therefore, marketing activities would be under par.
5. Inadequate market research, if the business plan data used was inadequate, the resulting business decisions made will never be good.
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6. Lack of marketing governance, it means that the alignment of internal audience and business activities to the vision, mission, and business objectives is weak.
7. Ego of the C-suite executives, the inability to get adequate assistance when competence is lacking will result in poor execution and results in failure.
8. Unstructured marketing plan, or the lack of plan. It simply means there is inadequate effort in proper planning.
REFERENCES
Figure 6.1 The Product Life Cycle: Charting The Product Life Cycle. (n.d.). [Graph]. Kerin, R., & Hartley, S. (2019). Loose Leaf for Marketing (14th Ed.). McGraw-Hill Education. Chapter 10, Developing New Product and Services, page301.
Figure 6.2 Buyers in the product life cycle: Five categories and profiles of product adopters.
(n.d.). [Graph]. Kerin, R., & Hartley, S. (2019). Loose Leaf for Marketing (14th Ed.).
McGraw-Hill Education. Chapter 10, Developing New Product and Services, page307.
Figure 6.3 Alternative Product Life Cycle Curves: Styles, Fashion Fads. (n.d.). [Graphs].
Kotler, P., Armstrong, G., Ang, S. H., Leong, S.-M., Tan, C. T., & Yau, O. H.-M. (2012). Principles of marketing: An Asian perspective (3rd Ed.). Singapore, Singapore: Pearson
Education Centre. Chapter 9, New Product Development and Product Life Cycle Strategies,
page302.
Figure 6.4 New Product Development Process: The New Product Development Process Adopters. (n.d.). [Illustration]. Kerin, R., & Hartley, S. (2019). Loose Leaf for Marketing
(14th Ed.). McGraw-Hill Education. Chapter 10, Developing New Product and Services, page282.
Kotler, P., Armstrong, G., Ang, S. H., Leong, S.-M., Tan, C. T., & Yau, O. H.-M. (2012). Principles of marketing: An Asian perspective (3rd Ed.). Singapore, Singapore: Pearson Education Centre.
Kerin, R., & Hartley, S. (2019). Loose Leaf for Marketing (14th Ed.). McGraw-Hill Education.
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1. What are the two possible ways in which a company can obtain new products?
(A) new-product development and acquisition
(B) internal development and product audits
(C) market mix modification and integrated marketing
(D) market development and product extension
2. A review of the sales, costs, and profit projections for a new product to find out
whether they satisfy the company's objectives is called a .
(A) portfolio analysis
(B) business analysis
(C) SWOT analysis
(D) concept analysis
3. Which of the following is a definition of style?
(A) a trend that represents consumer choices relating to minor goods and services
(B) a product of unusually high sales driven by consumer enthusiasm
(C) a basic and distinctive mode of expression
(D) a currently accepted or popular style in a given field
4. Which of the following statements is true of the PLC?
(A) Throughout the product introduction stage, sales are zero.
(B) Growth is a period of rapid rise in sales but profits are lower than sales.
(C) Profits are non-existent in the growth stage.
(D) Maturity is the period when sales fall off but profits continue to rise.
Self-Practice Exercise:
MCQ and True/False
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5. When a product enters the maturity stage, the company should consider .
(A) maintaining the product
(B) harvesting the product
(C) modifying the product
(D) divesting the product
6. The stage at which new product and marketing programs are introduced into realistic market settings for testing is called concept testing.
True/False
7. A product idea is an idea for a new product a company can offer the market, while a product concept is a detailed version of the idea stated in meaningful consumer terms.
True/False
8. Today packages must perform many marketing tasks—from attracting buyers, to communicating brand positioning.
True/False
9. The label should describe several things about the product—who made it, where it was made, when it was made, its contents, how it is to be used, and how to use it safely.
True/False
10. Good data from market research will not help in reducing failures in marketing new products.
True/False
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.10 F
.9 T
.8 T
.7 T
.6 F
.5 C
.4 B
.3 C
.2 B
.1 A
Questions:
Answers to Self-Practice
1. Each product will have a life cycle, although its exact shape and length is not known in advance. Briefly explain each step in the PLC. Is it possible to determine the duration of each stage? Why?
2. Can the PLC be applied to more than just individual products? If yes, what are they?
3. Distinguish among a product idea, a product concept and product image. How can an idea become a concept? Why are the activities needed to bring it there?
4. At the end maturity stage, businesses apply life extensions strategies. What is the difference between product extension and marketing mix extension? Why would businesses select one over the other?
5. Explain why so many new products fail and how a company can improve its odds of new product success. By using the New Product Development Process, will it reduce product failures?
REFLECTIVE EXERCISES
SESSION 7
PRICING CONSIDERATIONS AND STRATEGIES
At the end of this session, students should be able to:
Discuss the importance of understanding customer-value perceptions and company costs when setting prices.
Identify and describe important internal and external factors affecting a firm ‗s pricing decisions.
Describe the major strategies for pricing products.
Discuss how companies adjust their prices to take into account different types of customers and situations.
7 PRICING
Pricing is the element in the marketing mix dealing with methods of setting profitable and justifiable prices. Essential it is the amount of money charged for a product or service. It
should be the sum of all the values that customers give up gaining the benefits of having or using the product or service. It is the only element in the marketing mix that produces
revenue. It is also one of the most flexible marketing mix elements.
7.1 PRICING CONSIDERATIONS
Pricing is very often misunderstood as just the list price of the product. Pricing is sum of all the values that customers give up gaining the benefits of having or using the product or
service. It is the list price that have extra fees and charges added and any incentives or
allowances deducted.
The list price is often called the published rate and recommended retail price. It represents the long-term pricing. This pricing is kept consistent over the longer term to prevent the
fluctuations in short term environmental changes from creating confusion and dissatisfaction with the consumers. For adjustments in the short term up, marketer resort to adding the
incremental value to the list price using fees and charges. For adjustments in the short term
down, marketer resort to deducting value from the list price using discount and allowance.
Price is the amount of monetary worth charged for a product or service. It is the sum of the
values that customers exchanged for the benefits of the purchase. Perceived value is more important to the consumer than the price paid because it is evaluated relative to the perceived
benefits gained.
Adjusting prices down immediately creates a higher value to the consumer but it is not
always the answer. This is because price reductions increase revenue at the expense of a substantial reduction in margin that may reduce overall profitability. Reducing price can also
initiate price wars. It may also cheapen perceptions of brand quality in the eyes of the consumer.
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Therefore, successful marketers focus on creating perceived value rather than reduce price.
This can be done by making the perceived benefit of the product of service appear better.
This can be done by advertising benefits for example.
Figure 7.1 The Pricing Equation
PRICE FLOOR TO CEILING: The range of the possible prices is from the price floor up to the price ceiling. Price floor is the lowest price, it is determined by the cost of manufacturing and marketing that product to the customer with the minimal profit margin that is needed. It is the lowest price because businesses will not produce the product if the selling price is lower than that.
At the other extreme end is the price ceiling. This is determined by the perceived value of the consumer. No logical consumer will buy a product that he feels is overpriced, he will only pay to the limit of his perceived value for the product.
However, most products that exist in the market is neither at the price floor or price
ceiling. This is because competition and other forces will drive the prices towards the centre. Competition will provide alternatives for the consumer and hence, they will
not need to pay so much for the perceived benefit that they want. Other forces like government regulations or market competition structure, may help push prices up or
down.
Hence, marketer may develop their prices using the cost (at the price floor) as a basis
and work towards a more favourable price, or from the perceived value of the product
and work towards a price that consumers are willing to pay based on the competitive and market condition. There are also two other categories of pricing, profit, and
competition-based pricing, which will also be discussed in greater length later in this chapter. Ultimately, the customer is the one who decides if a product ‗s price is right,
by the amount he is willing to pay.
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MARKET COMPETITION (STRUCTURE) AND PRICING: The market competition structure has a significant effect on the nature of the pricing as. There are four structures, pure competition, monopolistic competition, oligopoly, and pure monopoly.
In pure competition, consumers see the product as a commodity without any form of
differentiation deserving premium prices. Therefore, the marketer is a price taker, having no influence on the prices as the price is set by the market. The market for
water in utilities is one such market.
In monopolistic competition, consumers see the product with differentiation deserving
premium prices, but only in the short run. Over time the differentiation loses its value and hence ability to command a premium. Therefore, the monopolies have some
influence in the prices but only in the short run. The electronic products market is one such market.
Oligopoly is where there are only three to four major players in the industry. The pricing adjustment of one play will immediately result in adjustment to the purchase
behaviour of the consumers. As the result, all player in the oligopoly is very price
reactive, and would respond very quickly and similarly to each other. The petroleum market is an example of oligopoly pricing.
Monopoly is when one player is the only producer in the industry. As there are no
alternatives, he can set the prices and consumers have no choice but to accept.
Monopoly would set a price that maximises its own profit at the expense of the consumers if given the chance. However, this seldom happens as the regulators often
step in to prevent pricing abuses.
PRICE TRANSPARENCY: Price transparency is usually desired by the consumers. However, for the marketer, with price transparency, it prevents marketers from setting a higher premium. Hence, marketer would often blur the transparency to generate better premium. Are you able to determine which the best pricing without a calculator is if you were the consumer in the following example below?
1. Which represents the biggest savings in total dollars?
a) A markdown from $87.17 to $72.83
b) A markdown from $83.99 to $69.99
c) A markdown from $80 to $70
2. Which represents the biggest percentage off a $2,000 item?
a) 50% off
b) 25% off, then another 25% off the reduced price
c) 20% off, then another 20% off the reduced price, then 20% off the twice-reduced price
Most probably not. This is the result of blurring of price transparency by using tiered discounting.
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INTERNATIONAL PRICING: In the case of international pricing. Marketers should be mindful of some issues that must be considered. Firstly, you will find that the economic conditions are different in different countries. This affects the amount of disposable income that can be used in discretionary spending, which affects the prices that can be accepted by the consumers.
You will find that the laws and regulations pertaining to pricing is different in
different countries. Hence when trading in a foreign country or pricing for companies of foreign origin it is always good to be mindful of the more sensitive laws. For
example, in the United States there is Robinson–Patman Act protecting against price discrimination, that cover all United States companies ‗operations even those in
foreign land.
Companies will find that competitive situations differ from countries to countries resulting in the need to customise the pricing to accommodate their difference.
Grey markets are one of the biggest concerns for pricing in the international market.
This is marketing of parallel imported goods. With the significant improvement in
supply chain and logistics it is now very easy to import products for grey market
selling from another country. To prevent grey markets some companies price products
such that prices are pegged to a common international price. Other companies provide
price tags with nearby countries also included. The purpose is to reassure the
consumer that there is little benefit buying from the overseas market as the price is
similar, and the cost of buying from grey markets will out weight the benefit.
THE STATE OF ECONOMY ON PRICING: Another key factor to be considered is the state of the economy. Current prevailing economic situation like the epidemics (For example covid19), trade wars (For example between the US and China) and the position in the economic cycle will all effect consumer sentiments and must be factored when managing pricing.
7.2 THE PRICING PROCESS
There are six steps in the pricing process. The six steps are:
1. Identify pricing objectives, and constraints.
2. Estimate demand and supply.
3. Determine cost, volume, and profit relationship.
4. Select an approximate price.
5. Set the list price.
6. Make adjustment to list price.
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7.2.1 IDENTIFY PRICING OBJECTIVES
Generally pricing objectives may include factors like survival, current profit maximization,
market share leadership, or customer retention and relationship building. Price is only one of the elements in marketing mix that a company uses to achieve its marketing objectives.
Hence, price decisions must be coordinated with the other 4Ps to form a consistent and effective integrated marketing program.
Companies may position their products on price and then tailor other marketing mix decisions to the prices they want to charge. Businesses may also deemphasize price and use other marketing mix tools to create non-price positions.
Some constraints in pricing could be organizational decision considerations, styles, product nature, market structure, economic conditions, demand, and supply factors, etc. These must be taken into consideration as well in the pricing process.
7.2.2 DEMAND AND SUPPLY FACTORS
The relationship between the prices, the demand and supply are important for price setting.
Marketers need to analyse them to be able to set good pricing.
Demand is the relationship between prices and how much quantity is demanded. It will differ
by Class (Cars), Group (Sedan) and Brand (Toyota Camry). It will also be significantly
affected by the level of innovation. As innovation wanes so will the businesses ‗ability to command a premium in the product. Recall in chapter 6, it was mentioned that at different
stage in the lifecycle there are different pricing strategy to adopt at the various stages.
The other aspect of demand that is important to understand for pricing is price elasticity of
demand. Price elasticity of demand is about how responsive quantity demanded is affected by a change in price. If quantity demanded hardly changes with a change in price, we say
demand is inelastic. If quantity demanded changes greatly from a small change in price, we say the demand is elastic.
Supply is the relationship between the production volume and the cost to produce the products. The relationship between volume and production cost is seldom linear. This is
because of the effects of the benefits of economies of scale and learning curve.
Other factors that may affect supply are the model of manufacturing used, and the technology adoption in production. This is because they will also significantly affect the cost of
production. For example, 5G will reduce the cost of machinery and result in higher profits.
Government support for such initiatives will further reduce the cost to the producers.
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7.3 NEW PRODUCT PRICING
There are two pricing strategies that can only be used for new products. They are skimming pricing and market penetration pricing.
SKIMMING PRICING: Skimming pricing is done by setting a high price for a new
product. Revenue is maximized as customers is skimmed layer by layer from the segments willing to pay the highest to those willing to pay market price slowly over
time. Market skimming pricing makes sense only under certain conditions, firstly, the
product ‗s quality and image must support its higher price, and sufficient demand exist. Next the costs of producing a smaller volume cannot be so high that they cancel
the advantage of charging more. Finally, competitors should not be able to enter the market easily and undercut the high price that have been set.
MARKET-PENETRATION PRICING: Market-penetration pricing is the setting of an exceptionally low price for a new product to attract as many buyers as possible to gain a large market share. Market-penetration pricing works only if, firstly, the market must be highly price sensitive so that the low-price leads to market growth. Next, the production and distribution costs must fall as sales volume increases. Finally, the low price must help to keep out the competition.
7.4 DEMAND-BASED PRICING TECHNIQUES
This is the technique where the list price is set based on buyers ‗perceptions of value rather than on the seller ‗s cost. The following are value-based pricing techniques:
Prestige Pricing
Price-lining
Optional Product Pricing
Good Value Pricing
Captive Product (Loss Leader) Pricing
Bundled Pricing.
PRESTIGE PRICING: Using price to position the product or brand as prestigious. Consumers perceive that the higher prices mean that the product is of a higher quality. Hence, pricing is used to position the product as prestigious. For example, Gucci bags.
PRICE LINING: Price lining aka product line pricing. The marketer set the prices in intervals to differentiate the various products in a product line, account for the quality differences between products in the line. Hence the price separation between the various models in the line to reflect difference in quality.
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GOOD VALUE PRICING: Good value pricing is the pricing technique to make the goods appear to have more value for money. Price is considered along with the other marketing mix variables before the marketing program is set. Good-value Pricing is not setting a ―low price‖ but offering just the right combination of quality and good service at a fair price. For example, McDonald ‗s value meal.
OPTIONAL PRODUCT PRICING: Optional product pricing aka value add pricing. It is the pricing of options or accessory products along with a main product. It is done when marketers attach value-added features and services to the base product, and prices correspond to selected options. For example, Budget Airlines
CAPTIVE PRODUCT PRICING: Captive-product pricing aka loss-leader pricing. The business captures more sales at the expense of lost profit from some other product. To do this, consumable products, which is the profit generator, must be used along with a main product which is the loss leader. For example, Shaver and blades. In the case of services, captive-product pricing may be done with a fixed fee of the service, as the loss leader, plus a variable usage rate, as the profit generator.
PRODUCT BUNDLE PRICING: In product bundle pricing, products, usually complimentary in nature, are bundled for a more attractive selling price. For example, this is used in some shampoo and conditionals bundling.
ODD-EVEN (PSYCHOLOGICAL) PRICING: Odd-even pricing or psychological
pricing occurs when sellers consider the psychology of prices and not just simply the
economics of prices. Using odd ending like 99 instead 100, 88 instead of 90 helps
because of the odd endings result in consumer perceiving the prices are much more
attractive than actual price difference. For example, $99, $88, $66.
YIELD MANAGEMENT PRICING: Yield management pricing is used mostly in services where supply is constant and limited, and the demand fluctuates by the seasons. Prices are set based on time of the year or season. For example, Hotels, Airlines, Cinemas.
7.5 COST BASED PRICING TECHNIQUES
In contrast to customer-based value-based pricing, cost-based pricing is set based on the costs for producing, distributing, and marketing the product plus an expected return for its effort. Cost-plus (mark-up) pricing is the predominate pricing used in cost-based pricing.
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COST-PLUS (MARK-UP) PRICING: Cost-plus (mark-up) pricing is done by adding a standard mark-up to the cost of the product. The mark up can be in absolute or a percentage of the cost of goods or selling price. This is most used because sellers are more certain about costs than demand and when all firms in the industry use this pricing method, prices tend to be similar and price competition is thus minimized. For example, Category pricing in supermarkets.
7.6 PROFIT BASED PRICING TECHNIQUES
Profit based pricing is used mostly in the situation where demand and supply is almost certain and there is the ability for the marketer to set the price like in a monopoly market. For example, utilities supply like water. Target return pricing is used in profit-based pricing.
TARGET RETURN PRICING: In target return pricing, prices are set at a value that can make a targeted return. Figure 7.2 illustrates the relationship of the cost, revenue, and targeted return on a breakeven chart. The target return price is calculated this way: Total expected revenue/Total expected production, $12,000,000/800,000units, which amounts $15/unit. For example, the twenty limited edition Bugatti Carbon- Covered Chiron Noire Duo sold at USD3.3mil each is priced using this method.
Figure 7.2 Illustration of Breakeven Graph in Target Return pricing.
7.7 COMPETITION/MARKET BASED PRICING TECHNIQUE
Competition/market-based pricing is done by setting prices based on parity with competitors ‗strategies, prices, costs, and market offerings. Hence, it is aka parity pricing. Using a
customary price as reference price, price is set higher and lower depending on comparative
offering by marketer. For example, soft drinks.
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In assessing competitors ‗pricing strategies, the enterprise should ask several questions such as:
How does the firm ‗s market offering compare with competitors ‗offerings in terms of customer value?
How strong the current competitors are and what are their current pricing strategies?
How does the competitive landscape influence customer price sensitivity?
7.8 PRICING ADJUSTMENT STRATEGIES
List price are difficult to set and amend. However, in the short term, price adjustments may be needed to account for diverse types of customers and situations. To do this, businesses should not amend the list price but use the price adjustment methods instead, like:
Segmented Pricing
Discounts
Geographical Pricing
SEGMENTED PRICING: Segmented Pricing is pricing a product or service at two or more prices, where the difference in prices is not based on differences in costs but market segments. The following are some ways pricing is segmented:
o Customer-segment. For example, Apple products for standard market and academic market.
o Product-form. For example, Industrial and consumer users of electricity o Location-based. For example, 7Eleven prices products at shops in central business
districts higher than those located in Housing Development Board locations. o Time-based. For example, Electric Road Pricing for the road tolls.
DISCOUNT PRICING: Discounts are a straight reduction in price that is not permanent. The following are some forms:
o Cash discount, where discount is given for not using credit that has been offered.
o Quantity discount, where purchase in larger amount result in discounts given. o Functional discount, where discounts are given to the functions performed by the
different marketing intermediaries. o Seasonal discount, discounts that are given on specific seasons or occasions.
O Promotional discounts are a temporarily lowering of price below list price for promotional purposes. This creates buying excitement and urgency and motivates consumer to buy.
GEOGRAPHICAL PRICING: Geographical pricing is done to adjust for cost of distribution. The follow are some common forms:
o Incoterms pricing, priced to transport to the location where the goods are handled over to customer according to rules setup under Incoterms. For example, FOB, CIF, DDT price.
o Zone pricing, all customers within a given zone pay the same total transport charge.
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o Basing-point pricing, a location is sited as the ―base-point‖ and the transport charges to all customers are based on distance from the set base -point.
o Freight-absorption pricing, all or part of the transport charges is absorbed by the seller.
o Uniform-delivered pricing, the same price plus freight to all customers, regardless of their location.
DYNAMIC PRICING: In dynamic pricing the prices are constantly changing. This
is done to meet the characteristics and needs of individual customers and situations.
For example, internet sellers like Amazon.com can mine their databases to gauge a
specific shopper ‗s desires, measure his or her means, and instantaneously tailor
products to fit that shopper ‗s behaviour, and price those products accordingly.
REFERENCES
Figure 7.1 The Pricing Equation: Charting The Price Equation. (n.d.). [Graph]. Kerin, R., & Hartley, S. (2019). Loose Leaf for Marketing (14th Ed.). McGraw-Hill Education. Chapter 13, Building The Price Foundation, page361.
Figure 7.2 Illustration of Breakeven Graph in Target Return Pricing: Breakeven Graph in Target Profit Pricing and Break-even Volume. (n.d.). [Graphs]. Kotler, P., Armstrong, G.,
Ang, S. H., Leong, S.-M., Tan, C. T., & Yau, O. H.-M. (2012). Principles of marketing: An
Asian perspective (3rd Ed.). Singapore, Singapore: Pearson Education Centre. Chapter 10, Pricing Products: Understanding and Capturing Customer Value, page326.
Kotler, P., Armstrong, G., Ang, S. H., Leong, S.-M., Tan, C. T., & Yau, O. H.-M. (2012). Principles of marketing: An Asian perspective (3rd Ed.). Singapore, Singapore: Pearson Education Centre.
Kerin, R., & Hartley, S. (2019). Loose Leaf for Marketing (14th Ed.). McGraw-Hill Education.
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1. Price is the only element in the marketing mix that produces .
(A) revenue
(B) expenses
(C) fixed costs
(D) demand
2. Consumer perceptions of the product's value set the for prices.
(A) floor
(B) ceiling
(C) demand curve
(D) image
3. Under , the market consists of a few large sellers who are highly sensitive to
each other's pricing and marketing strategies.
(A) pure competition
(B) monopolistic competition
(C) a pure monopoly
(D) oligopolistic competition
4. With an understanding of price elasticity, sellers should know that the less elastic the
demand for their product is, the more advantageous it is for them to .
(A) discontinue the item
(B) raise the price
(C) leave the price where it is
(D) drop the price
Self-Practice Exercise:
MCQ and True/False
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5. Companies facing the challenge of setting prices for the first time can choose between two broad strategies: .
(A) market-penetration pricing and market-skimming pricing
(B) target cost pricing and market-skimming pricing
(C) value-added pricing and market-level pricing
(D) target cost pricing and competitive pricing
6. Rather than cutting prices to match competitors, companies attach value-added
features and services to differentiate their offers and thus support their higher prices.
True/False
7. Cost-based pricing relies on consumer perception of value to drive
pricing. True/False
8. Product costs set the ceiling for a product's price, whereas consumer perceptions of is
used for price adjustments.
True/False
9. When consumers cannot judge the quality of a product because they lack information or skill, they are likely to perceive a higher-priced product as having higher quality.
True/False
10. Freight-absorption pricing is used for market skimming and to hold on to monopolistic markets.
True/False
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.10 F
.9 T
.8 F
.7 F
.6 T
.5 A
.4 B
.3 D
.2 B
.1 A
Answers to Self-Practice Questions:
1. Companies bringing out a new product can choose between two broad strategies: market-skimming pricing and market-penetration pricing. Distinguish between the two. Is one a better method then the other? Discuss.
2. Identify and explain at least two situations in which price cuts or price increases might be necessary.
3. Why do marketers want to keep the list price consistent and adjust price using alternative means like discounting and additional fees?
4. Consumers do not buy the product because it cost so much to produce, but the benefit they see in the purchase. Hence, how come marketers are still using cost plus pricing for their products?
5. How is international pricing different from localised pricing? What do you think are the biggest challenges in international pricing?
REFLECTIVE EXERCISES
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SESSION 8
PLACING STRATEGIES
At the end of this session, students should be able to:
Explain why companies use marketing channels and discuss the functions these channels perform.
Identify the major channel alternatives open to a company.
Discuss the nature and importance of marketing logistics and integrated supply chain management.
Identify and classify store and non-store retailers.
Explain changes in retailing with the wheel of retailing.
8 PLACE
Place aka distribution is the element in the marketing mix concerned with activities and marketing intermediaries needed to get the good or service to the firm ‗s customers.
Distribution decisions include modes of transportation, warehousing, inventory control, order processing, and selection of marketing channels. In this chapter the three main concerns of
place, channel distribution, physical distribution and retailing will be covered.
8.1 CHANNEL OF DISTRIBUTION
The use of channel generates greater efficiency in making goods available to target markets, refer to Figure 8.1 on the benefits of have channels.
Figure 8.1 The distribution with and without intermediary
8.1.1 FUNCTIONS OF INTERMEDIARIES
Channel members (Intermediaries) are expensive to have in the distribution, a retailer for
example may cost as much as 50% margin off the selling price. Hence, it is for the value that they add that justify their presence. They achieve this by reducing the amount of work that
needs to be done by both producers and consumers in the purchase process and achieving economies of scale.
They add value through three major groups of activities, transactional, logistical, and facilitating functions.
For transactional function, the intermediaries help the producer to buy and sell the product and undertake any risk involved in carrying out the channel work during the transaction like
return and repair policies. They develop and spread persuasive communications about an offer. They also find and communicate with prospective buyers for the producer. These
intermediaries also help reach agreements on price and other terms of the offer so that
ownership or possession can be transferred.
For the logistical function, the role of marketing intermediaries is to purchase in bulk from
various producers and transform them into the assortments wanted by consumers. To achieve this end, they will be involved in storing, sorting, and transporting the goods to the customers
on behalf of the producer.
For the facilitating function, they gather and distribute marketing research and intelligence
about the actors and forces in the marketing environment for the producer. They shape and fit the offer to the buyer ‗s needs through activities such as manufacturing, grading, assembling,
and packaging. They also help the producer by assisting in financial matters like extending credit to the end customers. They acquire and use funds to cover the costs of the channel
work.
8.1.2 MARKETING INTERMEDIARIES
The types of marketing intermediaries involved in channel distribution are many, however, the following four are the key intermediaries used:
Distributors, they are the businesses ‗representatives in the market, usually in a market that
the producer is not familiar with. The distributor will take title of goods, and act on the behalf of the business to undertake some additional marketing functions like promotions and pricing,
or even to represent the business legally. Essentially, they are the business champion in another geographical region where the business lacks familiarity with.
Wholesalers, main function is to buy in bulk from different producers to achieve the assortment that the retailers want. Since retailer purchases are too small to be entertained by
producers, the wholesaler is the intermediary for the producer to service the need of retailers.
Retailers, they are the intermediaries who serve the end-use consumers.
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Agents are like distributors representing the business in another market. However, an agent
does not buy the goods and hence do not take title of the goods but earns from commission
off sales done on behalf of the producer. They are more suitable for businesses that have infrequent transaction and therefore, it is not viable to have a distributor as the result.
8.1.3 CHANNEL STRUCTURES
Figure 8.2 Channel of distribution
A conventional channel structures consist of a series of distribution intermediaries. It may consist of one or more independent producers, wholesalers, and retailers. Each, and separate
business seeks to maximize its own profits, sometimes at the expense of the system as a whole. Refer to Figure 8.2 for the various structure designs.
8.1.4 CHANNEL CONFLICTS
In a conventional channel structure conflicts can happen horizontally and vertically. Horizontal conflict occurs among firms at the same level of the channel (For example,
between different dealers of the same brand). Vertical conflict occurs between different levels of the same channel (For example, between a brand and its franchisee).
These conflicts rob the business of profitability. A marketing channel consists of firms that have partnered with each other for their common good. Each channel member plays a
specialized role and depends on the others. The channel is most effective when each member assumes the tasks it performs best. With conflicts, this effectiveness is lost.
8.1.5 CONVENTIONAL VS VERTICAL MARKETING SYSTEM (VMS)
The conflicts that exist in the conventional channel can be minimised if the entire channel is combined and managed such that it works as a unified channel. This reduces the number of
conflicts, and all members benefit from the greater efficiency. This channel structure is called a vertical marketing system. Customer will usually perceive the entire system as one as well,
usually under banner of the producer ‗s brand.
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8.1.6 VERTICAL MARKETING SYSTEMS
Figure 8.3 Vertical Marketing Systems
Vertical marketing system (VMS) comprises producers, wholesalers, and retailers acting as a
unified system. One channel member owns the others, has contracts with them, or wields so much power that they must all cooperate. There are three types of VMS, corporate VMS,
contractual VMS, and administered VMS.
A corporate VMS integrates successive stages of production and distribution under a single ownership. For example, Deutsche Post DHL Group
A contractual VMS consists of independent firms at different levels of production and
distribution joined through contracts to obtain more economies or sales impact than each could achieve alone. The franchise organization is the most common type of contractual
relationship. A channel member called a franchisor links several stages in the production distribution process. There are three types of franchises:
Manufacturer sponsored retailer franchise system, like Ford and its network of independent franchised dealers.
Manufacturer sponsored wholesaler franchise system like Coca Cola licenses bottlers (wholesalers) in various markets who buy Coca-Cola syrup concentrate and then bottle and sell the finished product to retailers in local markets.
service firm sponsored retailer franchise system, examples are the auto-rental business
(Avis), fast food service business (McDonald ‗s), and the motel business (Ramada
Inn).
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In an administered VMS, leadership is assumed not through common ownership or
contractual ties, but through the size and power of one dominant channel member. These leaders manage the marketing system such that all members benefit from the arrangement
and are happy to follow. For example, Dell and P&G.
8.1.7 STEPS IN CHANNEL DESIGN
To decide on the best channel design, it is important to first perform an analysis to understand
what the consumer wants from its distribution. Do they want it to be always and easily available, or do they want it distributed cheaply? Do they want it with full service? These are
just some basic questions that needs to be analysed in deciding on the channel design. Other issues that consumers want could be information of delivery progress, convenience of getting
the product, variety of other goods when making the purchase. Ultimately it is a balance of costs and consumer price preferences.
Base on the consumer needs and wants, and existing constraints like resource that you have,
the marketer will establish the objectives for the channel. Business would set channel objectives by stating it in terms of targeted levels of customer service, or level of target
market coverage, this would help the business identify and select the possible channel alternatives.
The level of channel coverage is the density of the intended distribution. It could be intensive,
exclusive, or selective. Intensive distribution is ideal for producers of convenience goods and
common raw materials since they would stock their products in as many outlets as possible.
Exclusive distribution is when the producer intentionally limits the number of intermediaries handling the products. Only a limited number of dealers own the exclusive right to distribute
the products in their territories. It is usually used for specialty goods. Selective distribution uses several willing retailers that fit a given criteria to carry the company‘s products. This is
used mainly for shopping goods.
With these objectives in mind, the next step is to identify the suitable channel design alternatives that can be used. In identifying alternatives, there is a need to consider the types
of intermediaries needed. For example, Retailers, value-added retailers, independent distributors, agents. It is also necessary to consider the roles and responsibilities of channel
members like the price policies, conditions of sale, territory rights and specific services to be performed.
The last step is to evaluate and decide the most suitable design or combinations of designs.
Usually for most of the bigger businesses, they would adopt a multi-channel approach where there are more than one channel designs. Evaluating the major alternatives involves
comparing each alternative to economic criteria like the cost to potential revenue of the channel design selected. Businesses should also consider strategic issues like when the
business grow can the design or intermediaries adapt. Finally, control issues need to be evaluated. How much control to give channel members in the marketing of the product. For
example, different intermediaries may be assigned different degree of control for pricing of
the product.
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8.2 PHYSICAL DISTRIBUTION
Businesses today are placing greater emphasis on logistics and supply chain management because it helps them to gain a powerful competitive advantage through improved logistics
that provide better customer service or lower prices. By improving the supply chain, they can achieve significant cost savings for both the company and its customers through improved
logistics. In addition, a greater variety of products can be supported. Finally, businesses can
take advantage of greater distribution efficiencies from the leverage of information technology.
The goal of marketing logistics should be to provide a targeted level of customer service at the least cost. Logistics refers to the overall process of managing how resources are acquired,
stored, and transported to their destination. Essential it is an act of balancing customer expectation for timeliness, dependability, desired level of communication given and
convenience with the cost of transportation, inventory, order processing, stock outs, handling
materials and returns. It involves the planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of
consumption to meet customer requirements at a profit.
Supply chain is a network between a company and its suppliers to produce and distribute a specific product to the final buyer. This network includes different activities, people, entities,
information, and resources. It involves an entire supply chain management, managing upstream and downstream value-added flows of materials, final goods, and related
information among suppliers, the company, resellers, and final consumers
8.3 RETAILING
Retailing is the element in Place. Location is paramount in physical-store retailing. Essentially it about managing the stores, shops or online platform that serves the end
customers. The focus in this module will be in the retail strategy. The wheel of retailing will also be covered briefly.
ELEMENTS OF A RETAILING STRATEGY: A retailing business starts with a
good retail strategy. This is a long-term plan for the retail setup. This plan will define the retail positioning that it should adopt. With that positioning in mind, the retailer would need to have a retail mix to support it. This retail mix will consist of two key functions, merchandise management and store management.
Merchandise management is the management of goods carried and the services provided at the retailer. Store management is all aspects managing the store itself, like the look and feel, and service level.
Both merchandise and store management must be similarly aligned with its pricing
plan, store concept and communication, location and merchandise carried. For
example, a retailer for Gucci, would have a store concept that is exclusive, located at the expensive shopping belt, carry goods that is expensive and exclusive.
RETAILING POSITIONING: There are many ways to position the retailer. One popular approach is using breath of product line and the intended value- add of the retailer. Using this method, it is possible to identify four commonly used position. To begin, the high value-add narrow product breath retailer. These are like Tiffany and Co. The focus is to provide exclusive service for its shopper.
The second is the low value-add narrow product breath retailer. The neighbourhood self-service laundry mat is one such example. It is focus is to provide a no-frills experience for the few specialised products or services it carries.
The third is the high value-add wide product breath retail. Bloomingdales in the United States is an example of this, they carry many different high-end brands and
products and is seen as an exclusive departmental store. The focus of this positioning is one shop high touch shopping for those that can afford.
The last of the group would be the low value-add wide product breath retailer. For example, the NTUC Extra. You will find many categories of products are available,
prices are low, and only common brands carried. The focus of this positioning is to carry as many products as possible for convenient shopping for the everyday man.
RETAIL PRICING: Based on what is determined in the positioning, the
merchandise, location, and communication must also be selling the same concept. Hence, you will find that retail pricing can be very high like Tiffany and Co. and as low as NTUC extra.
STORE LOCATION: In general, location options are the central business districts,
regional shopping centres, Strip locations and Community shopping centres
The central business districts are usually for the higher end retailers, the products command sufficient margin to justify the rent paid, the image of exclusivity is conveyed in retailer located in this area.
Regional shopping centre is a viable alternative in Singapore. Locations include
Tampines hub area, the Jurong-East Central and the Woodland Civic centre. The
rental rates in these areas are affordable for the good accessibility and good image. Except for exclusive brands and bespoke businesses, most retailers would usually
choose to be located within regional shopping centres.
Strip location are areas with a unique feel or theme. In Singapore, the Boat Quay area
is a form of strip location that specializes in the night life theme. Hence, it provides a good retail location for bars and restaurants. Retailers that locate in strip locations will
want to capitalize on the strip ‗s unique feel or theme.
Community shopping centres are the shopping centres located in the housing districts itself. The groups that best locates there are the grocers, hair stylist, convenience retailer.
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RETAIL COMMUNICATION: Generally, the retail communication is done by the location, store image, atmosphere of the service providers and ambiance of its surrounding. The store image may adopt several styles, like the Zen look in the apple store, the classy look of Tiffany and Co., or contemporary look, antique look, etc. It provides some form of inducement for consumers to come.
The ambiance like the colour, brightness, smell, music piped, all affects the mood of the consumers. Having it suit for the targeted retail customer will naturally result in
more walk-ins. For example, high tempo music is particularly good for selling fast fashion, but soothing music is more suitable at food establishments.
The atmosphere like the friendliness of service providers need to be considered in the retail strategy. Starbuck for example is able to create a very friendly and cosy
atmosphere that have made it quite successful in the café scene.
MERCHANDISE: Merchandising for retailers is usually done by categorical management. In many retail setups, they carry many different lines of products from many brands. This makes managing individual products impossible. Hence, the bigger retailers usually manage the products first by the category or line of product first, and only manage the individual products within the category if they are able to. Hence, there is usually a customary practice for product selection, pricing, and promotion method to be applied by the categories. Ultimately what ‗s most important is the merchandising should match the retail positioning well to be effective.
8.4 THE WHEEL OF RETAILING
Figure 8.4 The Wheel of Retailing
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The wheel of retailing cycle in figure 8.4 illustrates that retailing will progress and then evolve over time. It will usually start as a low priced, margin and status retailer and progress
to a higher priced, margin and retailer as it improves on its management. This will happen repeatedly until a point where the retailer can no longer progress by just moving up the price
and quality scale in this retail concept. When that happens, it will need to develop a new
retail concept to grow, and when it happens the retail wheel of retailing starts again for the new retail concept.
REFERENCES
Figure 8.1 The distribution with and without intermediary: How Channel Members Add
Value. (n.d.). [Illustration]. Kotler, P., Armstrong, G., Ang, S. H., Leong, S.-M., Tan, C. T., & Yau, O. H.-M. (2012). Principles of marketing: An Asian perspective (3rd Ed.). Singapore,
Singapore: Pearson Education Centre. Chapter 12, Marketing Channels and Supply Chain Management, page377.
Figure 8.2 Channel of distribution: Consumer and Business Marketing Channels. (n.d.). [Illustration]. Kotler, P., Armstrong, G., Ang, S. H., Leong, S.-M., Tan, C. T., & Yau, O. H.-
M. (2012). Principles of marketing: An Asian perspective (3rd Ed.). Singapore, Singapore: Pearson Education Centre. Chapter 12, Marketing Channels and Supply Chain Management,
page379.
Figure 8.3 Vertical Marketing Systems: Three Major Types of Vertical Marketing Systems. (n.d.). [Graph]. Kerin, R., & Hartley, S. (2019). Loose Leaf for Marketing (14th Ed.).
McGraw-Hill Education. Chapter 15, Managing Marketing Channels and Supply Chain, page425.
Figure 8.4 The Wheel of Retailing: The Wheel of Retailing. (n.d.). [Illustration]. Kerin, R., & Hartley, S. (2019). Loose Leaf for Marketing (14th Ed.). McGraw-Hill Education. Chapter 16, Retailing and Wholesaling, page464.
Kotler, P., Armstrong, G., Ang, S. H., Leong, S.-M., Tan, C. T., & Yau, O. H.-M. (2012). Principles of marketing: An Asian perspective (3rd Ed.). Singapore, Singapore: Pearson Education Centre.
Kerin, R., & Hartley, S. (2019). Loose Leaf for Marketing (14th Ed.). McGraw-Hill Education.
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1. An agent refers to
(A) an intermediary with legal authority to act on behalf of the producer and earns
from commission.
(B) independent firms or individuals whose principal function is to transport goods.
(C) any intermediary who takes ownership of a manufacturer's goods or services and then finds multiple buyers for those goods or services.
(D) a manufacturer's paid representative and acting voice in initial sales transactions.
2. When marketing channel members are engaged in gathering, storing, sorting, and
transporting products to buyers, they are performing functions.
(A) logistical
(B) implementing
(C) transactional
(D) facilitating
3. When dell computer sells made-to-order PCs via its web site, it is an example of
which type of marketing channel?
(A) indirect channel
(B) direct channel
(C) strategic channel alliances
(D) marketing channel
4. The three major types of corporate vertical marketing systems are corporate,
contractual, and .
(A) integrated
(B) cooperative
(C) delegated
(D) administered
5. The wheel of retailing refers to the
Self-Practice Exercise:
MCQ and True/False
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(A) turnover rate of hourly employees.
(B) life cycle of most consumer goods.
(C) description how new forms of retail outlets enter the market.
(D) cycle of a customer's buying behaviour.
6. A demand flow chain is referring to a sequence of linked suppliers and customers in
which every customer is, in turn, a supplier to another customer until a finished product reaches the final consumer.
True/False
7. The objective of logistics management in a supply chain is to minimize total logistics costs while delivering the appropriate level of customer service.
True/False
8. Services like hotels, banks, airlines, restaurants, colleges, and hospitals cannot be retailer.
True/False
9. A corporate VMS is a system in which the distribution channels are under common ownership.
True/False
10. A channel conflict between a manufacturer and a retailer would be considered a vertical conflict.
True/False
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.10 T
.9 T
.8 F
.7 T
.6 F
.5 C
.4 D
.3 B
.2 A
.1 A
Answers to Self-Practice Questions:
1. What is a contractual vertical marketing system? Give an example of a type of business that works as a contractual VMS.
2. How is supply chain different from the channel of distribution?
3. In franchising, the franchisee will be required to pay the franchisor a fee. Why would a business be a franchisee when it can manage the business on its own without the franchisor?
4. Why would some businesses require a distributor and others would sell to the wholesaler directly without having to go through a distributor?
5. What are the reasons that marketing intermediaries would follow the leadership of the producer in an administered vertical marketing system?
REFLECTIVE EXERCISES
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SESSION 9
PROMOTION: ADVERTISING AND PUBLIC RELATIONS
At the end of this session, students should be able to:
• Describe the importance of the marketing communications process in promotion of products and services.
• Identify the elements the marketing communication mix
• Describe the five steps in developing advertising communications
• Discuss the different approaches used in Public Relations
• Describe the importance of using digital marketing in the 21 st century.
9.1 MARKETING COMMUNICATION PROCESS
The marketing communication mix or promotion refers to how marketers use a set of five
tools to communicate the value of their products to their target consumers. The five communication tools also known as marketing communication mix are advertising, public
relations, sales promotion, personal selling, and direct marketing.
Figure 9.1: Marketing Communication Process
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Using the basic model of the communication process, we can outline how marketers may use
the five promotion tools to effectively reach their target consumers. For the communication
process to be effective, the marketer has to make decisions at each step of the communication process as follows:
The sender of the message in a marketing communication process is the company
who initiates the communication process as it wants to persuade or influence its target consumers to consider purchase of its products.
Encoding is the process where the company must determine how to convert its
message to ensure it is unique and eye-catching with clever use of visuals, headline, and content.
Media refers to the medium in which the marketer choose to send the message. Given
that customers are selective in the type of media they choose to pay attention to, marketers must understand the media habits of their consumers to be able to reach them.
Decoding refers to the ability of the customer to interpret the message correctly.
Given that consumers are influenced by selective distortion, a promotional message can sometimes be perceived differently.
Receivers refer to the target consumers the marketer hopes to reach with its
promotional message. If the company hopes to reach a large group of consumers, they will tend to choose mass communication tools like advertising and public relations. If the target consumers prefer more personalized messages, marketers will choose to adopt personal selling or direct marketing.
Feedback refers to the response of the customers to the promotional messages. It can
come in the form of measuring whether the sales volume has increased or carrying out surveys to gauge whether a promotion is well-received.
Noise may interfere or distort the ability of the marketer to reach its target consumers.
Consumers reading a message on his mobile phone can often miss seeing the advertisements on bus stops and train stations or an email message may be sent to the junk mail before the consumer had a chance to view it.
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Figure 9.2: Marketing Communication Mix
Thus, it is essential for marketers to make the right decisions at each step of the
communication process to ensure that its messages are not missed or misunderstood. Thus, we will examine each of the five elements of the promotion mix to ensure that effective
communication is carried out. Marketers often use a combination of these marketing communication tools in designing a communications campaign that can enable them to reach
their customers.
9.2 STEPS IN DEVELOPING ADVERTISING COMMUNICATION
Advertising is a marketing tactic used to pay for a space to enable a sponsor (company) to
put up a non-personal form of presentation to promote its goods or services. The goal is to
influence the consumer behaviour of their targeted consumers with a persuasive message to get them to pay attention and eventually be interested to purchase the product.
To formulate an advertising campaign that can indeed persuade and win the customers, marketers adopt the five steps in developing an effective advertising program namely
Step 1: Identify the target audience: The most crucial step is to identify who is the
target consumers (receiver) that advertising campaign is aimed at. This is to ensure that the message is in line with the needs and wants of this customer segment and the media habits of the target segment is taken into account when designing the following elements of the campaign:
o What will be said (message content)
o How it will be said (message structure, format)
o When it will be said (timing)
o Where it will be said (media)
o Who will say it (source)
Step 2: Determine the mission/objectives of the advertising program: For a well- planned advertising campaign, the firm must have a clear idea what are its objectives. Objectives are classified into three categories: informative advertising, persuasive advertising and reminder advertising as shown in the Table 9.1 above.
Step 3: Design the advertising message: Given the thousands of advertising
messages a customer will be exposed to; it is critical to design a creative message that is eye-catching and interesting. Marketers must pay attention to the content, structure, format, and design of the advertising message it is sending. The common execution styles used by advertisers include:
o Slice of life: This style uses a typical customer using the product.
o Lifestyle: This style blends the use of products into the lifestyle customers prefer.
o Fantasy: This style uses magic or fantasy around the use of the product.
o Mood or image: This style uses themes like beauty and love to build an
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emotional response to the product.
o Musical: This style uses music, song, and dance to highlight the use of a product.
o Personality symbol: This style aligns the product with a well-known celebrity or create a personality that represents the product.
o Technical expertise: This style uses an expert or demonstrate the firm ‗s expertise in the product advertised.
o Scientific evidence: This style uses scientific evidence to persuade consumers their brand is superior to other brands.
o Testimonial evidence or endorsement: This style seeks to get customers to be influenced by someone they like or identify with who strongly endorse the product.
Step 4: Choosing the media: The right choice of media must relate to the media habits of the target customers. To reach business executives who often drive to work, the most cost-effective media to use is radio advertisements during the peak hour morning and evening traffic. However, to reach the Millennial, digital media is more effective than traditional media as this segment prefer using their mobile phones and laptops to access social media to source and purchase their products online.
Step 5: Collecting feedback: This last step is to collect feedback which helps the marketer judge the performance of the advertising campaign in terms of the response from the customers. This can be measured in terms of the customer ‗s understanding of the advertising message, perception of the product advertised and awareness of the brand.
Let ‗s relate the five steps of developing a successful advertising campaign to Dove ‗s ―Real
th Beauty‖ which celebrated its 10 year since it was launched. It is one of the most talked
about and successful campaign introduced by a beauty brand. The quest by Dove to define what real beauty is, started with an exhibition and has since expanded from billboards to television advertisements and online videos.
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Figure 9.3: Dove ‗s Real Beauty Campaign
Source: https://stmuhistorymedia.org/the-campaign-of-a-century-doves-real-beauty/
Step 1: Identify the target market: Dove is a beauty brand under Unilever and is
known for its moisturizing soap, facial cleansers, and hair care product lines. Thus,
its main target market is women who uses their products to beautify and pamper themselves. To understand its target consumers better, Dove commissioned a
research study with 3,200 women to learn about women ‗s priorities and interests. The research found that only 2% of women interviewed were satisfied with their
own appearance. Dove realized that women were overly concerned with matching the physical attributes of beauty as defined by the media and cannot appreciate their
beauty within.
Step 2: Determine the mission/objectives of the advertising campaign: Dove despite its long history, have been unsuccessful in building up a strong brand awareness amongst its women consumers. It needed a radical campaign to get women to notice its brand and formed a positive perception of what the brand stands for.
Step 3: Designing the Advertising message: Dove decided to design a daring and
risky campaign to challenge the stereotype of beauty that are often depicted as young, tall, and blond to emphasizing the inner beauty each woman possess. Instead
of using professional models, Dove ‗s advertisements featured women from the age
of 22 to 96 and size varying from 6 to 12. Dove ‗s first steps in the Campaign were ―Tick Box‖ billboards featuring images of women with two tick-box options next to
them such as ―fat or fit?‖ and ―grey or gorgeous?‖. Another one of the other eye- catching campaigns that received overwhelming response was the short film titled
―Evolution‖ that reveal how media used cosmetics and digital technology to alter women ‗s appearance to the ―perfect beauty‖ portrayed in magazines which are
unrealistic and impossible.
Step 4: Choosing the Media: These ―Tick Box‖ advertisements were placed on
billboards and bus stops and viewers were asked to go online to cast their vote: whether the models were ―Wrinkled or Wonderful?‖, ―Grey or Gorgeous?‖ and
―Freckled or flawless?‖. When people respond to the vote with a text, the
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percentages appeared next to the image on the billboard. The ‗Evolution short film went viral online and has collected 16.9 million views todate.
Figure 9.4: Tick Box Advertisements
Figure 9.5: Dove ‗s Evolution Advertisement
Step 5: Collecting Feedback: Dove knew it was a great start to the campaign as they collected more than 1.5 million visitors to their website when the Real Beauty Campaign was launched. Dove knew this campaign was able to strike a chord with the women consumers who felt insecure and unsatisfied with their physical appearance. This campaign also resulted in a double-digit growth in sales for Dove.
9.3 PUBLIC RELATIONS
Both advertising and public relations (PR) are similar in that both promotion tools enable the
marketer to build brands and communicate with mass target audiences. However, while marketers need to pay for advertising messages, public relations results are earned through
providing newspapers, TV news reports or social media with newsworthy information in the form of press releases and pitches.
While advertising tool are used to create messages to reach a specific target consumer
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segment, PR aim to reach both internal and external publics that includes employees, investors, customers, the media, and social influencers or celebrities with a large following.
While advertising is focused on promoting the features of the product to initiate sales, the goal of PR is aimed more at building brand awareness and carving a positive image of the
brand. This is because most companies realized that consumers are more likely to be brand loyal to brands with a compelling reputation whom they admire and trust.
The major PR tools include:
Press conferences or Press releases: By creating favourable news stories about the
firm, its products or its people can present a positive image of the company. This may occur naturally as journalists choose to feature the company‘s new products or discuss innovative promotional activities in their magazines that provides free publicity for the firm.
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Interviews/ Exclusives: Accepting interviews and invitation to give speeches at trade
associations, conferences can create powerful publicity for the company.
Online materials on internet: Firms will also issue written materials like annual
reports, company newsletters and useful write-ups that interests their publics to keep
them inform of what how well the company is doing and its plans for the future.
The company uses its websites, blogs, and social networks such as Facebook,
Twitter, and YouTube to tell powerful stories and spark conversations that can go
viral and thus spread ―word-of-mouth‖ communications.
Community involvement: More firms are putting up corporate videos to introduce
their mission, vision as well as community service programmes they are supporting on
YouTube or social media to let viewers form a positive opinion of the company.
Figure 9.6: Mediacorp Subaru Palm Challenge
The Mediacorp Subaru Palm Challenge started in 2002 and has been held annually for the
th 18 round in 2019 – attracting 400 participants from around the region with contestants from Cambodia, China, Hong Kong, Malaysia, Philippines, Singapore, Taiwan, Thailand, and Vietnam. Each participant was to place their right palms onto specified palm decals on a Subaru car and the winner is the person who is the only palm standing.
Figure 9.7: Print screen of publicity at Channel Newsasia highlighting the Thai winner in the 2019 Mediacorp Subraru Car Challenge
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Throughout the four days of the challenge, various media coverage of the event can be seen on news channel and publicized in the newspapers. Alongside this challenge, MediaCorp
organized a special Charity Challenge to raise funds for the President ‗s Star Charity. MediaCorp recruited celebrities like Sheila Sim, Ya Hu, and Denise Camilla Tan to get
greater publicity and support for this charity event. Subaru also made use of digital media on
YouTube and its website to publicize these events to keep the excitement high during and after the event.
Unlike advertising which can dictate where the message is placed, what is said and how long it will be run, PR has less control over how their information is presented in the news and
whether it will indeed be able to generate good or bad publicity. Although there are some marketers that believe that it is better to generate news about their firm than be forgotten,
marketers ‗worst nightmare is handling bad publicity that can negatively impact the firm ‗s
image.
Figure 9.8: Activists Appeal to RWS
Resort World Singapore (RWS) faced bad publicity before the opening of its Marine Life Park when news reports concerning the death of three dolphins being transported from
Philippines to Singapore went viral. Animal welfare group ACRES urged a boycott of the Marine Life Park and petition of 1000 animal lovers at Hong Lim Park were held to get RWS
to release the dolphins from confinement.
Figure 9.9: Print screen of website highlighting plight of dolphins in captivity
Recently in 4 Jan 2020, RWS again faced bad publicity when a visitor videotaped a dolphin
repeatedly banging its head against the wall of the tank which marine scientists believe is a
sign of depression and boredom due to the confined living space and the life in captivity in the marine park. These social media sites urge all who support animal rights not to visit
marine theme parks. This spells the challenge marketers face in using PR as a communication tool.
9.4 IMPORTANCE OF DIGITAL MEDIA IN THE NEW MARKETING WORLD
Figure 9.10: Where and how consumers shop
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Figure 9.10: Positive Online Review
As discussed in our Topic 2 on marketing environment, due to the Covid situation, customers have started to learn to shop differently in 2020 and this is likely to lead to a permanent change
in their shopping behaviour. Covid-19 has increased the rate of adoption of digital technology as consumers seek information through digital content. This does not mean traditional media is no
longer relevant – it requires marketers to achieve a good balance of the use of both traditional
and new media to reap the benefits of marketing in this new world.
Why is digital marketing increasing in importance for both small and big business? If a firm
places an advertisement on traditional media like TV, magazines or on a billboard, it has limited control over who is exposed to the advertising message and cannot easily measure the results of
their advertising campaign. Digital marketing is more effective as it allows the firm to target a specific audience using data analytics provided on the company‘s website and social media
tracking software. With the use of social media, companies are engaging with their customers by
responding directly to their feedback diligently.
The company‘s website, Facebook, Twitter, and YouTube accounts are perfect channels for
advertising and PR as it gives the brand a voice and a space for its public to find out useful
content like news updates, videos, latest product information, newsletters, useful articles, or a community sharing page to constantly engage with existing as well as potential new customers.
In addition, the company can obtain feedback to know how effective their promotion campaign has been by monitoring the impressions, clicks, conversion rates and sales volume.
Another aspect that marketers need to monitor is online reviews on digital media. This is because many consumers do check online reviews before making a purchase decision. The
marketer must also pay attention to negative reviews. Like bad publicity in PR, these negative reviews have a direct impact on their sales volume as most consumers will not consider the firm
at all if it is rated low on customer satisfaction. If the firm can reach out to customers who were dissatisfied with their service and resolve the issue to their satisfaction, negative reviews can be
turned into a positive one as many will be impressed with how the firm handled a bad situation.
In the new world today, digital marketing is a must have for every business. It seems like every
brand has its own website, social media page and well-coordinated digital strategies. It can also
be said that consumers today expect and rely on the brand to have a digital presence and to provide not only content information but actively engage with them to win their loyalty.
REFERENCES
3. Figure 9.1: Marketing Communication Process (n.d) 11.1 Integrated Marketing
Communications (IMC) Copyright © 2017 by Babu John Mariadoss. Retrieved May
27, 2021, from https://opentext.wsu.edu/marketing/chapter/11-1-integrated- marketing-communications-imc/
4. Figure 9.2: Marketing Communication Mix (n.d) from
Marketingmgtsolution.blogspot.com. Retrieved May 27, 2021, from
http://marketingmgtsolution.blogspot.com/2015/07/the-promotion-mix-and-major-
tools-of.html
5. Figure 9.3: Dove Real Beauty Campaign (n.d) Kimberley Simmons ‗The Campaign
of a Century: Dove ‗s ―Real Beauty’ STMU History Media. Retrieved May 27,
2021, from https://stmuhistorymedia.org/the-campaign-of-a-century-doves-real-
beauty/
6. Figure 9.4: Tick Box Advertisements (n.d) ilearnlot ‗Discuss Case Study for Dove
Campaign for Real Beauty’ ilearnlot. Retrieved May 27, 2021, from
https://www.ilearnlot.com/discuss-case-study-for-doves-campaign-for-real-
beauty/54910/
7. Figure 9.5: Dove Evolution Campaign (n.d) Kimberley Simmons ‗The Campaign of a
Century: Dove‘s ―Real Beauty‖ STMU History Media. Retrieved May 27, 2021,
from https://stmuhistorymedia.org/the-campaign-of-a-century-doves-real-beauty/
8. Figure 9.6: MediaCorp Subaru Palm Challenge (2 Nov 2019) ‗"Last Palm Standing,"
18th MediaCorp Subaru Palm Challenge Kicks Off‗ Car Guide.Ph. Retrieved May 27,
2021, from https://www.carguide.ph/2019/11/last-palm-standing-18th-mediacorp.html
9. Figure 9.7: Printscreen of Thai winner to Subaru Palm Challenge (5 Nov 2019) Ahmad Khan ‗Thai contestant wins Last Palm Standing – MediaCorp Subaru Car
Challenge | Video‗Channelnewsasia.com. Retrieved May 27, 2021, from https://www.channelnewsasia.com/news/singapore/thai-contestant-wins-last-palm-
standing-mediacorp-subaru-car-12066532
10. Figure 9.8: Activists Appeal to RWS (29 May 2011) Sandra Davis ‗Free the Dolphins Guide, Sunday Times.
11. Figure 9.9: Print screen of website highlighting plight of dolphins in captivity
Source: (4 Jan 2020) Depressed Captive Dolphin Repeatedly Slams his Head Against
Tank in Aquarium in Singapore. Focusonwildlife.com. Retrieved May 27, 2021, from
https://focusingonwildlife.com/news/depressed-captive-dolphin-repeatedly-slams-his-
head-against-tank-in-aquarium-in-singapore/ BUS0119 Copyright by SIM GE, 2021 122
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12. Figure 9.10: Where and how consumers shop (23 June 2020) Euromonitor Report:
Coronavirus Era: Where and how consumers shop.
13. Figure 9.11: Positive online reviews (1 Dec 2019) Jenn Chan ‗Creating an online
review management strategy‗ Sproutsocial.com. Retrieved May 27, 2021, from
https://sproutsocial.com/insights/online-review-management/
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1. Marketing communication is most difficult to achieve when _
(A) the source and the receiver are not in face-to-face contact with each other.
(B) the source and receiver do not have a common understanding of the message.
(C) immediate feedback is not provided.
(D) some trace of ―noise‖ remains in the message channel
2. Which of the following statements about advertising objectives is FALSE?
(A) Advertising objectives should set the framework for the advertising campaign
(B) Advertising objectives need not be specific as marketers may adapt their advertising depending on feedback
(C) Advertising objectives will determine the kind of advertising messages that are suitable.
(D) Advertising objectives can be seen clearly from the nature of the advertising messages.
3. Glen developed an innovative wine chiller which will make it easier and less expensive to
store wine bottles. He decided to place an advertisement message in ―Great Food‖
magazine describing the features of his wine cabinet; the 3 years warranty provided, and free delivery service offered in the first 3 months of its launch. What kind of advertising
objective is Glen pursuing?
(A) Reminder advertising
(B) Persuasive advertising
(C) Informative advertising
(D) Comparison advertising
Self-Practice Exercise:
MCQ and True/False
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4. Many sports brands are sponsoring annual walkathons to attract parents to bring their children out for exercises to promote healthy lifestyles. This is an example of the use of which promotion tool/s?
(A) Public Relations only
(B) Advertising only
(C) Advertising and Public Relations
(D) Neither Advertising nor Public Relations
5. The choice of the most suitable advertising medium to use depends on
(A) advertising objectives.
(B) target market media habits. (C) characteristics of each medium.
(D) All of the above.
6. Advertising effectiveness can be measured quite simply by analysing increase or
decrease in sales volume after the advertising campaign.
True/False
7. Public relations is seen as more credible than advertising as marketers have less control
over the content of the message.
True/False
8. The use of digital media is just as cost-effective as using traditional media.
True/False
9. The major advantage of using social media is the ability to use data analytics to measure the effectiveness of an advertising campaign versus outdoor advertising.
True/False
10. All publicity is good for the company as it is free and promotes word-of-mouth communication.
True/False
1. Scan youtube.com to watch interesting videos on the top 10 most successful
advertising campaigns. Determine which advertising message appeals to you most and
which creative advertising style was used to catch your attention.
2. Watch a YouTube video where the advertising message uses a language with which you are unfamiliar. Did you fully understand the advertising message? Consider
which element in the communication process affected your understanding of the advertising message.
3. In the past week, make an effort to pay attention to the advertising messages you come across – outdoor advertising on train panels or bus-stop ads vs ad messages you
come across on social media. Which media do you feel is more effective at catching your attention?
4. Source for one public relations event that you will be interested to join in the coming 3 months. Why will this event appeal to you? Reflect on the impact participation in this event will have on your perception of the brand sponsoring it.
5. Source for one news article or online reviews that has affected a company negatively.
How has this company responded to the bad publicity – did they handle it well?
Reflect on the impact it has on the reputation of the company or brand.
.10 F .9 T .8 F .7 T .6 F .5 D .4 A .3 C .2 B .1 B
Practice Questions:
Answers to Self-
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REFLECTIVE EXERCISES
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SESSION 10
PROMOTION: SALES PROMOTION, PERSONAL SELLING AND
DIRECT MARKETING
At the end of this session, students should be able to:
• Explain the role and significance of sales promotion in the marketing communications (promotion) mix
• Discuss the objectives and evaluate the use of various sales promotion tools.
• Outline the seven steps involved in the personal selling process.
• Discuss the growing importance of direct marketing in providing customized cost- effective communication.
10.1 IMPORTANCE OF SALES PROMOTION
In the earlier topic, we examine the use of advertising and public relations which are mass
communication tools that can help advertise the features of the product or carve a good image of the company through public relations, it may not entice consumers to go to the store and
buy the product. Sales promotion, on the other hand, is an effective communication tool as it
is the use of short-term incentives to persuade the customers to visit the store, check out the sales promotion incentive and often entices them to make that purchase.
,
Figure 10.1: Image: Sale – Photo
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Sales promotion as a tool is increasing in importance as a result of the following factors:
Price sensitivity of consumers have increased as consumers now have a choice of
wide variety of products offered by both online and physical stores – as differences in product quality narrows and researching for the best price is getting easier, consumers are always on the lookout for a good promotional deal before they buy.
Increased sensitivity to promotional offers also meant consumers are becoming less brand loyal. To get consumers to repurchase the same brand or shop at the same retail stores, it has expected that the marketer must continue to hold regular sales promotion to get them interested.
Many product categories have moved into the maturity stage of the product life cycle. With intense competition for market share, sales promotion is seen to be more cost- effective as compared to other promotional tools.
Marketers also favour sales promotion as it often yields almost immediate results in terms of increase in sales volume unlike advertising or public relations that may take a long time to yield positive results.
10.2 SALES PROMOTION OBJECTIVES AND TOOLS
According to American Marketing Association, ―Sales promotion includes those marketing activities, other than personal selling, advertising, and publicity, which stimulate consumer purchasing and dealer effectiveness, such as displays, shows and expositions, demonstration, and various non-recurrent selling efforts not in the ordinary routine.‖
There are many different sales promotion tools that are carried out to meet the objectives of increasing sales by either getting consumers to increase consumption by buying in bigger
quantity or returning back to repurchase or to get them to switch from competitor ‗s brands to the brand on promotion.
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Let ‗s examine the nature of the various sales promotion tools and the objectives met:
Coupons: In the past, coupons come in the form of a printed certificate which
customers can cut from the newspapers, magazines or retrieved it from a package of
an existing product offering those discounts for the next purchase. Nowadays it is
not uncommon to find customers downloading electronic coupons from websites or
emails. Some electronic vouchers can be sent to customers on their mobile phones
where a QR code will be sent entitling them to a discount on their next online
purchase. The objective is to remind customers to purchase this item on promotion
the next time they visit the stores. Coupons engage the customer in the act of
―cutting‖ and ―downloading‖ which will be retain in their memory longer and thus
stand a higher chance of redemption as compared to advertising a price discount in a
newspaper advertisement.
Figure 10.2: Coupon deals from KFC for takeaways
Price deals: One of the most common sales promotions is the price deals which is any discount given over the original price of a product. This is similar to the discount pricing strategies that was discussed in our pricing topic. Groupon for example often offer discounts of 35% to 60% to entice consumers to purchase the products and services on its online store.
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Premiums or free gifts: Food manufacturers often package a free gift that are practical to get consumers to purchase their product e.g., a free toothbrush is given for purchase of a toothpaste, or a free water bottle is given for purchase of a bottle of soft drink. So instead of giving a discount on the product, the company can entice customers to switch from competitor ‗s brand with the practical gift which customers find attractive and useful.
Contests/sweepstake: This type of sales promotion usually grants the customer a chance to win a big prize that can includes cash prizes, electrical appliances, or a
holiday package. The only difference between a contest and a sweepstake is that sweepstake is easier to qualify as it often only requires customers to purchase a
certain amount while contests are usually more demanding and requires involvement by customers in a game or challenge to qualify. Contests is more effective as it is
often designed to get consumers to find out information about the brand to answer the questions – this engages the customers and create brand awareness and
knowledge about the product usage and benefits. Sweepstakes are less effective as many customers who have participated in numerous sweepstakes and did not win
prizes often stop participating in sweepstake as they feel their chance of winning is
too small as winners are drawn randomly rather than on merit.
Samples: Giving out free samples or trial packs of products are often used by
marketers introducing new products into the market. Cosmetic brands often attach small sample sachets of perfumes or moisturizing creams into fashion magazines to enable female customers to entice them to try the products and hopefully draw them into the store to purchase it.
Loyalty schemes: The promotion reward customers with points or stamps to
encourage customers to continue buying repeatedly from same retailer or shop thus achieving the objective of encouraging loyalty from customers until the promotion period ends. This type of scheme was started long ago by airlines with their frequent flyer programmes where passengers can accumulate air miles to redeem for free flights. This loyalty programmes can now be commonly found among credit card companies as well as supermarkets rewarding membership points which can be redeemed for cash rebates.
Rebates or refunds: Rebates often come in the form of a cash voucher or a refund
to the customer ‗s account if they purchase above a certain amount. The objective is to encourage customers in purchase multiple products from the store to qualify for the rebate. The use of a cash voucher is more effective at increasing sales as customers will need to return to the store to cash in the voucher they receive on their next visit.
Point of purchase displays: Point of purchase displays, also known as POPs,
involve the use of display racks, standees, wall displays, balloons, large banners etc. in the retail store to attract the attention of the customers to the special promotion. Some retail stores even set up an Event Hall‖ at a section of the store where all the best promotional items are displayed. This is effective at drawing in price-sensitive consumers looking for good value deals.
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Trade promotions: The objectives of trade promotions are to give short term incentives to retailers to give the company more shelf space to enable it to carry more products, including latest items and store more inventory of their products to ultimately increase sales to customers.
As sales promotion incentives are short-lived, the impact on sales volume is not long-lasting.
Most of the sales promotion tools, except for loyalty schemes, appeal only to customers who buy only when there is a good deal around. For certain brands, it may also be damaging to
hold sales promotion too regularly as it gives the impression that the brand is not selling well and must resort to sales promotion to get customers to buy. As most of the promotional deals
involve good value deals, profit margin is shaved thinly thus increase in sales volume may not lead to high profit volume for the company.
10.3 PERSONAL SELLING PROCESS
Personal selling is a personal marketing communication tool that employs face-to-face
interaction between a sales representative and prospective customers to influence the
customer to purchase usually a fairly complex product like cars, properties, or insurance. With the advancement in digital technology, this face-to-face selling can take place using
video-conference or video calls.
It can also be adopted by food manufacturers introducing new products by getting their sales staff onto retail stores to offer free samples or demonstrate the use of the product and promote its features and benefits.
Figure 10.3: 7 Steps in the Personal Selling Process
The personal selling process consists of seven stages which is often carried out by a
salesperson to be able to secure a successful sale. Below is a brief description of how the steps in personal selling can be carried out by Jane who has been sent to set up a sales booth
at the supermarkets to promote a new improved milk formula to mothers with infants below 3 years old:
Prospecting and qualifying: In this first step of the process, Jane should identify
who are the potential customers most likely to be interested in this new improved milk formula. This sales staff may spend time researching demographic information on government statistics to determine which region has the most percentage of young married couples to choose which outlet is the ideal location to set up the sampling booth to reach out to young parents.
Preapproach: Given that this milk formula is only suitable for infants below 3 years
old, it does not make sense to approach anyone who walks into the supermarket.
Thus, as a good sales representative, Jane should use observations of the contents in
the shopping trolley to help identify who to approach to give out the samples.
Mothers with young infants are likely to purchase baby shampoos, diapers, baby
biscuits or baby foods in their supermarket trolley. This is the best way to identify
the best prospects to approach.
Approach: This is the step when the sales staff determine the best way to approach
the prospects she has identified. She should know how to greet the buyer to gauge
how interested the customer is in trying this new milk formula. Jane should never
assume that the customer is free to listen to her. Thus, the best approach is to ask
politely whether the customer can spare a few minutes to sample the milk formula
and check whether her observation that this consumer is a young mother is accurate.
Sales Presentation and Demonstration: There are four styles of sales presentation
a sales staff can use namely, canned approach; formula approach, need satisfaction
approach or problem-solving approach. Canned approach is memorized sales talk
covering the main points while formulated approach identifies the buyer ‗s needs
and buying style and then uses an appropriate approach. The need-satisfaction
approach starts with a search for customer ‗s real needs. The problem-solving
approach is the most complex as it requires the sales staff to adopt a fully
customized approach after a thorough understanding of the customers ‗needs. Given
that the milk formula is not a complex product, Jane can adopt the canned approach -
where she can explain the ingredients used in the milk formula and list out the key
benefits to help in a child ‗s development. This approach should work at getting the
young mother to try the milk formula.
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Handling objections: It is rare for customers to purchase a product without raising
objections. Common objections include citing the price as too expensive,
questioning the quality of the product, or needing time to think about it before
deciding. Jane should equip herself with an answer to each of the objections raised
by the consumers. Jane should start off by acknowledging the concerns of the
customer and offer them a discount to those who felt the price was too high by
lowering the price for them during the introductory period. For those who question
the quality of the milk formula, Jane can prepare a file that shows clinical studies
that prove that the improved formula is indeed proven to speed up the
developmental growth of young infants. If customers insists that she would like
some time to reflect before purchase, it is best not to adopt high pressure selling as
this is likely to turn the customers off. Thus, a good approach Jane can adopt to
handle this objection is to remind customers that the promotional price is only for a
short period of time but assure her that the sales booth will be at the supermarket for
the next few days if she chooses to return to buy.
Closing: By observing the body language and questions asked by the customer, Jane
should be able to know when it is the right time to close the sale. She can fill up the
order form for the customer and offer to help the customer settle the purchase at the
cashier.
Follow-up: This last step is carried out to ensure customer is fully satisfied and to
ensure repeat purchase. Jane can pass the customers her name card and contact
details and assure them she can be contacted should the customer have any concerns.
9.4 GROWING IMPORTANCE OF DIRECT MARKETING
Direct marketing is a unique marketing communication tool that can tap on the use of various
media to send a marketing offer and measure the response from customers. In the past, direct marketing offers comes in the form of catalogues, letters by mail, inserts in newspapers and
radio spots. However, with the advancement in digital technology and the increased use of mobile phones, it is now more cost effective to reach out to consumers using SMS, email, and
mobile app
Direct marketing, in contrast to mass marketing communication tools like advertising, public relations and sales promotion, allows the firm to send personalized communication to a select group of customers most likely to respond to their offers.
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The following are the most common media used to reach customers through direct marketing:
Telemarketing: The use of the phone to contact and speak directly with a potential
customer is still being used by many businesses. This is especially popular for marketing services where there is no need for customers to see or view the product. However, the main challenge faced is many consumers often ignore telephone calls from unknown numbers. It is also tough for the telemarketers to keep the customer from hanging the phone on them. The use of phone calls has thus reduced in terms of effectiveness in today ‗s context.
Email marketing: Direct mailing to the email addresses of customers to alert them with e-coupons and information about the latest offers are often used by online retailers to reach out to their customers. It is however not uncommon for these emails to disappear into spam mail or junk box of the customers. Even if the emails reached the intended customers, there is no guarantee the email messages will be read.
Direct mail marketing: Financial institutions has used direct mailing to the homes of their customers for years. Most customers who receive junk mail in the form of brochures in their letterboxes will often throw these away without giving them a second look. However, with important letters from the banks containing their account statements and bills, they are likely to take time to look through all the documents attached in their mails. For the older customers who are still not comfortable with the use of online banking, this means of direct communications with their customers still works.
Short Messaging Service (SMS): The use of SMS is considered one of the best
direct communication tool to reach customers today. With the increased use of mobile phones as a communication device, it provides a cheap and instant communication
means to reach customers. Many businesses like Watsons do not spend much money on mass advertising or public relations, instead it entices consumers to sign up for its
membership card so it can use instant messaging to reach out to their customers with marketing offers. Customers receive a weblink to check out the ongoing promotional
deals with visuals of the various products on sale. Watsons can check data analytics to see how many click on the weblinks and how many customers follow up by ordering
online at their Watsons app.
Mobile apps: When a customer download a mobile app from any store, she is usually
open to receiving notifications on her mobile phone which alerts her whenever an electronic coupon is available, information on the latest price deals as well as keeps her updated on the status of her orders and reward points. The use of mobile app has grown in importance as consumers are leading busy lifestyles and find it more convenient and less of a hassle to shop online. The digital media now provides the most convenient way for consumers to be able to research information about products, compare prices and offers and shop with just a swipe of their fingers on the mobile phones.
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Figure 10.4: Watsons SG App
Whichever media is used, the key advantage of using direct marketing is its ability to track
the response rate for each media used. Recording the phone conversations for each
telemarketing call, a unique direct mail code or online code and tracking the user analytics on
the mobile app are all ways to measure the response data of each campaign. These response
data can thus be used to measure the effectiveness of the campaign.
REFERENCES
1. Figure 10.1: Red Hanging Sale Label, canstockphoto.com Retrieved May 27, 2021, from https://www.canstockphoto.com/red-hanging-sale-labels-3330706.html
2. Figure 10.2: Coupons from KFC takeaways, mustvisit.sg Retrieved May 27, 2021,
from https://mustvisit.sg/2020/04/14/circuit-breaker-promotion-kfc-half-price-deals-
for-online-orders/
3. Figure 10.3: 7 Steps in the Personal Selling Process from pinterest.com. Retrieved May 27, 2021, from https://www.pinterest.com/pin/337558934548737071/
4. Figure 10.4: Watsons Mobile App from watsons.com.sg Retrieved May 27, 2021, from
https://www.watsons.com.sg/promo-mobile-app-download
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1. A variety of short-term incentives to encourage trial or purchase of a product or service belongs to which marketing communication mix tool?
(A) Personal selling.
(B) Sales promotion.
(C) Direct marketing
(D) Direct selling
2. If a shopping mall decides to send consumers a booklet of discount vouchers to entice them to visit the various retail outlets at its store the week before Christmas, it is adopting which sales promotion tool?
(A) Coupons
(B) Price deals
(C) Premiums.
(D) Samples.
3. Pampers decided to organize a campaign where parents submit a 30-second video clip of
―their bonding day with their baby and pampers diapers‖ for a chance to win a year‗s supply of diapers. This is an example of
(A) Sweepstake
(B) Loyalty schemes
(C) Contests
(D) Lucky Draw
Self-Practice Exercise:
MCQ and True/False
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4. Sampling is most suitable for which types of products?
(A) Perishable products
(B) New products.
(C) Convenience products
(D) Expensive products
5. A bubble tea chain is facing keen competition is considering running a sales promotion
campaign that can encourage repeat purchase of its bubble tea. Which sales promotion tool should it employ?
(A) A two-for-the-price-of-one deal.
(B) A coupon for a 10% off next purchase.
(C) A stamp card offering free cup of bubble tea after 10 stamps are collected.
(D) Free samples of its new bubble tea flavours.
6. Direct marketing can initiate direct marketing
responses. True/False
7. Personal selling is the most expensive marketing communication tool among the
marketing communication mix.
True/False
8. Sales promotion is a means of personal communication with the customers while personal selling is a mass communication tool.
True/False
9. The increasingly busy lifestyle of consumers today has led to the growth in the use of direct marketing using digital media.
True/False
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10. The canned approach to sales presentation is the most effective method to use when selling complex products to consumers.
True/False
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.10 F
.9 T
.8 F
.7 T
.6 T
.5 C
.4 B
.3 C
.2 A
.1 B
Questions:
Answers to Self-Practice
1. Visit your local supermarket and check out the various products on promotion.
Determine which sales promotion tools were adopted and evaluate the effectiveness of
each of these promotional deals to determine whether if you would purchase these products if you were their targeted consumers.
2. Watch a YouTube video where the company uses an online contest to engage consumers using digital media. Reflect on the strengths of using the new online media instead of traditional media in reaching out to mass consumers.
3. Sign up for an online retail store like Shopee, Lazada or Qoo10. Pay attention to the email messages or SMS sent to you. Which media do you feel is more effective at catching your attention?
4. Source for one contest that is ongoing in your country. Evaluate the nature of the contest and determine whether this contest and the prizes offered will contest appeal
to you? What changes would you propose to make this contest more engaging for
consumers?
REFLECTIVE EXERCISES
SESSION 11
PROMOTION: INTEGRATED MARKETING COMMUNICATIONS
At the end of this session, students should be able to:
Discuss the need for an integrated marketing communication campaign.
Outline the strengths and weaknesses of each of the five promotion mix tools.
Select the promotional approach appropriate to a product‗s target audience
Determine the promotional strategies appropriate to the product life-cycle stage.
Design of push vs pull promotional strategies.
11.1 WHY THE NEED FOR IMC
In topic 9 and 10, we describe each of the marketing communication tools. To effectively
promote products or services to customers, companies realized that it is best to integrate the various marketing communication tools such as advertising, public relations, sales promotion,
personal selling, and direct marketing so that multiple strategies can be used to work together and reinforce each other.
Marketing expert Philips Kotler wrote in ―Marketing Management‖ (2014) as follows:
“Modern marketing must not only find a way to develop a better
product, a more attractive price but also communicate most effectively
to target customers. The company must know how to integrate
communications tools to present to existing and potential customers because individual communication is unlikely to lead to success.”
,
Figure 11.1: Integrated Marketing communications
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The need to integrate the various marketing communication tools into an Integrated Marketing Communications (IMC) campaign is growing in importance because of the following factors:
With higher levels of competition and the use of digital channels to communicate to
customers, there is a shift from mass communication towards a more customized approach to communicating to customers.
IMC involves promoting a brand through multiple media such as print, television, social media as well as mobile to blend the best of both the traditional as well as the new medium. The company can consider the best way to reach targeted consumes with the same consistent message creatively so that the audience will be exposed to their communications constantly. This is the same approach used by McDonalds even though the brand is already so well known, it does not stop communicating with customers.
Each of marketing communication tools serve different marketing objectives. Each of these tools have their individual strengths and weaknesses. By integrating the various tools into a promotional campaign, the company can meet several objectives and ensures it can measure the returns on their promotional investment to achieve the optimum results set for the brand.
Marketers are moving away from short-term promotional campaigns towards long- term communications with customers that is aimed at acquiring new customers and retaining them through useful content that keeps them visiting the website or mobile app. Building brand loyalty is the key goal behind most IMC campaigns.
11.2 NATURE OF EACH IMC TOOL
The five marketing communication tools: advertising, public relations, sales promotion,
personal selling, and direct marketing are suited for specific situations and target market. In this section, we will explore the unique strengths and weaknesses of each promotional tool to
understand how the marketing communication tools can be blended to craft the ideal promotional strategies for certain products.
11.2.1 Strengths and Weaknesses of Advertising
Strengths of Advertising Weaknesses of Advertising
Good control of the message High costs of producing and content running ads
Cost effective way to reach mass One way communication audiences
Can build brand images and Can get the wrong message across symbolic appeals without realizing
Can be repeated over an extended period
Difficulty getting noticed due to of time advertising clutter thus measuring
effectiveness is challenging
Table 11.1: Strengths and Weaknesses of Advertising
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Advertising remained the most popularly used marketing communication tool as it is indeed a
cost-effective way to reach mass audiences – with the use of a wide range of media from print, outdoor and digital media, the company has full control of the message content and can
build its brand image through the effective use of symbolic appeals. It is not uncommon for companies to adopt the same brand positioning over a long period of time which helps the
brand carve a consistent image to its consumers.
However due to saturation of advertising messages in the market, advertising messages have
begun to lose its effectiveness as less people pay attention to messages. Many companies are beginning to question putting up costly advertisements when it has limited effectiveness. As a
form of one-way communication, marketers sometimes inadvertently use the wrong symbols or have their messages misunderstood without realizing. This is especially true when
marketers attempt to advertise in foreign markets and make translation mistakes.
11.2.2 Strengths and Weaknesses of Public Relations
Strengths of Public Relations Weaknesses of Public Relations
Low or no cost promotion especially Lack of control for publicity
More believable and credible as Can lead to bad news which is customers trust the source of difficult to handle information
Good for building long-term Difficult to measure success of PR relationships with customers, media campaign as results may only show and community itself in the long term
Table 11.2: Strengths and Weaknesses of Public Relations
Public relations as a marketing communication tool is considered a viable alternative to advertising especially for small businesses or non-profit organisations with a small promotion
budget as it is a form of earned media rather than paid media. If the company is able to create a newsworthy story which gets picked up by journalists and is published in print as well as
social media, it can make the brand well-known at little cost. Unlike advertising messages
which are paid information, public relations messages may be more believable as it is written by an objective source who has not been paid by the brand to highlight only positive news
about the brand. If the brand invests in community services and sponsorship of charitable causes, it also helps the brand build a positive image through building long-term relationships
with its customers, media, and the community.
However, unlike advertising where the company has control over when their paid message will be aired, public relations rely on the discretion of the media staff to decide how the message should be written or whether it gets publicized.
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The worst nightmare for the company is when negative reviews about the company lead to bad experiences or complaints from customers or due to inaccurate information. This can
sometimes lead to dwindling of trust in the firm. It may take years for the company to regain trust if the situation is not well handled. It is also difficult to assess the extent of the damage
to their reputation to assess how whether the company is successful in redeeming their good
image.
11.2.3 Strengths and Weaknesses of Sales Promotion
Strengths of Sales Promotion Weaknesses of Sales Promotion
Can increase sales Tends to attract price-conscious - easy to track effectiveness of sales customers who will only buy when promotion campaign there is a promotional price
discount
Lead to customer satisfaction as Leads to price wars incentives are attractive
Effective at acquiring new customers Does not lead to brand loyalty
Table 11.3: Strengths and weaknesses of Sales Promotion
The key advantage of using sales promotion as a marketing communication tool is its ability
to increase sales especially in introducing new products, drawing more consumers into the stores, helping to clear stocks, and increase sales volume during the promotion period. Thus,
it is easy for the company to determine whether the sales promotion has been effective by tracking the number of coupons redeemed, how many premiums or free gifts was given out
and the increase in sales volume of the sale items. By holding sales promotion regularly
keeps customers engaged and is effective at increasing customer satisfaction.
Although sales promotion is effective at acquiring new customers and increasing sales
volume, overuse of sales promotion may lead to customers waiting until there is a promotional period to purchase the products. Thus, the type of customers drawn by sales
promotion are usually brand switchers and price-sensitive consumers who are not known to be brand loyal. Frequent price deals offered can also sometimes lead to a price war between
brands which will shave the company‘s profit margins yet may not lead to the increase in
sales volume the company anticipated.
11.2.4 Strengths and Weaknesses of Personal Selling
The greatest strength of personal selling is that the sales representatives can give a demonstration and address customer needs, queries, and objections through face-to-face,
video-conferencing or the use of telephone selling. Hence it involves the ability to customise messages tailored to the needs of the specific target consumers and provide the
two-way interactions that enable sales staff to give as well as receive immediate feedback.
Strengths of Personal Selling Weaknesses of Personal Selling
Sales message tailored to specific Most expensive tool as each sales needs of customers person can only interact with
limited number of customers
2-way interaction sales staff can give Unable to cater to mass audiences and receive immediate feedback
Can identify best prospects most Difficult to have consistent and likely to buy uniform message delivered to all
customers
Table 11.4: Strengths and Weaknesses of Personal Selling
The greatest weakness of personal selling is that it is the most expensive marketing
communication tool for a company to use as it requires intensive training to equip the
sales team with the effective skills to carry out the 7 steps of the personal selling process.
The sales process is lengthy and slow and may take several meetings before a sale can be
secured. There is also limited reach as each salesperson can squeeze in at most 3-5
meetings per day to meet with clients or put up a demonstration to reach at most 10 – 15
consumers at any point in time. This marketing communication tool is thus not effective
if the company wants to reach mass audiences in a short period of time. Another problem
with personal selling is that it is possible for the company to receive complaints from
clients of deviant sales representatives who use pressure selling or deceptive assurances
just to close the deal. This can affect the reputation of the company.
11.2.5 Strengths and Weaknesses of Direct Marketing
Strengths of Direct Marketing Weaknesses of Direct Marketing
Can be used for a variety of IMC Not all consumers respond to
functions messages
Messages can be tailored to Attention to Internet ads is very specific interests and needs of low thus difficulty getting noticed customers
Interactive nature of the Internet Expensive to maintain databases leads to higher level of
involvement
Easy to measure response rate Negative image of junk and spam mail
Table 11.5: Strengths and Weaknesses of Direct Marketing
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Push and Pull Strategies
Stage of Decision Process
Using a customer database, direct marketing as a marketing communication tool allows the
firm to target only selected customers whom they feel has the highest potential of purchasing
the product. Direct marketing can take on a variety of creative forms. Marketers can send
discount coupons and advertising brochures through direct mail to the homes of customers.
An email can be sent to customers informing them of the latest sales promotion or inviting
customers to accept an invitation to a personal selling workshop. An SMS message could be
sent to customer mobile phones to alert them to the latest price deals offered at the store and
invite customers to respond by checking out the website for details of what products are on
promotion. It is even possible for the firm to use direct mail, emails, or SMS to tailor their
message to individual customers. With the interactive nature of social media, direct response
marketing has grown in popularity as marketers can easily track the response rate for each
direct marketing campaign closely.
The key problem with the use of direct marketing is the negative perception of direct
marketing material as spam. These are often ignored as junk mail. Response rate to check out a price promotion or accept an invitation to an event may be low especially if the database is
not accurate. It is expensive to maintain the accuracy of the database as customers change addresses, mobile phone numbers and email addresses or switch jobs. Direct response
advertisements on social media are losing its effectiveness as customers become more cautious because of the rising online scams in the digital world.
10.3 FACTORS THAT INFLUENCE IMC STRATEGIES
Nature of Product
Product Life Cycle
Characteristics of Stage Target Market
Figure 11.2: Factors that Influence IMC Strategies
There are five factors that influence how integrated marketing communication tools should be blended for maximum effectiveness. These include:
Nature of Product: The effectiveness of promotion mix varies with the nature of
the product. Convenience products often make use of informative advertising and sales promotion as these tools are more suited to reach out to mass audiences. Shopping products, on the other hand, often adopts persuasive advertising and direct marketing to draw the attention of the customers to visit their physical or online stores. Complex and expensive products tend to rely on public relations and personal selling tools as brand and quality are more important for specialty products.
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Characteristics of Target market: If the size of the consumer segment is small, the use of personal selling and direct marketing would be effective at reaching these customers. However, if the consumer base is large and spreads across many geographical regions, it makes more sense to use mass marketing communication tools like advertising, public relations, and sales promotions to reach out to the masses. The choice of media suitable depends on the age, media habits and lifestyles of the market segments.
Stage of Decision Process: Marketers must apply the correct promotional tools at
various stages of buyer decision process. If customers are only at the awareness stage of a new product launched in the market, it is wiser to spend most of the promotional budget on advertising and public relations to build brand awareness and provide detailed information of the features and benefits of the product. These two tools will be effective at moving the consumer from awareness to interest stage. Once the consumer moved to desire stage, the blend of personal selling and sales promotion can then be effectively used to close the deal by moving customers from desire to action.
Figure 11.3: AIDA and Promotion Mix
Push vs Pull Strategies: If a manufacturer decides to adopt a Push strategy,
personal selling and trade promotions are adopted to get the cooperation of the
retailers to carry the product and promote the product to the customer through
point-of-purchase displays, banners, and price deals. Marketers who prefer to
use the Pull strategy will choose to use advertising and sales promotion to
promote directly to customers.
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Figure 11.4: Push vs Pull Strategies
Product Life Cycle Stage: The right blend of the promotion mix depends on the
stage in which the product moves through the product life cycle. If the product is
still at the introductory stage of the PLC, heavy advertising and public relations are
usually employed to highlight the product features and benefits. In the growth stage
of the PLC, as more competition enters the market, it becomes increasingly
important to use advertising and personal selling to differentiate the product from
other brands to retain market share. As the product moves into maturity stage of the
PLC, there is a need to employ more direct marketing and sales promotion as the
firm reaches out to the late majority who are usually more price sensitive. In the
decline stage, the company will employ sales promotion to clear stocks of the
product as it focuses its attention on other product line.
Figure 11.5: PLC and Promotion Mix
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It is essential for marketers to determine how the various marketing communication tools
convey the right messages to their customers through the different ways. As promotion is a
key marketing mix element in the overall marketing strategy for any firm, it is critical to
blend the five promotion mix tools appropriately at each product line, with the characteristics
of its target market in mind so as to create a relevant, cost-effective campaign to achieve the
objectives set for each promotional campaign.
REFERENCES
5. Figure 11.1: Integrated Marketing Communication, adelabiancahan.blogspot.com Retrieved May 27, 2021, from
https://adelabiancahan.blogspot.com/2015/09/integrated-marketing-communication- imc.html
6. Figure 11.3: AIDA and promotion mix, pinterest.com Retrieved May 27, 2021, from https://www.pinterest.com/pin/815855288716732738/
7. Figure 11.4: Push vs Pull Strategies, darketyler.wordpress.com Retrieved May 27, 2021, from https://darketyler.wordpress.com/reflection-essays-1-2/reflection-essays- 2/promotion-mix-and-strategies/
8. Figure 11.5: PLC and promotion mix, Marketingencylopedia.blogspot.com.
Retrieved May 27, 2021, from http://marketingencyclopedia.blogspot.com/2012/11/communications-or-promotional-mix.html
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1. Personal selling is most appropriate than mass communication tools like advertising and public relations when:
(A) the target market is large and scattered.
(B) there are many potential customers and a desire to keep promotion cost low.
(C) flexibility is not important.
(D) immediate feedback is desirable.
2. During the introductory stage of the PLC, the basic objective of promotion is to
(A) spend more money on promotion than competitors.
(B) remind customers about the firm and its brand name.
(C) inform customers about the features of the product.
(D) persuade the late majority to buy the product
3. Pampers decided to organize a promotion campaign to introduce its new ―swimming
diapers‖ by sending its sales force on call on retailers to explain the features of the product and work out trade incentives to get them to promote the products to their
customer base. This is an example of
(A) pull strategy
(B) push strategy
(C) sales promotion strategy
(D) Both B and C are correct
Self-Practice Exercise:
MCQ and True/False
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4. Advertising and public relations are most suitable communication tools to adopt for which types of products?
(A) New products
(B) Perishable products.
(C) Convenience products
(D) Expensive products
5. The AIDA model of promotion focuses on which of the following objectives?
(A) Awareness, interest, demand and action
(B) Awareness, interest, desire and action
(C) Awareness, interest, desire and acceptance
(D) Awareness, interest, decision, acceptance
6. The key strength of advertising over public relations is that the firm can control the
nature of message send to customers.
True/False
7. The major advantage of public relations is that the consumer gets immediate feedback
to help handle customers ‗doubts and objections.
True/False
8. Advertising and sales promotion are effective as mass communication tools, but they cannot provide customized messaging like direct marketing.
True/False
9. Marketers that use direct marketing communication tools must be sensitive to ethical issues relating to data protection and privacy.
True/False
10. In the maturity stage of the product life cycle, marketers will focus mainly on advertising as the main communication tools to customers.
True/False
1. Check out the local newspapers and compare the advertisements of two similar
supermarkets. Determine which integrated marketing communication promotion tools were adopted and evaluate the effectiveness of this blend of promotions adopted to
determine which supermarket is more effective.
2. Watch a YouTube video where the company uses integrated marketing communication to promote to its consumers using a combination of traditional and digital media. Reflect on how this blend of IMC help the company reach out to mass consumers.
3. Sign up for an online retail store like Shopee, Lazada or Qooo10. What kind of products do you see more sales promotion used by these online retailers? Which other
promotional tools were used by online retailers to get you to click on their app and
start shopping?
4. Source for one firm that adopts both public relations and advertising. Evaluate the nature of the public relations campaign and determine whether using PR is more
effective versus the use of advertising. What changes would you propose to make their IMC more interesting and engaging for consumers?
.10 F .9 T .8 T .7 F .6 T .5 B .4 A .3 B .2 C .1 D
Questions:
Answers to Self-Practice
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REFLECTIVE EXERCISES
SESSION 12
MARKETING RESEARCH
At the end of this session, students should be able to:
Explain the importance of information to the company and its understanding of the marketplace.
Define the marketing information system and discuss its parts.
Outline the steps in the marketing research process.
Explain how companies analyze and distribute marketing information.
12 MARKETING RESEARCH
Marketing research is used for any aspect of marketing that requires information for decision- making. It links the customers and public to the marketer through the conduit of information.
Enterprises need to approach marketing research in a logical manner. They must understand that the quality of the inputs into the research impacts the outcome of the research. The
availability of data also poses a challenge. When data is available, reporting, interpretation
and communication to the appropriate decision-maker are important. In this chapter the five- steps in marketing research and its elements will be used in understanding market research
concepts.
12.1 FIVE-STEP MARKETING RESEARCH APPROACH
Figure 12.1 Five-Steps Marketing Research
There are many approaches used for market research, for this module the five-steps
marketing research will be adopted. This approach starts with defining the problem, followed by developing of research plan, collecting the relevant information, developing findings, and
concludes with the application of research information to marketing actions. These steps will
be discussed in detail in the following sections.
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12.2 DEFINE THE PROBLEM
To define the problem, the researcher needs to understand the problem well to translate it into
measurable research objectives that data can then be collected to be analysed. The research
problem often presented to the research are usually abstract in nature. It may also be too
vague or large to be defined easily. The marketer must be able to break the problem into
smaller measurable items to collect useful data for analysis. This also requires that the
marketer and the researcher work closely together to define the problem carefully and agree
on the research objectives
DEFINING RESEARCH OBJECTIVE: To be able to do the research, the research problem, which is usually very generic must be translated to research objectives that are more detailed. This must be further broken down into research questions that are specific enough for data to be collected. At this stage it is important to have the translation from research problem to research question done correctly, or the research would not be able to solve the research problem after it has been completed.
SELECT BASIC RESEARCH DESIGN: Next, the researcher needs to consider the research design that best achieve his purpose. There are three designs that can be adopted, exploratory, descriptive, and causal research designs.
Is the problem understood well enough? If not, exploratory research is in order. Exploratory research is used to gather preliminary information that helps to improve
the definition of the problem. It is used to suggest hypotheses for further research. It aims to provide insights and understandings. The information collected tends to be
broadly or nominally defined (observational and ethnographic research). The
questions used tend to be open-ended. The process is flexible and unstructured. The sample tends to be small, also may be non-representative but selected to generate
maximum insights. Qualitative primary and secondary data is collected and analysed. The findings are regarded as tentative or used as input for further research, which is
why they are typically followed by descriptive or casual research.
If you understand the problem well, and are ready to collect the relevant descriptive
statistics, descriptive research is the design to adopt. Descriptive research is used to
describe things such as the market potential of a product or the demographics and
attitudes of customers who buy the product. Sometimes the objective is to test
hypotheses and examine relationships, which tends to require quantitative data
collection and analysis. The information needed is more clearly specified, typically
more formal and structured than exploratory research. Questions are usually close
ended. A large and representative sample is usually required. The data obtained are
subject to more robust evidence and quantitative analysis. Information derived is
considered confirmatory, and are used as inputs into managerial decision making,
although it may also trigger further research in related areas.
Causal research is done when you want to prove cause and effect relationships. Causal research is used to test hypotheses based on cause-and-effect relationships. It is used to formulate mathematical models that can be used to do predictive analysis. Such designs are usually expensive and require much statistical input and is more
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often done in academic setting than by marketers. However, where the benefits justify the cost, it may be still done by marketers.
MARKETING ACTION FROM RESEARCH: The ultimate purpose of the marketing research is usually to address a specific marketing issue that requires more information for effective action. Hence, the true measure of success of a market research program is how well the research has been able to solve the research problem. If all the steps, from start to end has been done correctly, the marketing action taken should be effective and the research problem solved well. Hence, key performance expectations that indicate improvement to the research problem is a good measure for the research effectiveness.
12.3 DEVELOP THE RESEARCH PLAN
The research plan facilitates the identification of the information needed and documents the
specific research approach, contact methods, sampling plans, and instruments that researchers will use to gather the primary data. The researcher should know what data already exists
before embarking on the collection of new data.
The research plan presented by the researcher is summarised in a written proposal called a
research brief. This brief covers the research problem to be addressed, and mapped them to the research objectives, information to be obtained, sources of secondary information and/or
methods for primary data to be collected. It should indicate how the results will help management decision making. The brief should also include the estimated costs and timeline
of the research.
SPECIFY CONSTRAINTS: Information gathered from market research is usually costly. It is very easy to desire all available data. However, it must always be wisely matched to the cost of information. Hence, a researcher must balance between the resource he has and the level of accuracy and detail of data that is needed. The researcher must be aware of the timeline available to him, the scope that is needed to gather enough info to solve the research problem, the cost of the research or the funds available for the research.
SAMPLING: The sampling plan must consider how samples will be constructed and used. A sample is a segment of the population selected to represent the population; the statistics derived from analysing the sample data can be inferred as representing the population ‗s characteristics. Designing a sample calls for these decisions; who are the target to be surveyed (aka sampling unit and sample frame), the size of sample needed (level of accuracy needed), is a randomised sample needed, and the sampling procedure and technique to be used.
Researchers would need random sample to infer population characteristics, but this is not always needed. If a randomised sample is needed, a simple random sample, or a systematic sample, or a stratified sample, or a cluster sample can be used.
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Researcher may not need the sample to be random, this reduces the cost of
collecting data. If this is the case, convenience sample, or voluntary response sample, or purposive sample, or snowball sample can be used. These sampling are
easier and cheaper to collect than a randomised sample.
12.4 COLLECTING RELEVANT INFORMATION
There are many ways of gathering data, and there are many sources of data. Collecting the data that is suitable for the research will enable the researcher to perform the appropriate
analyse needed to solve the research problem. In this section of the chapter, the types of data
to be collected, and the types of questions used in research will be covered.
TYPES OF MARKETING INFORMATION: Most researcher will usually gather secondary information first. Secondary data is information that already exists somewhere, having been collected for another purpose; sources includes both internal and external sources. Such data can usually be obtained more quickly and at a lower cost than primary data. Researchers must evaluate if the secondary information are relevant to the research. It should be sufficiently accurate, current, and impartial to be useful, but very often they may not be.
Secondary research may not always be able to provide sufficient data. Researchers
will need to collect their own data, in other words, conduct primary data collection. Primary data is information collected for a specific research problem. Its collection
calls for several decisions on research approaches, contact methods, sampling plans, and research instruments.
SECONDARY DATA: Secondary data may exist within the organisation (internal) of out of the organization (external).
Internal data can exist in the form of supply chain or accounting data available in the enterprise resource planning system. It can also exist is the form of published reports
like the company annual investors reports. It provides a cheap and valuable resource for the researcher. Supply chain data can be particularly useful in indicating trends,
and easily matched to other available data for analysis.
External data is readily available, some are free, and others are not. They are helpful in providing useful insight to the researcher especially when doing exploratory research. Some useful sources are:
o Census bureaus, in Singapore the Singapore Department of Statistics (SingStats) provides a wealth of demographic and economic data that is very much needed by the market researchers.
o Business periodicals, like the Economist, are particularly useful in providing the latest market insight to researchers.
o Syndicated services, like the trackers from IDC and Gartner are useful in determining market share, and trends in the market.
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o Online Databases, like those from Economic Intelligence Unit (EIU) provides multidimensions data for query and analysis through their online analytic processing (OLAP) pivots that allows for customized data matching.
o Statistical & Financial Data - Statistical data can also be found in SingStats and EIU, Financial data for Singapore can be found in Singapore Financial Data
o Portals & Search Engines - In the 21
st century, information portals and search
engines like Google, provide access to a wealth of information from various sources, which may be imprecise or fake. Therefore, discretion and validation are required for such data.
PRIMARY DATA: There are a number of ways that primary data can be obtained. The following are some of the more common methods:
Personal observation, where information is gained by observing relevant people,
actions, and situations by researchers. This method is highly effective in collecting information that is true behaviour of the consumers. The weakness of this method is
that the reasoning behind the action and opinions cannot be determined by just observing.
Mystery shopper is used to observe the competition or monitor their own businesses.
These are researchers assigned to secretly observe the competition or monitor their own businesses. They will appear as any customer, but they are there not to make a
purchase but to spy or collect information.
Video recording is commonly used to observe behaviours. The advantage is that the consumer will behave more naturally if he is not aware that he is being observed.
Another advantage is the availability of software for processing the recorded data
from observation.
Ethnographic Research is when trained observers observe and interact with consumers in their natural habitat. It enables the researcher to not only collect quality information
of actual behaviour through observing the consumer, but also interact with the
consumer to understand the reason for the behaviour or discover the opinion of consumers.
Focus group is a research method involving participants as a group and not as individuals. The advantage of focus groups is idea sharing which can produce richer
quality of data. The disadvantage is the phenomena of ―group-think‖ that sometimes occur in focus groups. This creates biasness in the information gathered. The host
must take measures to prevent this from happening.
Questionnaire Surveys is the gathering of primary data by asking people questions
about their knowledge, attitudes, preferences, and buying behaviour. Surveys are
conducted via personal interviews, the telephone, mail (and fax), and the internet (and
email). The methods differ in the cost, the ability to probe complex question, biasness,
and anonymity.
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Personal interviews are costly to conduct, but necessary when information required are complex in nature. In this kind of surveys, both the respondent and interviewer can observe each other, and this is a cause for bias. The interviewer must be trained to conduct the interview professionally and to manage for bias errors.
Telephone survey does away with the face-to-face requirement. Therefore, reducing interviewer bias and improves anonymity of the survey. While the cost of conducting
telephone surveys is lower, it is not suitable for when the questions require richer quality answers.
Mail, fax, online, email surveys are other methods that are less costly to conduct. These can be designed for respondent anonymity where the identity of respondents is not necessary. As in the case of telephone surveys, these are not suited for complex probing questioning.
TYPES OF QUESTIONS USED IN QUESTIONNAIRES: Questionnaire consisting of a set of questions that respondents help to answer. The market researcher decides its content, form, wording, and the order of questions.
Questions may be opened or closed ended. Open ended questions allow for all
possible answers by the respondent, while a close ended only provides a limited set of
possible answers that can be accepted. Open ended questions are useful in getting
qualitative inputs but cannot be used in quantitative analysis. It is usually used in exploratory research. Close ended questions are useful in quantity analysis in
descriptive research as the limited possible responses allowed are easily quantified for analysis.
In closed ended questions there are some useful scaling that is used. They are dichotomous, semantic differential and Likert scales.
Dichotomous response are responses where only two options are available. For example, yes/no, or male/female, like/dislike.
Semantic differential provides scaling in measure based on relative degrees. For example, if the scale was indicated as: Excellent, Very Good, Good, Average, Bad, Very Bad, Terrible.
Likert scales is the use of a value to indicate the degree of difference. For example, if the scale was indicated as 1 to 7. It is usually given in an odd number as the presence of a neutral scale is usually preferred.
PROBLEMS IN WORDING OF QUESTIONS: The manner which questions is structured and sentenced by the researcher may create error and biasness in the research. Some of the common mistakes are discussed below.
Leading questions, these are a series questions that will lead to an answer. This
questioning method is usually adopted by salespeople to drive a selling point.
However, such a method is bad when the desire is to derive the truth from the respondent.
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Ambiguous or double-barrel questions are questions that are vague and have more than one question embedded in a single question. For example, ―Do you eat nuts and drink beer?‖
Unanswerable questions are questions that truthful answers are unlikely to be given. This is because the consumer just will not know. For example, ―When was the first time you ate a burger?‖
Non exhaustive questions are where the question options do not cover all possibilities.
For example, when the question is ―Where do you live?‖, and only Clementi and Jurong is provided as options for the answer.
Non-mutually exclusive question is one where answer options are not mutually exclusive. For example, when the question is ―What is your age?‖ And the available
options are ―below 20 ‗, ‗20 to 40‗, and ‗40 and above‖. Forty years old respondents can answer in both ―20 to 40‖, and ―40 and above‖.
12.5 COLLECTING PRIMARY DATA
This involves collecting, scrubbing, and processing the data for the research. Data collection can be done by the firm ‗s own research staff or by outside firms. This phase is usually the
most expensive and subjected to the most errors. Hence, scrubbing is needed. The findings need to be processed and analysed to identify important findings.
12.6 DEVELOP FINDINGS
This is the phase of the project where new and useful information is extracted from the data and existing information. Researchers should avoid overwhelming marketers with numbers
and statistics. This is because it is the meaning behind the numbers, and not the numbers itself, that marketers are after.
There are usually a lot of data and information collected in the research. However, much of it is useless and meaningless, so present only the important findings that are useful for decisions faced by the marketer.
It is sometimes difficult to convince marketers of the findings from the research, as personal
biasness will exist. It is better to involve the managers in the interpretation of the findings as managers may have important insights into the problems beyond the researcher ‗s knowledge.
Also, the findings may not always be infallible. Therefore, do not encourage the managers to
blindly accept their interpretations which may be wrong or bias.
ANALYSING DATA
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There are many ways to analyse data, a simple and useful way is to cross tabulate data. Cross tabulation is when variables from the research data are used as headers in the columns and rows of a spreadsheet. Refer to Table 12.3 for example.
Next, find abnormally or patterns or trends in the data. Discover the reasons for them through the further drill down of data. The researcher must then interpret them in such a way that the
audience can easily understand. For example, in table 12.2 below, it is apparent that there are some abnormally existing in Table A. This abnormally tells the researcher that the younger
people are the highest frequent users of fast food.
Table 12.2 Cross tabulated data
PRESENT RESEARCH FINDINGS
Research findings are to be presented clearly and efficiently. Infographics, charts, and graphs
are commonly used for clarity and ease of understanding. Graphs usually provides the best impact and delivers the message expediently. Note that different types of graphs are effective
in presenting different types of information.
Pie charts are useful in presenting proportions. For example, in Figure 12.2, it is obvious, even without the percentages, that banana is the favourite fruit of the respondents.
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Figure 12.3 Pie chart
Bar charts and Histograms are good for period and categorical reporting. For example, Figure
12.4. Annual sales to different grouping sizes over four years for Tony pizza.
Figure 12.4 Bar chart
Line charts are good for trend reporting. For example, figure 12.5 you can easily see the upward trend in the first graph.
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Figure 12.5 Line Graphs
12.6 TAKE MARKET ACTION
The last step is to undertake marketing action to address the problem. If the research is done correctly, the information would suggest the appropriate marketing actions to take. The
outcome of the marketing actions taken is an indication of the quality of the researched
recommendations. As such it can be used to evaluate the quality of market research done.
12.7 INFORMATION TECHNOLOGY IN MARKET RESEARCH
To perform their marketing responsibilities, marketing managers need information, and they
often lack the right information but have too much of the wrong kind. To overcome these problems, enterprises need to improve their marketing information system (MIS) that consists
of people, equipment, and procedures to gather, sort, analyze, and distribute needed, timely, and accurate information to decision makers in marketing.
A good MIS balances the value of information, against what they really need and want. The MIS must monitor the marketing environment to provide the necessary information to facilitate marketing decision-making, it all comes at a cost.
The MIS is a data base that has both internal and external data sources that can be used by marketer.
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Internal data sources that consist of computerized collections of information obtained from
data sources within the company (like supply chain, sales, and account); this source of
information can usually be accessed more quickly and cheaply than other information sources.
External data sources are the systematic collection and analysis of publicly available
information about competitors and developments in the marketing environment, sources include company personnel, suppliers, resellers, customers, web pages, business publications,
trade shows, and online databases.
In today context, social media is also used extensively in market research. Social media provides direct communications with the consumers. Consumers are usually more willing to
provide ideas to businesses as they are usually the final benefactors of the ideas. Often, researcher encourage consumers to support them by rewarding them with incentives. Social
media is a new pioneering form of data collection that should not be ignored by marketers.
REFERENCES
Figure 12.1 Five-Steps Marketing Research: Five-Steps Marketing Research Approach Leading to Marketing Actions. (n.d.). [Illustration]. Kerin, R., & Hartley, S. (2019). Loose
Leaf for Marketing (14th Ed.). McGraw-Hill Education. Chapter 8, Marketing Research: From Customer Insights to Actions, page213.
Table 12.2 Cross tabulated data: Two forms of a cross tabulation relating age of head of
household to frequency of fast-food restaurant patronage. (n.d.). [Illustration]. Kerin, R., & Hartley, S. (2019). Loose Leaf for Marketing (14th Ed.). McGraw-Hill Education. Chapter 8,
Marketing Research: From Customer Insights to Actions, page230.
Figure 12.3 Pie chart: Getting the Details Right in an Interactive Line Graph. (n.d.). [Graph].
Nightingale. Retrieved 28 May 2021, from https://heap.io/blog/line-graph-redesign.
Figure 12.4 Bar chart: Presenting the findings. (n.d.). [Illustration]. Kerin, R., & Hartley, S. (2019). Loose Leaf for Marketing (14th Ed.). McGraw-Hill Education. Chapter 8, Marketing Research: From Customer Insights to Actions, page232.
Figure 12.5 Line Graphs: Getting the Details Right in an Interactive Line Graph. (n.d.).
[Graph]. Heap. Retrieved 28 May 2021, from https://heap.io/blog/line-graph-redesign.
Kotler, P., Armstrong, G., Ang, S. H., Leong, S.-M., Tan, C. T., & Yau, O. H.-M. (2012). Principles of marketing: An Asian perspective (3rd Ed.). Singapore, Singapore: Pearson Education Centre.
Kerin, R., & Hartley, S. (2019). Loose Leaf for Marketing (14th Ed.). McGraw-Hill Education.
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1. Which of the following statements concerning the marketing research approach is most accurate?
(A) The primary purpose of marketing research is to collect data, not to
take actions on it.
(B) When collecting marketing research, people may or may not be willing to tell you what you want to know if it is potentially embarrassing.
(C) People are just as able to give accurate information about products they have only heard about as those they have actually used.
(D) Amongst those people who participate in market research panels, there is an almost perfect correlation between a respondent's stated intentions and their actual buying behaviour.
2. What is the marketing research term for the specific, measurable goals the decision-maker seeks to achieve in conducting the marketing research?
(A) research risks
(B) research decisions
(C) measures of success
(D) research objectives
3. After defining the problem and developing the research plan, the next step in the marketing research process is to
(A) collect relevant information.
(B) develop findings and recommendations.
(C) take marketing actions.
(D) plan the budget.
Self-Practice Exercise:
MCQ and True/False
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4. A specialized observational approach in which trained observers seek to discover subtle behavioural and emotional reactions as consumers encounter product in their "natural use environment," is referred to as research.
(A) ethnographic
(B) cultural
(C) genealogical
(D) sociological
5. Why do you smoke?" is an example of which type of question?
(A) Likert scale
(B) fixed alternative
(C) open-ended
(D) dichotomous
6. Primary data refer to facts and figures that are newly collected for a project at hand.
True/False
7. Mystery shoppers are people hired by a customer to prove that illegal or unethical practices are regularly taking place at a particular establishment.
True/False
8. The fifth step of the marketing research approach is to take marketing actions.
True/False
9. "Have you been to a dentist within the past 6 months? Yes No?" is an example of semantic differential question.
True/False
10. Two important advantages of secondary data are they are inexpensive and up-to-date.
True/False
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.10 F
.9 F
.8 T
.7 F
.6 T
.5 C
.4 A
.3 A
.2 D
.1 B
Answers to Self-Practice Questions:
1. Explain why measures of success are important to effective decision makers and give an example of one.
2. What is the basic difference between primary and secondary data, and what are the advantages and disadvantages of each?
3. What is a focus group? How is it used in marketing research? What disadvantage is associated with its use?
4. Once the data has been collected and analysed it must be presented in a clear concise form. Explain how marketing charts and graphs can help in this process.
5. Under what conditions it is acceptable to use non-randomised data for statistical analysis? Why?
REFLECTIVE EXERCISES
