FACULTY OF MANAGEMENT AND LAW SCHOOL OF MANAGEMENT E X E C U T I V E MBA 2016/17 MAR7014-A Marketing MODULE STUDY BOOK Study Book: Marketing 2 Bradford MBA Copyright © University of Bradford 2005, 2007, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017 First published 2005 Seventh edition 2013 Second edition 2007 Eighth edition 2014 Third edition 2009 Ninth edition 2015 Fourth edition 2010 Tenth edition 2016 Fifth edition 2011 Eleventh edition 2017 Sixth edition 2012 MBAMINT_SB_11_2017 MAR7014-A University of Bradford Richmond Road Bradford BD7 1DP Bradford University School of Management Directors of Studies Bradford – Craig Johnson Dubai – Shahid Rasul Programme Administrators Gavin Turner [email protected] (Distance Learning MBA) Emma Pheasant [email protected] (Dubai and Bradford Executive MBA) Module Development Team Sally Burrows, Monique Cuthbert, Kyoko Fukukawa, Keith Hanning, David Jobber, Julian Rawel, Christine Swales, Gabi Witthaus, Lynn Parkinson, Jonathan Muir, Steve Moulds Module Leader Lynn Parkinson Bradford University School of Management Emm Lane Bradford BD9 4JL Tel: 01274 234374 Website: www.bradford.ac.uk/management This Study Book may not be sold, hired out or reproduced in part or in whole in any form or by any means whatsoever without the University’s prior consent in writing. Bradford MBA 3 Contents Introduction to the Module 7 Your module leader 7 Overview of module and module descriptor 7 Assessment criteria 7 Support for your learning 9 Developing good academic practice 11 Module feedback from previous students 12 Unit 1: Introduction to Marketing 13 Introduction 14 Objectives 14 Market and marketing orientation 16 What do marketers do? 18 The marketing mix 19 Marketing as exchange 19 Marketing and customer value 20 New concepts in marketing 21 Summary 21 Additional learning resources 22 References 23 Unit 2: Buying Behaviour 25 Introduction 26 Objectives 26 Buying behaviour 27 The consumer buying process 28 Perceptions, learning and memory 32 Personality 35 Motivation 36 Social contexts and social influences on behaviour 37 How do organisations buy? 38 Summary 41 Additional Learning Resources 42 References 43 Study Book: Marketing 4 Bradford MBA Unit 3: Researching and Understanding the Market Environment and Customers 45 Introduction 46 Objectives 46 Monitoring and researching the market environment and customers 47 Definitions of key terms 48 Environmental scanning and analysis 49 The internal environment 52 Information systems for marketing 55 Marketing research 56 The research brief 56 Summary 58 Additional learning resources 60 References 60 Unit 4: Marketing Strategy 63 Introduction 64 Objectives 65 Linking corporate strategy and marketing strategy 65 The strategic context 67 Strategic marketing planning 69 SWOT analysis 71 Strategic marketing goals 72 Competitive advantage and generic strategies 74 Competitive positioning and strategic intent 75 Marketing metrics 75 The marketing plan 76 Summary 77 Additional learning resources 79 References 80 Unit 5: Market Segmentation and Positioning 83 Introduction 84 Objectives 84 The segmentation process 85 Defining segments in consumer markets 86 Psychological bases 89 Behavioural criteria 91 Segmentation in business markets 91 Targeting 91 Contents Bradford MBA 5 Positioning 93 Summary 96 Additional Learning Resources 97 References 97 Unit 6: Product and Service 101 Introduction 102 Objectives 102 What is a product 103 Products or services 104 Key product and service terms and concepts 105 Classifications (types) of products 106 Services 107 Levels of product 109 Product ranges, lines and mix 110 Product lifecycle 111 Developing new product propositions 113 New product diffusion 115 Branding 115 Summary 116 Additional learning resources 120 References 120 Unit 7: Price and Place 123 Introduction 124 Objectives 124 Pricing in the marketing mix 125 Pricing terms, approaches and methods 126 Pricing objectives and approaches 128 Pricing a new product 130 Marketing channels 131 Intermediaries 133 Channel levels 134 Technology and channels 136 Summary 137 Additional learning resources 138 References 139 Unit 8: Marketing Communications 141 Introduction 143 Study Book: Marketing 6 Bradford MBA Objectives 143 Communication theory 145 Two-step models of communication 146 Elements of marketing communications 147 Marketing communications models 149 Choosing and using the right tools 152 Advertising media 154 Marketing communications messages 155 Social media and marketing communications 156 Key techniques in digital marketing 157 Marketing communications planning 157 Integrated marketing communications 159 Summary 159 Additional Learning Resources 162 References 163 Unit 9: Revision 167 Introduction 167 Objectives 167 Successful marketing 168 The assignment 168 Appendix: Module Descriptor 175 Bradford MBA 7 Introduction to the Module Your module leader Lynn Parkinson is a marketing and sales management specialist, with undergraduate and postgraduate qualifications in marketing. She has years of experience as an academic and as a practitioner. In the academic world, she has taught at undergraduate, postgraduate and postexperience levels in the UK, continental Europe (including central and eastern European counties), the Middle East, Asia and the Caribbean, working with students from different cultural and professional backgrounds. Her work (both face to face and distance learning tutoring) is rated highly. Lynn has worked as a consultant with companies such as Mars, Philip Morris, Coca-Cola and IBM on short-term projects and extended assignments. Overview of module and module descriptor The aim of this module is to provide a comprehensive introduction to contemporary marketing theory and practice. The module is designed to enable you to:  build knowledge and understanding of the key concepts and principles of marketing  develop the ability to apply these concepts and principles to practical marketing situations  refine analytical, problem-solving and creative skills in marketing. Please see the appendix for the module descriptor. Assessment criteria The module is assessed by 100% individual assignment. Assignment The assignment will contribute 100% of the assessment. It requires knowledge of the module material up to and including Unit 9. Study Book: Marketing 8 Bradford MBA The assignment will be in the form of a report and should be typed or word-processed; it should comprise no more than 2,000 words. Once your assignment has been marked, you will receive written feedback from your tutor. For guidance on successfully completing assignments see the Assessment section of the module Blackboard site. You will find further help and advice on the Effective Learning Service (www.bradford.ac.uk/management/els). Assignment aim The aim of the assignment is for you to demonstrate your understanding of the marketing theories and principles covered in the module. You should aim to show your understanding of how these are applied in practices of organisations in a meaningful, insightful and balanced way that shows critical reflection. Assignment task This assignment requires you to research, report and make recommendations on the marketing strategy of an organisation of your choice, using the knowledge and tools presented during this marketing module. Your example should be chosen because it demonstrates ‘success’ in implementing marketing.  Select and research a company, brand or non-profit organisation of your choice. Briefly introduce your chosen organisation, explaining why you consider it to be a ‘marketing success story’ (10 marks).  Detail and discuss the key factors which led to the marketing success of your chosen organisation. Your answer should show an appreciation of the core theories in this module (e.g. an understanding of the changing marketing environment, segmentation, market positioning and the marketing mix) (60 marks).  Building on your success story, evaluate the future challenges facing your chosen organisation, and make two or three recommendations on areas the organisation should address for continuing success (30 marks). Further detailed guidance on the assignment is available in the ‘Assessment’ menu item in Blackboard and in Unit 9 of this Study Book. Introduction to the Module Bradford MBA 9 Submitting the assignment All assignments will be submitted electronically via Turnitin on the module Blackboard site. Go to Blackboard > Module Site > Assessment > Executive MBA Assessment Dubai/Manila/Singapore > Turnitin. Click on ‘View/Complete’. You will then be taken to a submission page. The First and Last name boxes are automatically filled in. Check that your details are correct. In the submission title box, you should label your work using your UB number and the module code e.g. 0123456789 MAR4042-M (you can find the code on the title verso of this Study Book). It is imperative that you upload your assignment in the above format – failure to do so may result in examiners being unable to mark your work. Click the Browse button to upload your file. Navigate to your file and click Open. Click Upload. Wait while your file is uploaded to the server. The next page gives you the opportunity to review your submission. At this point you have not yet submitted, and can return to the submission page to start again if you so wish. If you are happy that this is the correct paper and you want to continue to submit, scroll to the bottom of the page and click Submit. You will then be emailed a receipt to your university email address, which will include your assignment identification reference. For further information on how to submit your assignments using Turnitin, go to the ‘How To’ section of Blackboard (Under ‘My Organisations’) and see ‘How to Submit an Assignment Electronically’. Support for your learning General guidance on the support available for students from information services can be found at: http://www.bradford.ac.uk/information-services/. Approach to studying marketing As an executive student you will be studying this module at a time and place that fits around your work, social and family commitments; however, Study Book: Marketing 10 Bradford MBA it is strongly advised that you progress steadily through the module. In this way, you will leave yourself plenty of time to prepare for the assessment. Textbook Throughout the module, you will need to refer to the module textbook: Baines, P. and Fill, C. (2014) Marketing. 3rd edition. Oxford: OUP. The textbook forms an essential part of your study. You will be asked to read the chapters specified at the beginning of each unit to familiarise yourself with the concepts and issues covered. Module Study Book To develop your understanding of the subject matter, this Study Book contains several exercises and refers to a variety of information sources (e.g. audio recordings, academic and non-academic papers). It is strongly advised that you follow the prompts provided and engage with all the materials. Study Book activities and case studies As you progress through the Study Book, you will be asked to complete a series of short activities. Completion of these activities is essential if you are to develop a good understanding of the subject. Simply reading the textbook and the Study Book will not be sufficient. Model answers to the activities, where applicable, are provided on Blackboard. Audio recordings and slides In each unit, you will be advised to listen to audio recordings and consult the corresponding slides highlighting key theories and ideas. Live tutorials on Blackboard collaborate virtual classroom platform During the module, you will be required to attend four live, online tutorials conducted by a module tutor. These online tutorials will provide you with an opportunity to engage in detailed, real-time discussions on key issues and concepts with other students and academics. The subject and materials for each live online tutorial are outlined in the Study Book. You will be given details of the times and dates of these tutorial sessions once the module has commenced. Introduction to the Module Bradford MBA 11 If you have never used the Blackboard Collaborate virtual classroom platform before, it is essential that you familiarise yourself with the platform and test your computer setup before you attend the first tutorial. To test your sound settings, please go to the Blackboard Collaborate Support site at http://bit.ly/1etRu2Y. For further support materials and information about Blackboard Collaborate, please see the Blackboard Collaborate Support site at http://bit.ly/1jBpgUc. Multiple-choice questions You will have access to a comprehensive bank of multiple-choice questions in Blackboard, allowing you to monitor your understanding of basic concepts and get instant feedback at the end of each unit. Internet resources There are several websites that provide relevant and up-to-date information related to the topics discussed in this module. Sites well worth visiting regularly include:  https://exchange.cim.co.uk/ (The Chartered Institute of Marketing)  www.marketingpower.com (American Marketing Association)  www.msi.org (Marketing Science Institute) For further information on additional resources see the sections in Blackboard entitled ‘Additional Learning Materials’ and ‘Web Links’. Developing good academic practice Harvard referencing style Students will be required to provide references to the sources used to produce work. This shows what students have read, supports the arguments and acknowledges the work of others. The referencing system used in this programme is called Harvard. The reference consists of two parts: 1. A citation in the text. This appears next to the information you have used. It consists of the family name of the author followed by the year of publication. Each citation is matched to a reference. 2. The reference goes in a reference list at the end of your work. The list is in alphabetical order. It contains the full details of all the sources referred to in the text. Study Book: Marketing 12 Bradford MBA For details on how to create your reference list, go to: http://www.bradford.ac.uk/library/help/referencing/. A note about referencing in the Study Book This Study Book provides you with a model for citing literature and presenting reference lists. Citations in the body of the units and in the References section at the end of each unit follow the University of Bradford version of the Harvard referencing system. However, please note that the references provided in the grey boxes at the start of each unit and at intervals throughout use a different convention, with hyperlinks embedded behind the title of the item (rather than given separately at the end of the reference) and no access date included. This is simply to increase the flow of text in the grey boxes. Module feedback from previous students At the end of the module you will receive an email with a link to a questionnaire, requesting you to comment on the module. The feedback you submit regarding your learning experience will help the module development team in their ongoing efforts to ensure the best possible learning experience for all students. Bradford MBA 13 Unit 1: Introduction to Marketing Key reading: 1. Baines and Fill (2014), Chapter 1 2. Cnossen, C., Li, Y., Sampath, N., Taylor-Maisano, W. and Tsonev, V., MBA Perspectives (nd) What Gives Red Bull Wings: Creating a Successful Market-Oriented Organization (Blackboard > Module Site > Module Materials > Unit 1) 3. Foreman, J., Donthu, N., Henson, S., and Poddar, A. (2014) The performance implications of planning, implementation, and evolution of firms’ customer and competitor orientations. Journal of Marketing Theory and Practice 22(4), 349–365 (Blackboard > Module Site > Module Materials > Unit 1) Key audio and video: 1. Introducing the Module: Lynn Parkinson (Blackboard > Module Site > Module Materials > Unit 1) – Activity 1.1 2. CNN (2013) Amazon CEO: Focus on customer is key. YouTube, 25 September (Blackboard > Module Site > Module Materials > Unit 1) – Activity 1.4 3. IBM (2011) IBM THINK Harold Schmitz Discusses Mutuality In Business With Errol Morris. YouTube, 21 September (Blackboard > Module Site > Module Materials > Unit 1) – Activity 1.5 4. The City Bin Company (2013) Welcome to The City Bin Co. YouTube, 16 December (Blackboard > Module Site > Module Materials > Unit 1) – Activity 1.6 Other: 1. Unit 1 audio and slides (Blackboard > Module Site > Module Materials > Unit 1 > Audio and Slides) – Activity 1.7 2. Unit 1 multiple-choice questions (Blackboard > Module Site > Formative Exercises > Multiple-Choice Questions > Unit 1) – Activity 1.8 Study Book: Marketing 14 Bradford MBA Introduction Read: Baines and Fill (2014), Chapter 1 Take a few minutes to think about your views of marketing. Make notes on your views and refer to them towards the end of the module. Most people shift their views over the period of study. Objectives By the end of this unit, you should be able to:  define the marketing concept  distinguish between marketing as a business orientation and as a business activity  understand the importance of mutual gain between buyers and sellers  define what is meant by the marketing mix and understand how the elements of the mix form an overall marketing management processes  appreciate how modern marketing activity contributes to society and the economy. Activity 1.1 – watch and reflect Watch: Introducing the Module: Lynn Parkinson (Blackboard > Module Site > Module Materials > Unit 1) The core of marketing stresses the need to satisfy customers, while meeting the organisation’s business goals. This seems simple and straightforward, but it is much more complex in practice. Customers or buyers make many decisions – some major, and some less important – as part of their daily life. Organisations – whether public or private – provide products and services for these buyers. Some organisations actively seek to meet customer needs, and to do so better than competitors. These organisations are market oriented. Others are less well focused on meeting the needs of customers, either through ignorance or poor practice. This can be frustrating for customers. Satisfying customers is central in academic definitions of marketing. Read: Baines and Fill (2014), Table 1.1, pages 5–6. The definitions in Table 1.1 raise central themes of marketing: Unit 1: Introduction to Marketing Bradford MBA 15  customers’ (and other stakeholders’) needs are critically important for success  there are key processes and activities which are involved in matching the organisation’s efforts to satisfy customers and other stakeholders  understanding customer perceptions of value is essential to meeting the requirements of customers. Activity 1.2 – stop and think Which organisations or brands do you think demonstrate good marketing practice, as identified by these definitions? Activity 1.2 – stop and think answers: Terminology of marketing may confuse. For example, people use the word ‘marketing’ to mean different things, many of which are only part of an organisation’s marketing efforts. Sometimes marketing terms are used incorrectly. You must ensure that you use the correct academic terms in assessed academic work. The definitions you have been referred to identify a range of terms for those who are the target of marketing activities. These include customers, consumers, clients and even buyers, shoppers, etc. Mostly, there is an overlap between these terms. The textbook identifies an important distinction: “The difference between a customer and a consumer is that a customer purchases or obtains an offering but a consumer uses it (or eats it in the case of food).” (Baines and Fill 2014: 7) Study Book: Marketing 16 Bradford MBA Do you agree with this view? Your views may vary, depending on your sector or context. For some manufacturing organisations, the customer is a major supermarket chain (like Tesco or Walmart) or a general retailer, and the consumer is a domestic buyer. Products targeted at individual households are usually termed consumer brands, which are offered to the consumer market. The important issue here is to think about these terms, and the rationale for them. You will see both terms – customer and consumer – used in this module. You need to use these terms correctly in your assessed work. Terms such as organisation and company may be used interchangeably in this work. The context should guide when this is (for example) applicable for all organisations, or exclusively for marketing in profit or non-profit organisations. Market and marketing orientation Marketing is often defined as a business philosophy. Market orientation is when organisations research the market (both customers/consumers and the general marketplace) to understand, anticipate and/or respond to the changing environment, and choose target customers. This generally means that the organisation focuses on gathering intelligence on the market – including customers, consumers and competitors – which is then used to deliver better offers to customers, and better returns to the company. In 2014, the new CEO at Tesco (a major UK grocery retailer) was reported as saying that he planned changes for Tesco that were ‘designed to put the customer at the heart of everything we do’ (Fletcher 2014). A marketing oriented organisation is one which recognises the importance of marketing as a business discipline, and where there is functional leadership in marketing. Marketing orientation is delivered through market sensing (identifying cues about changes in the market) and by environmental scanning, which is the focus of Unit 3. Activity 1.3 – stop and think Is your organisation market/marketing oriented, based on these definitions? (If you are not working currently, apply these to an organisation you know.) Think about the extent to which your organisation seeks to gather insight on the market, and to share this within the organisation. Is your organisation committed to developing an understanding of its customers and committed to satisfying their needs? Unit 1: Introduction to Marketing Bradford MBA 17 Activity 1.3 – stop and think answers: There are three core elements of a market orientation:  customer orientation – a focus on creating superior value through focusing on delivering customer needs  competitor orientation – a focus on researching and understanding the strengths, weaknesses, capabilities and strategies of competitors  inter-functional co-ordination – an alignment of efforts, so that the organisation pulls together to meet the organisational objectives. Research shows that blending these three components is more likely to result in long-term profit. Note – this is long-term profit – not short-term profit. Marketing is not about making a ‘quick buck’, but about making money over time, by retaining satisfied customers. Previously, organisations focused on different drivers of success. For example, Henry Ford focused on producing large quantities of identical products, at low cost, which was termed a production orientation. In the post-World War II years in Europe (1950s–1970s), the focus shifted to a sales orientation, where there was a focus on advertising and sales promotions. However, by the 1980s, the focus was shifting again towards a market orientation. These timings may differ depending on where you live, based on regional, economic or cultural differences. In particular, the extent of focus on production efficiency or focus on push selling may vary, based on economic differences and/or social or cultural issues. Likewise, there are differences related to industry sectors, such as between the hospitality sector and some public services. Study Book: Marketing 18 Bradford MBA Activity 1.4 – watch and reflect Watch: CNN (2013) Amazon CEO: Focus on customer is key. YouTube, 25 September (Blackboard > Module Site > Module Materials > Unit 1) The clip highlights the importance of focusing on customers. Reflect on how Jeff Bezos’s view (of the importance of focusing on customers) compares with how people in your organisation views its customers. What do marketers do? Baines and Fill (pages 10–11) pose the question: what do marketers do? They address this by distinguishing between sales and marketing functions, where the former is about ‘product push’ and the latter is about ‘demand pull’.  Product push – is more akin to a product orientation, where the product is ‘pushed’ to customers, using sales and advertising.  Demand pull – is when organisations use the insight mentioned earlier to develop an offer that meets – or even exceeds – customer requirements, and new business comes largely from word of mouth referrals. There are several fundamental issues here. Marketing is more focused on longer-term profits (or other long-term success criteria) than on short-term sales results. It is more focused on engaging customers than getting shortterm wins. Figure 1.1: What marketers do (Source: Baines and Fill 2014:11) Unit 1: Introduction to Marketing Bradford MBA 19 Figure 1.1 shows that marketing starts with market intelligence and insight, as identified by Jaworksi and Kohli (1993). Marketers then need to understand the strategic direction for the organisation. The customer proposition – what your organisation offers its customers – then follows, as does development of its marketing communications. You should review the responsibility for these areas in your organisation. The marketing mix Figure 1.1 identifies various activities undertaken by marketers. This links to one of the key frameworks used by marketers – the marketing mix. Four controllable elements (4Ps) make up the mix.  Product – this is what is sold. It could be a service offer, or a good (i.e. a physical product).  Price – this is the price to the consumer, but this will also consider prices to intermediaries (e.g. retailers or distributors).  Place – this encompasses the marketing channels which you will use to reach your customers, and the activities of channel partners to facilitate sales. These could be direct or through intermediaries.  Promotion – this encompasses the main groups of activity in marketing, such as advertising, personal selling, sales promotion, publicity/public relations and direct marketing (including social media communications). These elements are detailed in Units 6, 7 and 8 of this module. A variant of the basic marketing mix is the extended marketing mix for services. This adds three further elements.  Process – the way a service is delivered e.g. self-service in McDonald’s, or table service in the Hard Rock Café.  Physical evidence – the signage, uniforms and all forms of tangibles.  People – the staff (note, not the customers) who work together to design and deliver the service. Service organisations should address all seven elements of the extended marketing mix. Marketing as exchange Marketing is often defined as an exchange process. This exchange is sometimes called mutuality, or more commonly as win-win. Essentially a company provides a product or service, and its customers pay for – and receive – the service. Both are happy. Study Book: Marketing 20 Bradford MBA Activity 1.5 –watch and reflect Watch: IBM (2011) IBM THINK Harold Schmitz Discusses Mutuality In Business With Errol Morris. YouTube, 21 September (Blackboard > Module Site > Module Materials > Unit 1) – Activity 1.6 Marketing and customer value Managing the marketing mix well should deliver value to customers. Marketers commonly look at customer value as an equation. Customer value = perceived benefits – perceived sacrifice Colloquially, this means that consumers seek gain (i.e. benefit), that is greater than or equal to the pain (i.e. costs, whether financial or practical) of a purchase decision. City Bin Company, based in Ireland, is a small business which shows exemplary commitment to customer satisfaction. Its business is rubbish, i.e. it collects refuse from its customers. The company only serves two geographic areas currently, but it is highly successful. City Bin provides a service for its customers, and earns money from the customers. So, the firm flourishes because the customers are happy with the service. Activity 1.6 – watch and reflect Watch: The City Bin Company (2013) Welcome to The City Bin Co. YouTube, 16 December (Blackboard > Module Site > Module Materials > Unit 1) City Bin uses the Net Promoter Score (NPS), which is a measure of customer satisfaction. It asks customers whether they would recommend the company to others. This is a proxy for asking existing customers how satisfied they are. Customers who are very satisfied are more likely to recommend the company. Data is gathered to measure whether they would refer others to use the company. What are the benefits of customer referrals? Activity 1.6 – watch and reflect answers: Unit 1: Introduction to Marketing Bradford MBA 21 New concepts in marketing There are three new (or newish) concepts in marketing that are included in this module.  Relationship marketing – this moves the focus of marketing to building relationships, not only with customers, but within ’market domains’. These include suppliers, current and potential employees, internal markets, recruitment markets, influence markets and internal markets. It also focuses on customer retention, rather than new customer acquisition. It is long-term in focus.  Service-dominant logic – this theory is fundamentally challenging marketing, as its core view is that marketing needs to move beyond economic concepts, and recognise that service is the core of all transactions (or exchanges) in marketing. Buyers always determine value. This is considered in Unit 4.  Co-creation – getting others, including customers – involved in developing products (or other elements of the marketing mix) is not a new concept, but it is becoming more widely used, and new technologies are facilitating its use. These are identified as separate concepts, but they inter-relate. Summary Unit 1 explains that marketing is the function which focuses on meeting the needs of customers. Commercial businesses, whether selling products or services, also seek to achieve profit, thus allowing the organisation’s continued growth. The core tools of marketing are the marketing mix. Marketers, having identified the target customers, deliver the right product or service, at an appropriate price (i.e. a price which consumers consider good value, i.e. is affordable and appropriate for the product/service features and benefits), with appropriate promotion, i.e. communication to the target customers, and with the distribution channels designed to ensure the products or services are delivered in the right place (and time) for consumers. Central to this is that marketers seek to demonstrate customer and competitor orientations, to understand the marketplace, and interfunctional co-ordination, where the staff and policies of the organisation work together to meet the organisational objectives. Marketers seek to gain understanding of consumer needs through research on the market (especially on customers and competitors). This includes understanding how customers buy (Unit 2), understanding the Study Book: Marketing 22 Bradford MBA changing business environment and using marketing research to gain insight into the market requirements (Unit 3). Research and market insight help in the development of the marketing strategy (Unit 4), which focuses on matching the company’s resources and capabilities with the opportunities and threats of the external environment and competitors, and guide the choice of target market(s) and positioning (Unit 5). The positioning is delivered through the marketing mix (units 6–8). Activity 1.7 – audio and slides Listen to: the audio for this unit and view the accompanying slides at the same time (Blackboard > Module Site > Module Materials > Unit 1 > Audio and Slides) Activity 1.8 – multiple-choice questions The multiple-choice questions for this unit will enable you to test your knowledge and understanding of the key concepts covered. (Blackboard > Module Site > Formative Exercises > Multiple-Choice Questions > Unit 1) Additional learning resources Boeing (2014) Boeing Sky Interior: More Space in the Sky. YouTube, 17 April (Blackboard > Module Site > Module Materials > Unit 1 > Additional Learning Resources) This shows how other parties are involved in co-creating the new Boeing Dreamliner aircraft. Chicago Humanities Festival (2012) Philip Kotler: Marketing. YouTube, 26 November (Blackboard > Module Site > Module Materials > Unit 1 > Additional Learning Resources) Philip Kotler is often referred to as a marketing guru. This video contextualises some of his marketing thinking. Fletcher, B. (2014) All change at top of Tesco as Lewis takes a hands-on role. The Times, 2 December (Blackboard > Module Site > Module Materials > Unit 1 > Additional Learning Resources) This shows how a company can shift marketing focus to put the customer at the heart of everything it does. Unit 1: Introduction to Marketing Bradford MBA 23 References CNN (2013) Amazon CEO: Focus on customer is key. YouTube, 25 September. http://www.youtube.com/watch?v=56GFhr9r36Y Accessed 12 December 2016. IBM (2011) IBM THINK Harold Schmitz Discusses Mutuality In Business With Errol Morris. YouTube, 21 September. http://www.youtube.com/watch?v=9RBlyS-oBFY Accessed 12 December 2016. Jaworski, B.J. and Kohli, A.J. (1993) Market Orientation: Antecedents and Consequences. Journal of Marketing 57(3), 53–70. http://search.proquest.com.brad.idm.oclc.org/docview/1296674870?accou ntid=17193 Accessed 12 December 2016. Merlo, O., Eisingerich, A.B. and Auh, S. (2014) Why customer participation matters. MIT Sloan Management Review 55(2), 81–88. http://search.proquest.com.brad.idm.oclc.org/docview/1475566174?accou ntid=17193 Accessed 12 December 2016. The City Bin Company (2013) Welcome to The City Bin Co. YouTube, 16 December. http://www.youtube.com/watch%3Fv=gdn18qQJYZE Accessed11 December 2016. Bradford MBA 25 Unit 2: Buying Behaviour Key reading: 1. Baines and Fill (2014), Chapter 2 and Chapter 15, pages 527–545 2. Kantar Media, TGI (2014) What Makes The World’s Consumers Tick 2014 (Blackboard > Module Site > Module Materials > Unit 2) 3. Edelman, D. and Singer, M. (2015) The new consumer decision journey. McKinsey Insights, October (Blackboard > Module Site > Module Materials > Unit 2) – Activity 2.10 Key audio and video: 1. Simons, D. (2010) Selective attention test. YouTube, 10 March (Blackboard > Module Site > Module Materials > Unit 2) – Activity 2.4 2. The Guardian ‘points of view’ by BMP. www.campaignlive.co.uk, 1 January 1986 (Blackboard > Module Site > Module Materials > Unit 2) – Activity 2.5 3. L’Oréal Foundation (2015) #ChangeTheNumbers: discover the results of the study! YouTube, 15 September (Blackboard > Module Site > Module Materials > Unit 2) – Activity 2.6 4. Apple Mac UK adverts. YouTube, 24 April 2007 (Blackboard > Module Site > Module Materials > Unit 2) – Activity 2.8 5. https://www.fiat.co.uk/fiat500/500 (Blackboard > Module Site > Module Materials > Unit 2) – Activity 2.8 Other: 1. Unit 2 audio and slides (Blackboard > Module Site > Module Materials > Unit 2 > Audio and Slides) – Activity 2.13 2. Unit 2 multiple-choice questions (Blackboard > Module Site > Formative Exercises > Multiple-Choice Questions > Unit 2) – Activity 2.14 3. Unit 2 live online tutorial (Blackboard > Module Site > Collaborate) – Activity 2.15 Study Book: Marketing 26 Bradford MBA Introduction Unit 1 identified the importance of focusing on customers in order to achieve business objectives. Units 2 and 3 highlight what marketers need to understand about the market (i.e. customers and consumers) and the market environment to make effective marketing decisions. This unit’s focus is on buying behaviour. Buying behaviour examines how and why buyers make purchase decisions, and what influences these buying decisions. For consumer behaviour, these include personal influences, social influences and situational influences. For business-to- business (B2B) buying, this includes understanding the organisational buying behaviour, and the types of purchases (or buy classes), the decision-making units and buying process. In summary, marketers are especially interested in understanding:  how customers make buying decisions  what factors/choice criteria influence buying decisions  who is involved in buying decisions. This unit focuses mainly on consumer behaviour, but it also briefly explains how organisations (businesses or non-profit organisations) buy. Organisations buy goods and services to run their operations, or to make goods or services for their customers. B2B buying has some unique characteristics. You should read Baines and Fill (2014) Chapter 15, on organisational buying behaviour, if you work in a B2B setting and especially if you work in a B2B sales role. Try to relate the theory in this unit to your own experience, as this will make the concepts easier to understand. You can share purchase experiences with your peers in the Marketing discussions forums. Objectives By the end of this unit, you should be able to:  explain why marketers need to understand the decision-making process for both household and organisational consumers  identify, explain and apply a range of situational, personal and social influences on consumer behaviour  explain buyphases, buying centres and buying processes for a given business-to-business (B2B) purchase. Unit 2: Buying Behaviour Bradford MBA 27 Buying behaviour As previously indicated, this unit focuses on how customers buy, i.e. how they make buying decisions. Understanding how and why customers decide to buy a product (or service) enables marketers to design appropriate marketing offers for their target customers. Consumers are commonly not fully aware of how marketers design activities to influence or help customers make buying decisions. Sellers initiate many activities to capture the attention, and preference, of potential customers. They also often help customers as they go through the buying process. The apparently simple act of buying requires customers to make many smaller decisions or choices as they move towards making a purchase. For example, customers will make decisions on whether they need an item or not. If they decide they want the item, they need to decide which features and benefits are important to them. Not all customers want the same things. Perhaps you know people who like compact cars, because they are cheap to run and easy to park, while others seek a car with a prestigious brand, high performance and/or a good safety record. Later, buyers will make the purchase decision – and then they may either be delighted with their choice, or worried about whether they have made the right (or wrong) decision. If they are delighted with their purchase, they may make a repeat purchase at some point in the future. If they are dissatisfied, they may reject that brand or product in the future. Consumers differ, with different profiles, needs and wants, and they buy in different ways. Some might decide to undertake extensive research on a car purchase, or they might decide to rely on advice from a friend or family member with technical expertise. Some smaller purchases may be routine – ‘repeat buys’. Other products may be chosen on impulse, with limited search or involvement. So, consumers differ in what they want, why they want it, and even when they want it. Consumers will only be fully satisfied when the buying process and the offer (i.e. the marketing mix offer) meet their requirements. Activity 2.1 – stop and think Question 1: What purchases have you made in the last week? Try to think of at least five different purchases. Question 2: What prompted you to make these purchases? Question 3: Why did you choose the products or services you bought? Study Book: Marketing 28 Bradford MBA Question 4: How much thought or consideration did you give to each of these purchases? (For example, was it instantaneous, or was it more considered?) Make some notes on your answers, as you will be asked to review this again at the end of the section on consumer behaviour. Activity 2.1 – stop and think answers: The consumer buying process Consumer buying behaviour has been defined as ‘the decision process and acts of individuals involved in buying and using products and services’ (Dibb 2004). You will become aware of this process, of what happens at each stage of the buying process and of your buying criteria as you study this unit. Understanding of this process helps you develop a foundation for later units, and especially Unit 5 on segmentation. Unit 2: Buying Behaviour Bradford MBA 29 Marketers also need to understand what influences consumers as they go through each of these stages in the buying process, as this impacts on whether they buy, and how satisfied they are by their purchases. Figure 2.1: Linear sequential model of a ‘consumer proposition acquisition’ (Source: Baines and Fill 2014: 42) This model identifies six stages that consumers go through from recognising a need to making a final purchase, and its subsequent postpurchase evaluation. Note that the purchase decision is not the final stage – how buyers feel about their choice ‘post-purchase’ is critical to their overall satisfaction or dissatisfaction. Customers who are disappointed in their purchase are said to suffer from cognitive dissonance. This is also called buyer’s remorse. Customers may try to neutralise their dissatisfaction by returning the product or perhaps seek reassurance from viewing the seller’s advertising. Generally, buying models are presented in a flow chart showing the various tasks involved at each stage of the purchase process. Note that this chart is iterative – i.e. you can go backwards or forwards between stages. Read: Baines and Fill (2014), the discussion on pages 42–45 of details what is involved in each stage. Study Book: Marketing 30 Bradford MBA Activity 2.2 – stop and think Think about a recent major purchase you made – for example, a holiday, a car, household furniture, or a computer. Identify the steps you took when making this purchase. Use the consumer proposition acquisition model (Figure 2.1) to identify the stages in this process. Activity 2.2 – stop and think answers: Activity 2.3 – stop and think Put yourself in the following scenario. You are travelling to or from work and you find you are thirsty. You decide you need to get a drink soon. Detail the buying process you would go through to get a drink to quench your thirst. Activity 2.3 – stop and think answers: Unit 2: Buying Behaviour Bradford MBA 31 Now consider which factors influence your choice of drink. Put a tick by all of the following factors that apply:  brand name  special offer  price  packaging format (e.g. tap, bottle, can, draught format)  packaging material  package size  habit – it’s the kind you always buy  location on the shelf  ingredient information (cleaning agents, nutritional content)  past experience (preferred flavour, preferred retail/store outlet)  other criteria (detail these). We rarely go through an explicit process of carefully identifying our motives or needs for a soft drink, which is a low value repeat purchase. We are familiar with the products, and so there is no need to gather detailed information of the alternatives. Our minds take shortcuts, such as recognising a familiar, acceptable brand that meets our needs, and then choosing it. The purchase is not that important, and buying a known brand means that there is a low risk in this purchase. Low price and low risk purchases tend to be low involvement purchases. Often the choice is made instantly. High involvement purchases, e.g. for a car or luxury item, can involve extended research. Figure 2.2 in Baines and Fill (2014: 49) plots the level of involvement and how rational/emotional purchases in different categories are made. Note that soft drinks are in the bottom right quadrant, which is a low involvement category. However, it is a high ‘feel’ category, which means we are buying for emotional – not rational – reasons. You may disagree with this and believe that soft drinks are bought for rational reasons (e.g. to quench our thirst). The flip side to this is that, based on purely rational reasoning, we would buy the cheapest thirst-quenching option available, such as non-branded water. Yet, often people don’t do this. Rather, consumers may purchase a Pepsi or Dr Pepper because of the image it portrays (e.g. the masculine, yet health conscious, image of Pepsi Max) or because of an established familiarity or relationship with the brand. Study Book: Marketing 32 Bradford MBA Perceptions, learning and memory Perceptions, learning and memory are three key psychological influences on the buying process. Marketers use advertising and other promotional activities to attract consumers’ attention. Marketers do this expecting (or hoping!) that consumers will learn and respond – ideally by buying their products. Perception is the process of selecting, organising, and interpreting messages to create meaning. Marketers cannot make consumers buy, but they do try to add information (and emotional messages) in attempts to get consumers’ attention and interest. However, this is not always successful. Baines and Fill (2014: 48) state that ‘often consumers do not understand the messages marketers convey because they have not received, or comprehended, or remembered those messages or because the messages were unclear’. People perceive things through their interactions and senses (e.g. sight, taste, hearing, smell and touch). Most of our experiences are multisensory. However, people perceive things differently – for example, some diners many think restaurant staff are friendly, but others find them overly casual. One person could view the restaurant as being too noisy, whereas another finds it lively and buzzing. Perception is commonly described as being a process for selecting, organising and interpreting information around us. The process of sorting out what is meaningful and what is not is selective perception. Problems with the selective perception process include:  selective distortion – when people interpret information in a way that will support what they already believe  selective retention – when people retain or forget information, usually because of its relevance. Consumers are usually unaware of this mental processing. Activity 2.4 – watch and think Watch: Simons, D. (2010) Selective attention test. YouTube, 10 March (Blackboard > Module Site > Module Materials > Unit 2) Watch the video, and follow the instructions. What does this suggest about perception? Unit 2: Buying Behaviour Bradford MBA 33 Activity 2.4 – watch and reflect answers: Advertisers make a considerable effort to ensure messages stand out and are memorable. Yet, the selective perception concept suggests that many marketing initiatives, such as promotional activities, can be ineffective. The target recipients of this promotional activity often do not notice (or hear) these promotional messages, understand these messages, remember the messages or act upon them. Indeed, consumers are exposed to so many messages, they often ‘tune out’. However, situational factors, such as the start of the school term, can grab a mother’s attention and prompt her to check out the offers on school clothes. Activity 2.5 – watch and reflect Watch: The Guardian ‘points of view’ by BMP. www.campaignlive.co.uk, 1 January 1986 (Blackboard > Module Site > Module Materials > Unit 2) Question 1: This is an advertisement for The Guardian, a UK newspaper. What do you think this is saying about The Guardian, and other newspapers? Question 2: Why do you think it was shot in black and white, and with no music? Activity 2.5 – watch and reflect answers: Study Book: Marketing 34 Bradford MBA Relevant messages result in consumers being more involved in the offer. When consumers are highly involved, they may seek further information. Through search and learning, consumers will increase their understanding of the product or service. For example, they may seek out information on where to buy a product (possibly from advertising or looking online). Consumers may also be shown how to buy – for example, a retailer may require customers to complete a form, submit it at a checkout, and then pick it up in another location (such as another part of a store, for from a warehouse). Consumers may also learn about other issues, e.g. that supermarkets mark down some food prices later in the afternoon, and that is a cheaper time to buy. They may learn which pizza restaurant is best, or when it is likely to be very busy. Increasingly, companies also teach consumers how to dispose of packaging or products. Activity 2.6 – watch and reflect Watch: L’Oréal Foundation (2015) #ChangeTheNumbers: discover the results of the study! YouTube, 15 September (Blackboard > Module Site > Module Materials > Unit 2) Were the research findings in this video what you expected? Why would a brand like L’Oréal undertake this research and produce this video? Activity 2.6 – watch and reflect answers: Consumers do not expend too much effort (or pay that much attention) when making repeat purchases. Therefore, advertisers use different forms of reminders – visual, verbal, auditory or sensory. Most people know Coca-Cola bottle shape or the McDonald’s ‘golden arches’ symbol; can identify the sponsors of the ‘Just do it’ or ‘We try harder’ slogans; know when they pass Body Shop or Lush stores by the scent. They also recognise the ‘Intel inside’ auditory brand. Unit 2: Buying Behaviour Bradford MBA 35 The kind of packaging used on a product, the brand name and advertising are all important extrinsic cues to remind the consumer to purchase. Satisfied consumers settle into habitual buying patterns (i.e. learned behaviours) and buy with limited consideration of alternatives. Brand and store loyalty are both forms of habitual behaviour. Many supermarkets’ own-labels mimic the shapes, colours and designs of the brand leaders. The familiar appearance of these look-alikes can sway the buying preference from the branded product. Activity 2.7 – stop and think A report in The Guardian in 2005 stated that ‘half of all children aged four don’t know their own name – but two thirds of three-year-olds can recognise the McDonald’s golden arches’ (Freedland 2005). Why would the children be more likely to recognise the McDonald’s symbol than their own name? Activity 2.7 – stop and think answers: Personality Personality describes the traits and distinct behavioural tendencies which result in patterns of behaviour. The evidence of how personality impacts buying behaviour is patchy/inconsistent. Advertisements often highlight the owner’s personality, such as in the ‘I’m a Mac’ advertisements. People may buy a Mini, or a Fiat 500 car, to indicate that the driver is design conscious, unconventional and likes to have fun. Individuality is developed by enabling customers to customise (or co-create) their unique car by selecting various options. Study Book: Marketing 36 Bradford MBA Activity 2.8 – watch and reflect Watch: Apple Mac UK adverts. YouTube, 24 April (Blackboard > Module Site > Module Materials > Unit 2) Look at the Apple advertisements, and think about what this is saying about Apple users (and Windows PC users), and how this is communicated. Note down your thoughts in the space below. Go to: https://www.fiat.co.uk/fiat500/500 (Blackboard > Module Site > Module Materials > Unit 2) Now look at the Fiat 500 website, and reflect on the range of options for customisation. What benefit does this deliver for Fiat 500 customers? Activity 2.8 – watch and reflect answers: Motivation Maslow’s theory of motivation suggests that consumers meet lower level needs first (i.e. physiological needs such as the attainment of food and water and safety related needs). However, consumers may not always behave rationally. So, a young woman might understand that her budget is limited, but still spend a disproportionate amount of money on new clothes, cosmetics or entertainment (i.e. belonging and esteem based needs) rather than ensuring the basic physiological needs (e.g. food) and safety orientated needs (e.g. a taxi home) are met. Read: Kantar Media, TGI (2014) What Makes The World’s Consumers Tick 2014 (Blackboard > Module Site > Module Materials > Unit 2) Review how differences in motivations differ between countries. Unit 2: Buying Behaviour Bradford MBA 37 Social contexts and social influences on behaviour As consumers, we are influenced by others around us. Social influences can come from family, friends and colleagues. We may want to purchase a prestigious car such as a BMW or Porsche not only because of the car’s performance and build quality, but also because we think that owning such a car may prompt respect/admiration from friends and colleagues. A word of warning – the perceptions of friends and colleagues are subjective. For example, some may see the purchase of a Skoda car (a brand which used to have a poor reputation) as a shrewd and intelligent purchase, based on value for money. However, others may believe that such a purchase is a poor decision, based on Skoda’s earlier reputation. More recently, the 2015 ‘scandal’ about VW fuel emissions may result in VW drivers choosing to buy other brands as they do not want to be associated with VW’s lack of integrity. Review activity 2.9 – stop and think This unit introduces many aspects of buying behaviour. Activity 2.1 asked you to look at buying decisions, and make some notes. You should now review these and consider the key theory concepts.  What types of buying decisions were these – were they impulse purchases? Were they repeat purchases? Were they considered decisions?  In hindsight, can you identify each of the stages in the buying processes for your purchases?  What criteria did you use to choose the products/services you bought?  How aware were you of the buying influences? Did you buy based on seeing an advertisement, for example? Did family or friends influence any of these choices?  How long did it take from when you first identified a need to when you bought the product/service?  Did you have any post-purchase remorse? If so, why? Activity 2.10 – read and reflect Read: Edelman, D. and Singer, M. (2015) The new consumer decision journey. McKinsey Insights, October (Blackboard > Module Site > Module Materials > Unit 2) So far, this unit has identified a buying process made up of a series of stages (from motive development, information gathering, proposition Study Book: Marketing 38 Bradford MBA evaluation, proposition selection, acquisition/purchase and finally to reevaluation). The McKinsey article (and video) suggests that how people buy changes over time. New technology, such as online shopping, mobile and tablet shopping and even same-day delivery, are giving customers more access to information. Think about your buying behaviour. Is it linear (e.g. Baines and Fill’s stage by stage process)? Or do you relate more to the newer McKinsey model? Your answer should consider the academic theory and that of consultants’ models, such as those from McKinsey (a leading consultancy practice). Activity 2.10 – read and reflect answers: How do organisations buy? Organisational buying behaviour is highly relevant to those who work in B2B buying or selling. Business buying has some similarities to, and some differences from, consumer buying. There is an extended buying process for businesses and organisations, and there are more influences on B2B buying decisions. Business buying is only mentioned briefly in this unit, focusing on two key concepts – the ‘buying centre’ and ‘buy classes’. Buying centre The buying centre is a group of people who are involved in the buying decision. This group is a decision-making unit (DMU). There are Unit 2: Buying Behaviour Bradford MBA 39 conventionally six defined roles in the decision-making unit, although one person or department may have more than one role, or be involved in different stages of the buying process. Note that the seller is not part of the buying centre, although sellers try to influence the buying process and choice criteria. Those who are part of the purchase decision process often have different backgrounds (or work roles), such as financial, technical or administrative/managerial expertise. Their perspectives influence their roles in the buying decision and the attributes which they consider important. The people in the buying centre may meet and discuss issues about the proposed purchase, but often this can be a ‘virtual’ group, which does not meet face-to-face as a group, but where people may contribute opinions or facts that impact on the choice of supplier or product. Baines and Fill (2014: 542) state ‘the behaviour of DMU members is ... largely determined by the interpersonal relationships of the members of the buying centre’. So, sellers need to understand the needs and motivation of different buying centre members. Read: Baines and Fill (2014), pages 539–542 to learn about the buying centre roles and composition. Activity 2.11 – stop and think Task 1: Within your organisation find out who is involved in making the decision on a previous or current major purchase (e.g. a new computer system). What role does each individual fulfil (e.g. technical expertise, market knowledge?)? What was/is their interest in the buying process? Task 2: Consider whether the salesperson (or account manager) involved in selling the product/service which formed the basis of the major purchase should try to meet the needs of all parties in the buying process. Activity 2.11 – stop and think answers: Study Book: Marketing 40 Bradford MBA Buy classes The business-to-business (B2B) buying process distinguishes between three main classes of purchases (‘buy classes’) – a new task, a modified rebuy, and a straight rebuy. These differing ‘buy classes’ are associated with varying levels of research and investigation. A new task purchase (e.g. buying a new production or IT system) takes more time, as those involved need to gather extensive information on the various requirements and the offers. Modified rebuys vary in complexity – some having only minor requirement changes, whereas other changes are more substantial. A straight rebuy (e.g. buying more office stationery) can be repurchased quickly if the organisation was/is happy with a previous order of the same goods from the same supplier. Activity 2.12 – stop and think Read: Baines and Fill (2014), Figure 2.1, page 42, on the consumer proposition acquisition process. Compare this with the discussion of similar stages in the business buying process on pages 544–546. Why are there more steps in the B2B buying process than in the consumer buying process? Activity 2.12 – stop and think answers: Unit 2: Buying Behaviour Bradford MBA 41 Read: Baines and Fill (2014) Table 15.7, page 558 to see a summary of the main similarities and differences between consumer and organisational markets. Summary Marketers need to understand how and why customers buy. Marketers need to understand how customers identify needs, and work towards meeting these needs. Customers make many different purchases. Some decisions have limited consideration of alternatives, while others may involve extensive information search and evaluation. This means that some decisions are made with limited thought, such as routine purchases. Other purchases have considerable effort and information collection for more important, risky or expensive purchases. Consumer decision-making involves various psychological (mental) processes, including perception and learning, and also social processes, such as making decisions with others. After purchasing a product, consumers decide whether they are happy with their purchase or not. People are unlikely to repeat buy if they are dissatisfied with the product. They may experience cognitive dissonance – sometimes called ‘buyer’s remorse’ – if they are dissatisfied with their purchase decisions. Organisations go through a similar process of buying. However, some stages in the organisational buying process may involve more formal information collection and the involvement of others. Study Book: Marketing 42 Bradford MBA Activity 2.13 – audio and slides Listen to the audio for this unit and view the accompanying slides (Blackboard > Module Site > Module Materials > Unit 2 > Audio and Slides) Activity 2.14 – multiple-choice questions The multiple-choice questions for this unit will enable you to test your knowledge and understanding of the key concepts covered. (Blackboard > Module Site > Formative Exercises > Multiple-Choice Questions > Unit 2) Activity 2.15 – live online tutorial Read: Baines and Fill (2014), Market Insight 1.5, Back to the Future: Bringing Electric Cars to the Masses. Question 1: Do you think sales of electric cars will ever overtake sales of conventional petrol/diesel cars? Question 2: What might be a further enhancement of the electric car concept in 10 years time? Question 3: Can you think of other well-known offerings which have taken advantage of society’s increasingly strong environmental values? What are they? Note down your answers and be prepared to discuss them in the tutorial. Your tutor will advise you of the date when the tutorial will take place. Live online tutorial: To access the tutorial, please go to Blackboard > Module Site > Collaborate. To test your sound settings for the Blackboard Collaborate virtual classroom, please go to the Blackboard Collaborate Support site at http://bit.ly/1etRu2Y. For further support materials and information about Blackboard Collaborate, please see the Blackboard Collaborate Support site at http://bit.ly/1jBpgUc Additional Learning Resources White, S. (2014) Fear, anger, joy: why do we buy? The Guardian (online) 15 July. www.theguardian.com/media-network/media-networkblog/2014/jul/15/buyer-motivation-advertising-marketing Accessed 11 December 2016. Unit 2: Buying Behaviour Bradford MBA 43 References Apple Mac UK adverts. YouTube 24 April 2007. http://www.youtube.com/watch?v=4B4Z2OY9MQg Accessed 12 December 2016. Dibb, S. and Simkin, L. (2004) Marketing Briefs: A Revision and Study Guide. Oxford: Elsevier Butterwoth-Heinemann. 345. Edelman, D. and Singer, M. (2015) The new consumer decision journey. McKinsey Insights, October. http://www.mckinsey.com/insights/marketing_sales/the_new_consumer_d ecision_journey Accessed 11 December 2016. Freedland, J. (2005) The onslaught. The Guardian (online), 25 October. www.theguardian.com/media/2005/oct/25/advertising.food. Accessed 11 December 2016. Kantar Media, TGI (2014) What Makes The World’s Consumers Tick 2014. http://www.wpp.com/wpp/marketing/consumerinsights/what-the-worldthinks-2014/ Accessed 11 December 2016. L’Oréal Foundation (2015) #ChangeTheNumbers: discover the results of the study! YouTube, 15 September. www.youtube.com/watch?v=ZHDdL74Wmck Accessed 12 December 2016. Peretti, J. (2014) SUVs, handwash and FOMO: how the advertising industry embraced fear. The Guardian (online) 6 July. www.theguardian.com/media/2014/jul/06/how-advertising-industryconcept-fear Accessed 10 December 2016. Simons, D. (2010) Selective attention test. YouTube, 10 March. www.youtube.com/watch?v=vJG698U2Mvo Accessed 11 December 2016. The Guardian ‘points of view’ by BMP. www.campaignlive.co.uk, 1 January 1986. http://www.campaignlive.co.uk/thework/907755/ Accessed 9 December 2016. Bradford MBA 45 Unit 3: Researching and Understanding the Market Environment and Customers Key readings: 1. Baines and Fill (2014), Chapters 3 and 4 2. Morrison, A. and Wensley, R. (1991) Boxing up or boxing in: A short history of the Boston Consulting Group Share/Growth Matrix. Journal of Marketing Management 7(2), 105–129 (Blackboard > Module Site > Module Materials > Unit 3) 3. Macdonald, E.K., Wilson, H.N. and Konuş, U. (2012) Better Customer Insight—in Real Time. Harvard Business Review 90(9), 102–108 (Blackboard > Module Site > Module Materials > Unit 3) 4. UserZoom (2013) Two Thirds of Users Start a Purchase on Their Mobile Phone. www.marketresearchworld.net (Blackboard > Module Site > Module Materials > Unit 3) Key audio and video: 1. GfK (2014) GfK – A life without market research. YouTube, 12 November (Blackboard > Module Site > Module Materials > Unit 3) – Activity 3.1 2. Nielsen Co. (2011) Nielsen Global Consumer Video hd. YouTube, 29 March (Blackboard > Module Site > Module Materials > Unit 3) – Activity 3.3 3. Market Research Society (MRS) (2013) Roisin Donnelly, P&G, on using data and insight to win business. YouTube, 7 November (Blackboard > Module Site > Module Materials > Unit 3) – Activity 3.3 4. Harvard Business Review (2014) The Explainer: Porter’s Five Forces. Harvard Business Review (online), 10 June (Blackboard > Module Site > Module Materials > Unit 3) – Activity 3.5 Study Book: Marketing 46 Bradford MBA 5. Harvard Business Review (2008) The Five Competitive Forces That Shape Strategy: an interview with Michael E. Porter. YouTube, 30 June (Blackboard > Module Site > Module Materials > Unit 3) – Activity 3.5 6. Nielsen (2014) Nielsen Strategic Health Perspectives. YouTube, 8 October (Blackboard > Module Site > Module Materials > Unit 3) – Activity 3.7 Other: 1. Unit 3 audio and slides (Blackboard > Module Site > Module Materials > Unit 3 > Audio and Slides) – Activity 3.8 2. Unit 3 multiple-choice questions (Blackboard > Module Site > Formative Exercises > Multiple-Choice Questions > Unit 3) – Activity 3.9 Introduction Marketing decisions can address major or minor issues. They include decisions on the development of new products and how to cater for changes in consumer behaviour (e.g. the trend toward online or mobile shopping, or consumers’ use of price comparison websites). Alternatively, decisions may address which features (or benefits) could be added to an existing product, or gain insight into where people look first when buying drinks from a cooler in a corner shop. When making such decisions, marketers use information from published sources and undertake market-based research studies. Marketers’ attention is also on market trends, market size, potential opportunities and threats in the marketplace. Objectives By the end of this unit, you should be able to:  define and distinguish between the following terms – market research, marketing research, customer insight, environmental scanning  undertake PESTEL analysis and show how it helps inform marketing decisions  identify the key issues to investigate when undertaking a market analysis  describe how the BCG matrix helps managers to evaluate a product portfolio  explain the role of marketing information systems and marketing research in the insight process Unit 3: Researching and Understanding the Market Environment and Customers Bradford MBA 47  distinguish between secondary and primary research, and understand their respective roles in the research and insight process  identify a range of research approaches and evaluate the suitability of these in addressing specific marketing problems. Monitoring and researching the market environment and customers This unit considers two related chapters of the textbook – Chapter 3: Marketing Research and Customer Insight and Chapter 4: The Marketing Environment. Gathering data and managing information is essential for understanding and meeting customer requirements, and doing so better than your competitors. Research helps marketers understand what customers want, even if customers cannot describe the specific attributes of the product or service. “Offerings don’t design themselves. They are made in the knowledge that market research and market insight can bring.” (Baines and Fill 2014: 77) Activity 3.1 – watch and reflect Watch: GfK (2014) GfK – A life without market research. YouTube, 12 November (Blackboard > Module Site > Module Materials > Unit 3) Think about whether you would rather have the products shown in the video, or the ones we now have. Reflect on what this video is communicating about the value of research in marketing. Activity 3.2 – stop and think Has your organisation undertaken a research study? If so, how was the data collected? (For example, an online questionnaire, a focus group, oneto-one interviews, informal discussions.) Reflecting on your experience did the data collection method(s) used seem suitable? If not, how could they have been improved? Study Book: Marketing 48 Bradford MBA Activity 3.2 – stop and think answers: Definitions of key terms Many different terms are used to describe different forms of research and insight gathering. The textbook defines market and marketing research as follows: “Market research is conducted to understand markets – customers, competitors, and industries” “Marketing research determines the impact of marketing strategies and tactics, in addition to collecting information on customers, competitors, and industries.” (Baines and Fill 2014: 77) Barnes and Fill also add that: “Marketing research generates information to provide management with sufficient insight to make informed decisions.” However, some scholars believe that ‘insight’ is a unique form of research and understanding, which can add real value to the competiveness of an organisation. Smith, Wilson and Clark (2006) define insight as: “knowledge about customers which meets the criteria of an organisational strength; that is, it is valuable, rare and difficult to imitate and which the organisation is aligned to make use of” (cited in Baines and Fill 2014: 78) The following definition of customer insight identifies that customer insights – if used correctly – will deliver benefits to the company and its customers, i.e. it offers a ‘win-win’ outcome. Unit 3: Researching and Understanding the Market Environment and Customers Bradford MBA 49 “A non-obvious understanding about your customers, which if acted upon, has the potential to change their behaviour for mutual benefit.” (Laughlin 2015) Clearly, there are many ways of learning about the market, customers and consumers. These terms should be used with care, as they are often used or interpreted differently by academics, practitioners and authors. Activity 3.3 – watch and reflect Watch: Nielson Co. (2011) Nielsen Global Consumer Video hd. YouTube, 29 March (Blackboard > Module Site > Module Materials > Unit 3) Nielsen is a leading research agency. The video looks at ‘customer insight’, spanning various international markets. It aims to inform viewers, but it is also promotional, showing the research insights that Nielsen offers. Watch: Market Research Society (MRS) (2013) Roisin Donnelly, P&G, on using data and insight to win business. YouTube, 7 November (Blackboard > Module Site > Module Materials > Unit 3) Note how Donnelly stresses the importance of consumer focus, and how this helps build competitive advantage. This is part of the market insight process. Donnelly also mentions both quantitative and qualitative research, and using social media for research. A further approach to understanding markets is that of environmental scanning, defined as: “...the management process internal to an organisation designed to identify external issues, situations and threats that may impinge on an organisation’s future and its strategic decision making.” (Baines and Fill 2014: 712) Environmental scanning and analysis Marketers need to monitor the external environment because it is constantly changing. That means that decisions made in the past, or even today, may not be valid for the future. Baines and Fill (2014: 115) identify three levels of environment.  The external environment (or the macro-environment), over which the organisation has very little control.  The performance environment (or the micro-environment), which includes other organisations such as competitors, suppliers, intermediaries. Study Book: Marketing 50 Bradford MBA  The internal environment – the resources, processes and policies ... (for) an organisation to achieve its goals. The external environment Figure 4.2 (Baines and Fill 2014: 116) identifies the following elements in the external marketing environment.  Political environment – ‘that part of the macro-environment concerned with impending and potential legislation and how it may affect a particular firm’ (Baines and Fill 2014: 719).  Economic environment – e.g. changes in wages or prices, taxes (e.g. sales or corporation taxes), exchange rates, duties, levels of inflation, etc.  Socio-cultural – e.g. changes in lifestyles, demographics (e.g. age profile, household or family size, etc.) or values.  Technological – e.g. information and computer technologies, with faster and more sophisticated systems, but this may result in other problems (e.g. online fraud, etc.). This category could also include the changing roles of smartphones and the growing importance of social media.  Ecological (or environmental) – e.g. growing concern for the environment is increasing interest in sustainability.  Legal – changes to legislation, e.g. restrictions on products and where they can be used or who can use them such as, tobacco or alcohol or, data protection issues. This macro-environmental analysis is commonly referred to by an acronym, such as a PEST analysis or PESTEL analysis. Each category of the analysis can have positive or negative changes which impact on the organisation, i.e. they could be deemed to be an opportunity or a threat. Activity 3.4 – stop and think Think about the PESTEL factors which may apply to Starbucks, in your country, regionally or globally. Consider whether these factors are positive or negative. Positive means that these external factors will benefit the organisation. Negative external factors mean that the organisation is weaker because of changes in the external factors. Note down your answers in the box below.  Political environment  Economic environment  Socio-cultural Unit 3: Researching and Understanding the Market Environment and Customers Bradford MBA 51  Technological  Ecological  Legal Activity 3.4 – stop and think answer: Environmental scanning and strategic windows Environmental scanning enables organisations to have ‘advance notice’ of any possible changes in the market. Advance notice enables organisations to make decisions based on the likely changes to the environment in which they operate. These changes could be either positive or negative. Abell (1978) wrote about the concept of ‘strategic windows’. This describes a limited timescale in which a business can take advantage of external changes in the market in which it operates. It is about seizing the opportunity to gain advantage in the market. For example, CNN first saw the need for a 24 hour TV news service, whereas the BBC followed with 24 hour news much later. CNN is more widely available globally now, even though BBC had a stronger news competence and reputation. Abell (1978: 26) comments that managers ‘need to base marketing planning round predictions of future market evolution, and make assessments of the firm’s capabilities to deal with change’. This enables the company to identify and benefit from changes. The performance environment The performance environment is also known as the microenvironment. This means it is the ‘small’ or near environment, as opposed to the macroenvironment, which is the broad or wide environment. Study Book: Marketing 52 Bradford MBA The performance environment focuses on other companies that can impact on the organisation’s performance. These include:  suppliers  customers  rivals (direct competitors)  indirect competitors (i.e. those offering a substitute product or service)  new entrants. These elements form the framework of one of the most famous business models – Porter’s five forces framework. This model is illustrated in Baines and Fill (2014: 135). Note the direction of the arrows – these point towards the middle – i.e. to competitive rivalry. The stronger the pressures from each of the outer forces, the more this will fuel the intensity of competition. Activity 3.5 – watch and reflect Watch: Harvard Business Review (2014) The Explainer: Porter’s Five Forces. Harvard Business Review (online) 10 June (Blackboard > Module Site > Module Materials > Unit 3) You should also watch the following video, where Michael Porter explains his work. Watch: Harvard Business Review (2008) The Five Competitive Forces That Shape Strategy: an interview with Michael E. Porter. YouTube 30 June (Blackboard > Module Site > Module Materials > Unit 3) Read: Baines and Fill (2014), pages 134–138. The internal environment The third environment is the internal environment. This refers to the internal resources, and their potential and competences. This covers the departments and resources of the organisation. Baines and Fill focus on two tools for analysing the organisation’s situation. These are often considered as part of the marketing process, but these are presented here as they link with the internal market environment for the organisation. The two key tools are: Unit 3: Researching and Understanding the Market Environment and Customers Bradford MBA 53  portfolio analysis – this is a tool for analysing the blend and balance in the product portfolio, i.e. the products and services offered by the company, and the relative strength of the company in its markets  marketing audit – this is an analytical tool for checking the ‘health’ of the company, and identifying the potential competitive advantages or limitations facing the company. Portfolio analysis The BCG matrix was the ‘original’ portfolio analysis tool, developed by the Boston Consulting Group (a well-known management consultancy firm). This model was developed because companies had previously tended to favour one of two key concepts. These two key concepts were:  The product life cycle – this concept demonstrated how product growth levels (e.g. units sold) vary over the life of a product. The product life cycle concept also indicates how products need different levels of support at different stages of the product life cycle.  The results of PIMS research (Profit Impact of Marketing Strategy), which show the importance of market share for market success. The higher the market share, the better the return on investment. It reflects economies of scale (or more accurately, the experience curve). These two concepts, taken on their own, do not explain how to manage products in a multi-product portfolio. However, through combining these two concepts, the BCG matrix gives organisations the opportunity to identify which products need cash support and which drain cash (see page 139 of Baines and Fill for further details on the matrix). Within the BCG matrix, the product lifecycle is translated into rate of market growth, which can be high or low, and is shown on the y axis. The x axis relates to whether relative market share is high or low. Note that this is not about absolute market share, but rather it addresses relative market share. In other words, it considers the relative strength of a company compared to others, based on market share. The data on the performance of different products (or strategic business units, i.e. divisions of an organisation) is then plotted on to the matrix. Where the products are located on the matrix will lead to them being defined in one of four categories.  Stars are products with a high market share, and in a high growth market. This may appear to be the ideal situation – where you see future star product sales and future market growth – but companies have to use resources to support stars, as competitors want to get a share of this growing market. Study Book: Marketing 54 Bradford MBA  Cash cows are market leaders (i.e. have high market share) in low growth markets. They have steady, high volume sales and they generate more revenue than is needed to support the product sales.  Question marks are products in a high growth market, but have a low market share. They need money to support their growth in market share.  Dogs are products with a low market share and a low level of market growth. These are commonly a drain on the company finances. However, sometimes companies can have a strong niche position – one company used to refer to these as ‘golden dogs’. Ideally, companies seek to find a balance of cash users (e.g. where companies are investing in future growth) and cash earners (e.g. mature established products). If all products are cash cows, the company may have problems in future, as its products may decline in time. Likewise, if all products are stars, then the company needs considerable investment to support their growth. This matrix is a sophisticated form of analysis, but it can show insights even at a more simplistic level. Read: Baines and Fill (2014), pages 139 –142 to reinforce your learning. Activity 3.6 – stop and think Check your learning of these terms by completing the following table inserting the appropriate phrases in each cell. By way of example a number of cells have been filled in already. Rate of growth (high/low) Relative market share (high/low) Cash generation/use Stars High Growth Cash cows Cash Generator Dogs Low Share Question marks Read: Morrison, A. and Wensley, R. (1991) Boxing up or boxing in: A short history of the Boston Consulting Group Share/Growth Matrix. Journal of Marketing Management 7(2), 105–129 (Blackboard > Module Site > Module Materials > Unit 3) Unit 3: Researching and Understanding the Market Environment and Customers Bradford MBA 55 The marketing audit The second tool in this section is the marketing audit. This tool is a comprehensive and systematic review of the market situation. It examines or ‘audits’:  the marketing environment, examining the external and performance environment  the marketing strategy, examining the mission, goals and strategy  the marketing organisation, examining structure and personnel  the marketing system, examining information, planning and control systems  the marketing function, examining products, services, prices, distribution and promotion. The marketing audit should be independent (i.e. objective) and comprehensive. It should be undertaken regularly to determine problems and opportunities within the organisation and in its market environment. Information systems for marketing Increasingly, companies are developing and using IT to store and analyse data about the business and marketing situation and organisational performance. Marketers refer to these IT systems as marketing information systems (MkIS). These systems are usually part of the organisation’s management information system (MIS). The data used could come from invoicing systems, customer relationship management (CRM) systems and/or the results of purchased research findings. Activity 3.7 – watch and reflect Nielsen (2014) Nielsen Strategic Health Perspectives. YouTube, 8 October (Blackboard > Module Site > Module Materials > Unit 3) Environmental scanning is not limited to consumer goods sectors. Most ‘industries’ monitor their markets. The example in the Nielsen video is for healthcare markets. Check out what is available for your business sector and/or geography. Study Book: Marketing 56 Bradford MBA Marketing research Internal data or published reports are often insufficient for marketing managers to understand the situation fully, and so make informed business decisions. Marketers need to undertake marketing research – a systematic process of designing, collecting, analysing and reporting research data and information for a specific marketing problem or situation – to understand these situations. Often, organisations commission a research agency to undertake the work. Research agencies are usually members of a professional body, such as the UK Market Research Society. Organisations select an agency based on their expertise in the type of research required and other factors such as the availability/timescale and the cost. The research brief The last section indicated that organisations often gain insights into specific areas through engaging the services of a research agency. Marketers follow a process when using an agency to undertake research. The first stage involves the creation of a research brief which is sent out to the shortlisted agencies. This document provides key background information, such as details of the commissioning organisation, and the management problem which is to be researched. It will also set the parameters – or scope – for the research. This keeps the research focused, and gives an indication regarding the time involved. All this is provided to solicit competing proposals from the agencies. Once an agency has been selected the research process can begin. The marketing research process Baines and Fill (2014: 84) identify five stages in the research process.  Problem definition – the researcher translates the management problem into a research question. This may have several subquestions, as indicated in Baines and Fill, Figure 3.3 (page 86). The agency will prepare a research proposal to show they can address the set questions. This will also include details on the cost and timescale. The elements of this are detailed in Baines and Fill, Figure 3.4 (page 86).  Design the research plan – this involves consideration of whether to use secondary research (also called desk research) or primary research (also called field research). Secondary research is cheaper, but less specific. In many cases, research studies will start with secondary Unit 3: Researching and Understanding the Market Environment and Customers Bradford MBA 57 research, and then use primary research to address more specific research questions which are not addressed in the secondary research. Primary research can be quantitative or qualitative. – Quantitative research includes survey research, which uses large samples and often tends to report on how many respondents support particular views, habits or behaviours. – Qualitative research focuses on gaining market insight (e.g. into how customers think and behave). Qualitative research may often incorporate data collection methods such as focus groups, or online qualitative research. Often a research plan will use focus groups before undertaking more substantial quantitative research, such as a survey. It is important to consider whether you should use online data collection, or whether the data will be collected in person, by telephone or by mail/email.  Undertake the data collection – a key issue involves examining and defining the sample for the research. Larger quantitative studies will often use a form of random sampling, but focus groups will normally use a quota approach. Random sampling is where a group of respondents is chosen ‘at random’ – or by chance – from a larger list of possible respondents. This is commonly used for collecting information on political opinions (e.g. which political party you are likely to vote for). Quota sampling is used to identify respondents from a larger group, who share common characteristics or behaviour.  Undertake the data analysis/interpretation – as the title suggests this involves looking at the data collected (in the case of quantitative data this is likely to involve ‘number crunching’). Clients require the data to be valid and reliable, to analyse how significant any findings are before using them when making marketing decisions.  Write the report and deliver the presentation – most commonly the results are conveyed in a report. This report could also be supported by a presentation, where managers can ask questions of the researchers. In some instances, the marketing managers may want to interrogate the data further, and may ask for further analysis to gain additional insights on specific issues. Read: Baines and Fill (2014), pages 91–94, a discussion on qualitative and quantitative research, and pages 97–98, a discussion on the data analysis and interpretation stage. Read: UserZoom (2013) Two Thirds of Users Start a Purchase on Their Mobile Phone. www.marketresearchworld.net (Blackboard > Module Site > Module Materials > Unit 3) The article looks at market research into booking (holidays) online using mobile devices. It details sample, methodology, key features and results. Study Book: Marketing 58 Bradford MBA You should be able to link this with the discussion above on the market research process. Read: Macdonald, E.K., Wilson, H.N. and Konuş, U. (2012) Better customer insight—in real time. Harvard Business Review 90(9), 102–108 (Blackboard > Module Site > Module Materials > Unit 3) If you are interested in more sophisticated and more contemporary approaches to research see Price et al (2015) in Additional Learning Resources. Summary Effective marketing decisions depend on understanding customers and the marketplace. Various tools help understand the market.  Market research seeks to find out about customers, channels and competitors.  Marketing research examines how to improve the effectiveness of marketing activities.  Customer insight is about gaining an understanding of the customers and making the most of the organisational strengths. Marketers also monitor and examine the business environment through environmental scanning, to identify external issues, situations and threats that impact on the organisation’s future and its strategic marketing decisions. This involves researching:  The external environment (or macroenvironment). Organisations typically have very limited control over the macroenvironment. Marketers use PESTEL (or PEST) analysis to identify emerging issues in the macroenvironment.  The performance environment (or microenvironment). This seeks to gain insight on competitors, suppliers, intermediaries and substitutes. Porter’s Five Forces module is used to help identify changes in the performance environment, and to understand the inter-relationship between the players in the microenvironment.  The internal environment. This addresses the organisation’s resources, processes and policies in achieving the business goals. Key tools for analysing the internal environment are portfolio analysis, which examines the blend and balance between an organisation’s products and services, and its relative strength in its markets. A marketing audit can also be used to check the organisation’s ‘health’ and competitiveness. Portfolio analysis is particularly important in strategic marketing planning. It distinguishes between levels of product sales growth, and market share. Unit 3: Researching and Understanding the Market Environment and Customers Bradford MBA 59 Organisations make decisions on whether to invest in products, or to reduce support based on where they sit in a portfolio matrix. They are defined as being:  Stars – products with a high market share, and in a high growth market.  Cash cows – market leading products in low growth markets.  Question marks – products in a high growth market, with a low market share.  Dogs – products with a low market share in a low growth market. When organisations undertake marketing research, they typically send out a research brief to a few research agencies. The research brief details background information on the organisation and the problem which the organisation is seeking to research. The organisation can then choose the method which best meets its requirements. The five stages in the research process are:  Problem definition – when the management problem is turned into a research question or questions. The research agency prepares a research proposal with more details of the research process.  Design the research plan – when decisions are made about secondary research (also called desk research) or primary research (also called field research). Primary research can be quantitative, such as survey research or qualitative, seeking detailed understanding of how customers think and behave.  Data collection – involves defining the sample (i.e. the respondents or participants) for the research, and then undertaking the research using the defined research approach.  Data analysis/interpretation – this involves analysis of research findings.  Reporting – most commonly, research is reported in writing in the form of a report. This can also be supplemented through a presentation. Activity 3.8 – audio and slides Listen to the audio for this unit and view the accompanying slides. (Blackboard > Module Site > Module Materials > Unit 3 > Audio and Slides) Study Book: Marketing 60 Bradford MBA Activity 3.9 – multiple-choice questions The multiple-choice questions for this unit will enable you to test your knowledge and understanding of the key concepts covered. (Blackboard > Module Site > Formative Exercises > Multiple-Choice Questions > Unit 3) Additional learning resources You can find specific guidance on running qualitative research at www.aqr.org.uk/faq/projects.shtml Abell, D.F. (1978) Strategic Windows. Journal of Marketing 42(3), 2–26. http://search.proquest.com.brad.idm.oclc.org/docview/209271158?account id=17193 Accessed 15 December 2016. GfK (2014) GfK consumer & market trends: driving business growth. YouTube, 15 October. https://www.youtube.com/watch?v=L-VPRsAQSxc Accessed 11 December 2016. The video from GfK shows how its work on consumer and market trends helps drive business growth. Matzler, K., Veider, V. and Kathan, W. (2015) Adapting to the sharing economy. MIT Sloan Management Review 56(2), 71–77. http://search.proquest.com.brad.idm.oclc.org/docview/1650910724?pqorigsite=summon Accessed 15 December 2016. Nielsen Co. (2011) Nielsen Presents: Cross-Platform Home Panels and Extended Screen Ratings. YouTube, 9 September. https://www.youtube.com/watch?v=UizO9XjaHCA&list=UUPDGp0v24KS3t6xBCMsjWQ&index=166 Accessed 15 December 2016. Porter, M.E. (2008) The Five Competitive Forces That Shape Strategy. Harvard Business Review 86(1), 78–93. http://search.ebscohost.com.brad.idm.oclc.org/login.aspx?direct=true&db= bth&AN=28000138&site=ehost-live Accessed 15 December 2016. Price, R.A., Wrigley, C. and Straker, K. (2015) Not just what they want, but why they want it: Traditional market research to deep customer insights. Qualitative Market Research 18(2), 230–248. http://www.emeraldinsight.com/doi/abs/10.1108/QMR-03-2014-0024 Accessed 15 December 2016. References GfK (2014) GfK – A life without market research. YouTube, 12 November. https://www.youtube.com/watch?v=NpvOe7Foc8U Accessed 11 December 2016. Unit 3: Researching and Understanding the Market Environment and Customers Bradford MBA 61 Harvard Business Review (2008) The Five Competitive Forces That Shape Strategy: an interview with Michael E. Porter. YouTube, 30 June. https://www.youtube.com/watch?v=mYF2_FBCvXw Accessed 10 December 2016. Harvard Business Review (2014) The Explainer: Porter’s Five Forces. Harvard Business Review (online), 10 June. https://hbr.org/video/3590615226001/the-explainer-porters-five-forces Accessed 11 December 2016. Laughlin, P. (2015) The 4 essential elements of true customer insight. idmblog, 20 January. http://www.theidm.com/blog/the-4-essentialelements-of-true-customer-insight Accessed 11 December 2016. Macdonald, E.K., Wilson, H.N. and Konuş, U. (2012) Better customer insight—in real time. Harvard Business Review 90(9), 102–108. https://hbr.org/2012/09/better-customer-insight-in-real-time Accessed 11 December 2016. Market Research Society (MRS) (2013) Roisin Donnelly, P&G, on using data and insight to win business. YouTube, 7 November. https://www.youtube.com/watch?v=xw4ssk5hh8A Accessed 11 December 2016. Morrison, A. and Wensley, R. (1991) Boxing up or boxing in: A short history of the Boston Consulting Group Share/Growth Matrix. Journal of Marketing Management 7(2), 105–29. Nielson Co. (2011) Nielsen Global Consumer Video hd. YouTube, 29 March. www.youtube.com/watch?v=c0o3oHmq NOc&list=UUPDG-p0v24KS3t6xBCMsjWQ Accessed 10 December 2016. UserZoom (2014) Two Thirds of Users Start a Purchase on Their Mobile Phone. http://www.marketresearchworld.net/content/view/5601/76/ Accessed 11 December 2016. Bradford MBA 63 Unit 4: Marketing Strategy Key readings: 1. Baines and Fill (2014), Chapter 5 2. Roll, M. (2015) The Rebirth of the Chief Marketing Officer. INSEAD Blog, 12 January (Blackboard > Module Site > Module Materials > Unit 4) – Activity 4.1 3. The Coca-Cola Company (nd) Mission, Vision & Values (Blackboard > Module Site > Module Materials > Unit 4) 4. Hilton Worldwide (nd) Vision, Mission, and Values (Blackboard > Module Site > Module Materials > Unit 4) 5. Shirouzu, N. and Shah, A. (2015) Exclusive: GM set to storm India as Korea costs climb. Reuters, 3 May (Blackboard > Module Site > Module Materials > Unit 4) – Activity 4.3 6. Reuters (2016) GM re-evaluates India investment, new car platform on hold. Reuters, 25 July (Blackboard > Module Site > Module Materials > Unit 4) – Activity 4.3 7. Choudhury, S. and Nagesh, G. (2016) GM Puts India Investment Plan on Hold. www.wsj.com, 25 July (Blackboard > Module Site > Module Materials > Unit 4) – Activity 4.3 Key audio and video: 1. McKinsey & Company (2009) McKinsey conversations with global leaders: Paul Polman of Unilever. www.mckinsey.com, October (Blackboard > Module Site > Module Materials > Unit 4) 2. Free Online Business Education (2014) Vertical Integration in Business – Yum Yum Donuts & Winchell’s. YouTube, 13 May (Blackboard > Module Site > Module Materials > Unit 4) – Activity 4.4 3. Oxford Learning Lab (2009) The Ansoff Matrix. YouTube, 13 April (Blackboard > Module Site > Module Materials > Unit 4) 4. Bloomberg TV (2014) Carnival’s Donald on Market, Growth Strategy. www.bloomberg.com, 23 September (Blackboard > Module Site > Module Materials > Unit 4) – Activity 4.5 Study Book: Marketing 64 Bradford MBA Other: 1. Unit 4 audio and slides (Blackboard > Module Site > Module Materials > Unit 4 > Audio and Slides) – Activity 4.6 2. Unit 4 multiple-choice questions (Blackboard > Module Site > Formative Exercises > Multiple-Choice Questions > Unit 4) – Activity 4.7 3. Unit 4 live online tutorial (Blackboard > Module Site > Collaborate) – Activity 4.9 Introduction Organisations operate within an ever-changing environment. However, despite the changes – or maybe because of the changes – companies need to prepare plans to focus their business in the future. Marketers are especially interested in an organisation’s future marketing strategy. This strategy will identify where the organisation will compete – which is considered in more detail in Unit 5 – and how it will compete – which is detailed in Units 6–8. It is widely accepted that long-term business success does not happen by chance. Organisations must design appropriate strategies and implementation plans to ensure long-term survival. This unit identifies the activities and issues involved in preparing marketing strategies and plans. This involves a series of steps – or activities – which are undertaken in a specific order to identify the opportunities and threats for the organisation. For the organisation to survive – or work well – its staff need to understand its goals, and the processes need to be in place to deliver results. Survival relies on understanding and managing the strategic context. Baines and Fill (see Figure 5.1, page 153) identify four core elements regarding the strategic context:  the external environment  the organisation’s resources, skills and capabilities  target customers  the organisation’s competitors. Managers must find an appropriate fit between these elements for survival and growth over time. Attaining this fit involves matching the organisation’s resources and capabilities with changes in the external environment, while also taking account of competitors’ activities and customers’ wants and needs. Unit 4: Marketing Strategy Bradford MBA 65 A failure to appreciate and manage any of these elements can be disastrous for an organisation. Take the example of Blockbuster (a major video/DVD rental business). At its height, the organisation had more than 9,000 employees. However, within a few years, Blockbuster collapsed. The organisation failed to fully recognise the impact of the changing technology environment and the subsequent changes in the competitive environment with the emergence of online/on-demand film providers such as Netflix, Amazon Prime and NowTV. Blockbuster is not an isolated example – many companies have failed to understand changes in the market environment. However, if they do not develop relevant strategies for survival and growth in a changing environment, they may fail, just like Blockbuster did. Objectives By the end of this unit, you should be able to:  define key strategic planning terms and use these correctly  describe the strategic planning process and how this influences and shapes marketing strategy  undertake a SWOT analysis to match an organisation’s strengths and weaknesses with future market conditions to guide marketing strategies  be aware of different forms of analysis and activities associated with strategic marketing planning  appreciate different forms of measuring marketing performance, such as how effective the organisation is internally, including systems, and externally, i.e. in sales, profits and market share  outline the key elements of the marketing plan. Linking corporate strategy and marketing strategy This unit addresses how organisations plan and develop marketing strategies. The unit therefore explains several key terms, and outlines the steps and stages in preparing plans. The corporate strategy sets the intentions and the accepted level of investment at an organisational level. Kaplan and Norton (2005) identify the link between corporate and functional strategies. “The leaders of high-performing companies connect marketing to the business strategy and to the rest of the organization; inspire their organizations by engaging all levels with the brand purpose; focus their Study Book: Marketing 66 Bradford MBA people on a few key priorities; organize agile, cross-functional teams; and build the internal capabilities needed for success.” (Kaplan and Norton 2005) This quote clearly suggests that within successful organisations there is an explicit relationship between an organisation’s business strategy and marketing activities. A complementary view is expressed by the chief marketing officer of Sage, the accounting software company. This indicates marketing activities and the wider corporate strategy are interlinked: “Marketing is, by definition, strategic. No strategy conversation should take place without marketing at the table.” (Bolger nd) Despite this view, Cranfield University report that: “There has been a worrying trend for Marketing to become increasingly tactical and less involved in strategic decision making. Few companies now have Marketing Directors at main Board level, where strategy is determined… We remain concerned that marketing leaders are insufficiently focused on building influence with the Board and working collaboratively across functions given that marketing leaders are losing influence and the need for all functions to work together to deliver outstanding customer experience.” (Cranfield School of Management 2014) Activity 4.1 – stop and think Read: Roll, M. (2015) The Rebirth of the Chief Marketing Officer. INSEAD Blog, 12 January (Blackboard > Module Site > Module Materials > Unit 4) Is marketing represented on the board in your organisation? If not, what is the highest level at which marketing is represented in your organisation? Is there a Chief Marketing Officer (CMO)? How does this impact on the role of marketing in your organisation? Activity 4.1 – stop and think answers: Unit 4: Marketing Strategy Bradford MBA 67 The strategic context As already noted, Baines and Fill (2014) identify key elements that make up the strategic context in which an organisation operates. These are:  the external environment  the organisation’s resources, skills and capabilities  its target customers  the organisation’s competitors. Organisations are formed of groups of people. The above terms are intended to focus the management and staff on what the organisation wants to achieve, and how people should work together to achieve this. Baines and Fill (2014) introduce several additional key terms which help communicate what the organisation wants to achieve, and how it will be achieved:  vision – how an organisation sees its future and what it wants to become  mission – a statement that sets out an organisation’s long-term intentions, describing its purpose and direction  values – how the people should behave with each other in the organisation, and help shape the goals that will be achieved. Activity 4.2 – stop and think Read: Baines and Fill (2014) Market Insight 5.1, Values Matter (on IKEA), pages 155–156, and answer the questions. Activity 4.2 – stop and think answers: Study Book: Marketing 68 Bradford MBA Think about how mission sets the context for marketing (including their strategy and marketing mix), and how the staff should work. Refer to Unit 1 for an introduction to the marketing mix. Read: The Coca-Cola Company (nd) Mission, Vision and Values. www.coca-colacompany.com. (Blackboard > Module Site > Module Materials > Unit 4) Read: Hilton Worldwide (nd) Vision, Mission, and Values. http://www.hiltonworldwide.com/ (Blackboard > Module Site > Module Materials > Unit 4) Now reflect on how Coca-Cola’s and Hilton’s mission statements (i.e. the organisations’ long-term intentions, describing their purpose and direction) can focus each organisation’s marketing strategy (e.g. which consumers to target) and marketing mix (e.g. promotions used, products offered, pricing decisions). Baines and Fill (2014: 157–158) mention further terms, which are also key to developing a marketing strategy. These include:  organisational goals – the outcomes of the organisation’s various activities, often expressed as market share, share value, return on investment, or numbers of customers serviced  corporate strategy – how organisational resources are matched with the needs of the organisation’s environment, to achieve the organisation’s goals  strategic business unit – an organisational unit, which for planning purposes, is sufficiently large to exercise control over the principal strategic factors affecting its performance. The strategic marketing planning process is described in Baines and Fill (page 157). Read through this section to gain an overview of the steps involved in the process. Understand the distinction between the roles and activities for developing corporate strategy and marketing strategy by referring to Figure 4.1 below. Unit 4: Marketing Strategy Bradford MBA 69 Figure 4.1: Links between corporate strategy and marketing strategy (Source: Baines and Fill 2014: 158) Strategic marketing planning The focus will now move to activities involved in strategic marketing planning. The first step here is analysing and understanding the marketplace, especially the target markets. This extends the environmental analysis discussed in Unit 3 to include a more detailed analysis of competitors. Baines and Fill (2014: 159) identify five key questions in this process.  Who are our competitors?  What are their strengths and weaknesses?  What are their goals?  Which strategies are they using – i.e. which target markets, marketing mix, etc.?  How are they likely to respond to our marketing strategies, offers and/or activities? Study Book: Marketing 70 Bradford MBA Activity 4.3 – stop and think Read: Shirouzu, N. and Shah, A. (2015) Exclusive: GM set to storm India as Korea costs climb. Reuters, 3 May (Blackboard > Module Site > Module Materials > Unit 4) Reuters (2016) GM re-evaluates India investment, new car platform on hold, Reuters, 25 July (Blackboard > Module Site > Module Materials > Unit 4) Choudhury, S. and Nagesh, G. (2016) GM Puts India Investment Plan on Hold, > Unit 4), July 25, www.wsj.com. (Blackboard > Module Site > Module Materials Reflect on the factors which may have influenced the strategy changes mentioned above. General Motors globally undertakes planning across markets (sectors and geographies) and sets objectives and strategies for each key area (e.g. region or sectors). Does your organisation publish such details (either externally, or internally)? If not, how does the organisation know about its overall marketing performance? Activity 4.3 – stop and think answers: General Motors (GM) was facing declining sales in several markets, and it sought out new opportunities. Initially, the company appeared to have sales potential in India. However, with a changing marketing environment, GM’s prospects in India have weakened. The short news stories identify Unit 4: Marketing Strategy Bradford MBA 71 how changes in the external environment have resulted in GM changing strategy. SWOT analysis Once the background research is in place, the organisation can then analyse its market competences, limitations, emerging opportunities or problems through a SWOT analysis. SWOT analysis is amongst the bestknown management tools. It should result in overview of the current and future business situation. A strength is something that an organisation can do better than competitors, i.e. allowing it to have an advantage over other companies. This advantage usually – but not always – should be something that delivers a benefit to customers. Companies must continue to support, develop and invest in strengths for these to continue in the longer term. A weakness is where an organisation is at a disadvantage compared to its competitors. Weaknesses are controllable (i.e. they can – and often should – be addressed) by the company. Failing to address these problems could result in a weakening situation. Opportunities and threats come directly from the marketing environment analysis (addressed in the Unit 3). They are the things that are either positive, i.e. opportunities, or negative, i.e. threats to the company. Note: opportunities and threats are future focused. They should identify future trends identified the analysis of the marketing environment. A SWOT analysis should focus on key issues impacting on the business: “... the key elements should impact on strategy; if they don’t, they should not be in the (SWOT) analysis. A strength is not a strength if it does not have strategic implications and is not a strength in relation to competitors.” (Baines and Fill 2014: 164) Watch: McKinsey & Company (2009) McKinsey conversations with global leaders: Paul Polman of Unilever. www.mckinsey.com, October (Blackboard > Module Site > Module Materials > Unit 4) After watching the film, think about how the Unilever CEO (Paul Polman) saw the turbulent times after the 2008 economic crisis as an opportunity for Unilever and how the organisation modified its operations because of change in the wider economic environment. Note how he views strategy and execution and understanding customers. Figure 4.2 is an example of a SWOT analysis for a digital media agency. Note that it does not seek to identify all issues that may be relevant for the company. Study Book: Marketing 72 Bradford MBA Figure 4.2: SWOT analysis for a digital media agency (Source: Baines and Fill 2014: 164) Strategic marketing goals The organisation should have a sound appreciation of its wider environment and its competitors, and its strengths and weaknesses by this stage. The focus moves on to the goals or specific objectives of the organisation or its business units. There are several strategies an organisation may choose to adopt to achieve the company objectives.  Niche – the organisation may decide to operate in/develop a niche. A niche is a focused segment, which may be uneconomic or unattractive for a larger company. Some companies ‘cherry pick’ niche segments, as the lack of competition makes them attractive. Baines and Fill (page 165) mention that the Australian tourist authorities have identified niche tourism markets, such as ecotourism, bird-watching, cycle tourism, educational tourism, etc. These are specialist markets, which are unlikely to be targeted by major competitors.  Hold – this is normally a defensive strategic objective, where a company wishes to maintain or sustain its market share. It will try to use its power with suppliers and retailers to keep its position.  Harvest – is when a company seeks to take short-term revenue by cutting prices to stimulate demand, or to generate short-term business to gain cash flow. A company may choose to harvest when the market Unit 4: Marketing Strategy Bradford MBA 73 is declining and/or the product may be superseded. In such a situation, the organisation may simply try to sell what it can.  Divest – is when a company is losing money on a product and wishes to stop the losses. Other companies may see value in the product and may buy the failing product. Car companies have taken this approach in recent years. Ford has sold both the Jaguar brand (to Tata) and Volvo brand (to Geely) in recent years. It is perhaps unsurprising that most businesses focus on the rather obvious goal of growth. This can be achieved in different ways.  Intensive growth, where the company has an objective of market share growth, focusing on familiar products/markets. This could be realised through intensified efforts (e.g. product line extensions, promotional pricing).  Integrative growth, which occurs by adding elements along the value chain. This may offer advantages in quality, buying power, etc.  Growth through diversification, which enables growth through the new value chain activities. An example of this could be Marks and Spencer (known conventionally for selling groceries and clothing) moving into building new homes or running hotels. Activity 4.4 – watch and reflect Watch: Free Online Business Education (2014) Vertical Integration in Business – Yum Yum Donuts & Winchell’s. YouTube, 13 May (Blackboard > Module Site > Module Materials > Unit 4) After watching the film identify the additional benefits gained by Yum-Yum Donuts from vertical integration. Activity 4.4 – watch and reflect answers: The Ansoff matrix shows four core strategy options for growth - , opportunities in new and existing markets, and with new and existing products. Study Book: Marketing 74 Bradford MBA  Market penetration is where an organisation seeks to grow market share with existing products within existing markets. This could be delivered through increasing promotional activity or through opening further distribution channels (e.g. getting the products in new retail outlets).  Product development is where the business develops new products to meet the needs of existing customers.  Market development is where the organisation enters new markets with the current product(s), the aim being to increase sales/growth.  Diversification is where the organisation seeks new growth through new products in new markets. (Baines and Fill 2014:167) Watch: Oxford Learning Lab (2009) The Ansoff Matrix. YouTube, 13 April (Blackboard > Module Site > Module Materials > Unit 4) In the film, Professor Malcolm McDonald, a visiting professor at the Bradford School of Management, provides a brief overview of the Ansoff matrix. Competitive advantage and generic strategies Once the organisation has undertaken an audit and examined the growth options, it must identify how to deliver a (sustainable) competitive advantage. Porter (1985) identified four generic competitive strategies, distinguishing between companies with a broad or narrow market focus, and those with a cost-based or a differentiated offer. Cost leadership is where an organisation has an advantage through lower costs, which can result in a higher level of profit. WalMart and Tesco are examples of companies with this strategy. Differentiation is where an organisation tries to create an advantage based on delivering a superior offer. An example is the UK retailer Waitrose, which focuses on premium groceries, with a high level of customer service. Focus strategies are adopted by companies that see a gap in the market. This can be due to a segment of the market whose needs are not being met, or a gap in the product range (or both). An example of this is Ella’s Kitchen which specialised in organic baby foods (see www.ellaskitchen.co.uk). Unit 4: Marketing Strategy Bradford MBA 75 Competitive positioning and strategic intent After the analysis of the market, the industry and the competitors, the focus moves on to different roles in competitive strategy and, more specifically, the competitive positions within markets.  The market leader. A market leader typically has a high market share. The market leader has to defend its position or attack the market. Generally, market leaders invest to support their superior position. In practice, they may be rather complacent and other competitors may seize market share. Think about Polaroid or Kodak in film and cameras – they both lost their advantage when they became complacent and did not react to the growth in digital photography.  The market challenger can try to capture more market share (e.g. through price cuts or more promotional activity), by attacking the market leader or rivals. Alternatively, they could see surprising and innovative ways of doing business, e.g. Salesforce.com provided an innovative offer compared with the traditional IT company suppliers.  The market follower tries to avoid getting caught in competitive jockeying. It can adopt a ‘me too’ strategy, or focus on differentiation and market share by value, not volume.  The market nicher, as suggested above, focuses on something that requires or rewards specialist focus on a specialist market. There are military strategies associated with these terms. You can read about these in Baines and Fill (2014: 175–178). Marketing metrics Increasingly, companies seek to determine KPIs – key performance indicators – to judge their performance, including their marketing performance. Table 5.7 in Baines and Fill (2014: 186) identifies the most commonly used measures, as reported by Ambler et al (2004). Note that many companies claim to use all the KPIs identified in the table. Traditionally, companies have used measures such as sales, margins and profits. Marketers typically want to monitor levels of awareness, which can be unprompted (e.g. which car manufacturers can you name?), or prompted (e.g. which of the following car manufacturers have you heard of: Ford, Mercedes, General Motors, etc.?); and also market share (either volume based or value based, or both). Interestingly, Ambler et al’s survey cites number of new products, and not their success rates. This is more focused on activity, rather than outcome. Distribution coverage is in 10th place (in Ambler’s survey), despite being Study Book: Marketing 76 Bradford MBA of critical importance for some companies. A former CEO of Coca-Cola, Robert Goizueta, stated that he intended to have Coca-Cola at the arm’s reach of desire – i.e. wherever anyone might want a drink. The simple reason – availability drives sales. Customer complaints and customer satisfaction are ranked lower in the top 10 metrics, which may reflect that this is based on 2004 data. More recently, increasing attention is being given to complaint handling (e.g. in the UK banks), and the growing interesting in Net Promoter Score (NPS, mentioned in Unit 1), which aims to identify how strongly customers are likely to recommend a company. The marketing plan This unit has focused on the marketing planning process – a series of activities leading to the setting of marketing objectives and formulating plans to achieve the objectives. It has a lot of key terms, which may take you some time to learn and assimilate. However, you should reflect on these and their application to business. Talking to those in marketing – if possible – will help you link theory and practice for your organisation. The output of this planning process should be a marketing plan document, which addresses what activities/actions the company, strategic business unit (SBU), division or brand will embark on to achieve its objectives. As detailed in Baines and Fill (2014: 193), the time span for marketing plans can vary. Brands in the fast-moving consumer goods (FMCG) sector will commonly have a shorter time horizon than those operating in more slow moving sectors e.g. power generation companies, where time horizons can be over a decade(s). Baines and Fill (in Table 5.8) identify the key contents of a marketing plan. Many of these headings address categories within this unit. Ideally, you should try to read your organisation’s marketing plan, if you have not already done so. A simple sample marketing plan is available at: http://college.cengage.com/business/pride/foundations/2e/resources/pf_fo und_sample_mkt_plan.pdf. Activity 4.5 – watch and reflect This unit has a substantial theoretical base. This process is important though, and getting this flow in place will help you with your assignment. However, watching the following film will allow you to see how some key terms are used in practice. Unit 4: Marketing Strategy Bradford MBA 77 Watch: Bloomberg TV (2014) Carnival’s Donald on Market, Growth Strategy. www.bloomberg.com, 23 September (Blackboard > Module Site > Module Materials > Unit 4) Summary The strategic planning process details the series of steps that an organisation takes to define its strategic objectives. This in turn influences the marketing strategy. Strategic planning process is normally directed from the top of the organisation, which sets and communicates the direction and nature of the business, including its:  Vision – how an organisation sees its future and what it wants to become.  Mission –an organisation’s long-term intentions, describing its purpose and direction.  Values – defining the culture within the organisation, and how they shape the goals to be achieved. The marketing planning process builds on research and analysis of the environment and competitors to determine marketing strategies. In addition to market research and environmental scanning (Unit 3), marketing managers must understand the relative strengths and weaknesses of their organisation and/or brand. This involves the use of the SWOT analysis tool, which analyses:  the strengths and weaknesses of the organisation (i.e. an internal analysis of things which the business can control) with  the opportunities and threats from the external business environment (using PESTEL and Porter’s 5 Forces). The Ansoff Matrix identifies the different ways an organisation can achieve growth in its market. There are four core strategies for exploiting existing and new markets, and existing and new products.  Market penetration – where organisations seek to grow market share in the existing market, with the existing products  Product development – where organisations seek to grow share by developing and launching new products  Market development – where organisations seek business growth through entering new markets with their existing product ranges Study Book: Marketing 78 Bradford MBA  Diversification – where organisations seek entirely new opportunities with new products and new markets The risk is highest when choosing new products and new markets, but a diversification strategy may also offer the highest returns. The marketing strategy reports and informs the business strategy, and will hopefully achieve the objectives set. The success of the business and the marketing strategy are therefore linked. Increasing attention is being placed on monitoring performance, and showing how marketing contributes to business effectiveness, using marketing metrics. Marketing metrics enable organisations to determine their effectiveness both in its internal systems, and externally i.e. in how they perform in the marketplace. Various marketing metrics are used to monitor performance. These include:  levels of profit  market share  sales volume and value  brand awareness  levels of customer satisfaction  customer referrals  customer complaints. Activity 4.6 – audio and slides Listen to: the audio for this unit and view the accompanying slides (Blackboard > Module Site > Module Materials > Unit 4 > Audio and Slides) Activity 4.7 – multiple-choice questions The multiple-choice questions for this unit will enable you to test your knowledge and understanding of the key concepts covered. (Blackboard > Module Site > Formative Exercises > Multiple-Choice Questions > Unit 4) Activity 4.8 – live online tutorial Read: Baines and Fill, page 173, Market Insights 5.4, Phone Strategies. Unit 4: Marketing Strategy Bradford MBA 79 Question 1: To what degree do you believe Vodafone’s marketing strategy complements its corporate strategy? Question 2: If you are the marketing director at HTC, how would you establish a competitive advantage? Question 3: Which type of growth strategy has HTC been pursuing? Make a note of your answers and be prepared to discuss them in the online tutorial. Your tutor will advise you of the time and date that this will take place. Live online tutorial: To access the tutorial, please go to Blackboard > Module Site > Collaborate. To test your sound settings for the Blackboard Collaborate virtual classroom, please go to the Blackboard Collaborate Support site at http://bit.ly/1etRu2Y. For further support materials and information about Blackboard Collaborate, please see the Blackboard Collaborate Support site at http://bit.ly/1jBpgUc Additional learning resources Bouckley, B. (2014) AB InBev keen to steal larger ‘share of throat’ from wine and liquor. Beveragedaily.com, 26 February 2014. http://www.beveragedaily.com/Manufacturers/AB-InBev-keen-to-steallarger-share-of-throat-from-wine-andliquor?utm_source=copyright&utm_medium=OnSite&utm_campaign=copy right Accessed 12 December 2016. Bruzzese, A. (2014) How to Align a Sales Force With Strategic Goals. www.quickbase.com, 17 November. http://www.quickbase.com/blog/howto-align-a-sales-force-with-strategic-goals Accessed 15 December 2016. Cespedes, F. (2012) Aligning Strategy and Sales. YouTube, 25 June. https://www.youtube.com/watch?v=kbp-Rytdtr0 Accessed 15 December 2016. Cranfield School of Management (2014) UK Marketing Leaderships’ Lack of Insights for the Future: Insights from the Cranfield Marketing Directors’ Survey 2014. Bedford: Cranfield School of Management. http://www.som.cranfield.ac.uk/som/dinamiccontent/media/Hayley/MDSurvey2014_Final Report.pdf Accessed 15 December 2016. De Swaan Arons, M., van den Driest, F., and Weed. K. (2014) The Ultimate Marketing Machine. Harvard Business Review, July–Aug. https://hbr.org/2014/07/the-ultimate-marketing-machine Accessed 15 December 2016. Study Book: Marketing 80 Bradford MBA Houghton Mifflin Company (nd) A Sample Marketing Plan. http://college.cengage.com/business/pride/foundations/2e/resources/pf_fo und_sample_mkt_plan.pdf Accessed 15 December 2016. Johnson, N, (2013) Marc Speichert on how he has evolved L'Oreal's marketing focus. www.incite-group.com, 14 June. http://www.incitegroup.com/customer-engagement/marc-speichert-how-he-has-evolvedloreals-marketing-focus Accessed 15 December 2016. Kaplan, R.S. and Norton, D.P. (2005) The Office of Strategy Management. Harvard Business Review 83(10), 72–80. https://hbr.org/2005/10/theoffice-of-strategy-management Accessed 15 December 2016. Keiningham, T., Gupta, S., Aksoy, L. and Buoye, A. (2014) The high price of customer satisfaction. MIT Sloan Management Review 55(3), 37–46. http://search.proquest.com.brad.idm.oclc.org/docview/1514708719?accou ntid=17193 Accessed 15 December 2016. References Bloomberg TV (2014) Carnival’s Donald on Market, Growth Strategy. www.bloomberg.com, 23 September. http://www.bloomberg.com/video/carnival-s-donald-on-market-growthstrategy-Y8JOKVorSC2ZnP8VfxN~wQ.html Accessed 12 December 2016. Bolger, M. (nd) How to align marketing with business strategy. The Marketer. http://www.themarketer.co.uk/how-to/masterclass/alignmarketing-with-business-strategy/ Accessed 12 December 2016. Choudhury, S. and Nagesh, G. (2016) GM Puts India Investment Plan on Hold. Wall Street Journal, 25 July. http://www.wsj.com/articles/gm-putsindia-investment-plan-on-hold-1469478843 Accessed 11 December 2016. Coca-Cola Company (nd) Mission, Vision & Values. http://www.cocacolacompany.com/our-company/mission-vision-values Accessed 12 December 2016. Free Online Business Education (2014) Vertical Integration in Business – Yum Yum Donuts & Winchell’s. YouTube, 13 May. https://www.youtube.com/watch?v=qKzmEiZXmrk Accessed 11 December 2016. Hilton Worldwide (nd) Vision, Mission, and Values. www.hiltonworldwide.com. http://www.hiltonworldwide.com/about/mission/ Accessed 11 December 2016. McKinsey & Company (2009) McKinsey conversations with global leaders: Paul Polman of Unilever. www.mckinsey.com, October. Unit 4: Marketing Strategy Bradford MBA 81 http://www.mckinsey.com/insights/strategy/mckinsey_conversations_with_ global_leaders_paul_polman_of_unilever Accessed 11 December 2016. Oxford Learning Lab (2009) The Ansoff Matrix. YouTube, 13 April. https://www.youtube.com/watch?v=AORoMxgp428 Accessed 11 December 2016. Porter, M.E. (1985) The Competitive Advantage: Creating and Sustaining Superior Performance. New York: Free Press. Reuters (2016) GM re-evaluates India investment, new car platform on hold. Reuters, 25 July. http://www.reuters.com/article/us-gm-indiastrategy-idUSKCN1040S5 Accessed 12 December 2016. Roll, M. (2015) The Rebirth of the Chief Marketing Officer. INSEAD Blog, 12 January. http://knowledge.insead.edu/blog/insead-blog/the-rebirth-ofthe-chief-marketing-officer-3785 - j60pJ3pBFm17Tmb4.99 Accessed 12 December 2016. Shirouzu, N. and Shah, A. (2015) Exclusive: GM set to storm India as Korea costs climb. Reuters, 3 May. http://www.reuters.com/article/usautos-gm-india-exclusive-idUSKBN0NO0TW20150503 Accessed 12 December 2016. Bradford MBA 83 Unit 5: Market Segmentation and Positioning Key reading: 1. Baines and Fill (2014), Chapter 6 2. CACI Ltd (nd) How CACI use public and private sector data to describe communities (Blackboard > Module Site > Module Materials > Unit 5) 3. www.arcadiagroup.co.uk (Blackboard > Module Site > Module Materials > Unit 5) – Activity 5.6 4. www.thisgirlcan.co.uk (Blackboard > Module Site > Module Materials > Unit 5) – Activity 5.6 Key audio and video: 1. Club 18–30 TV (2014) Club 18-30 TV Episode 11: Best Holiday of Your Lives! YouTube, 13 August (Blackboard > Module Site > Module Materials > Unit 5) – Activity 5.2 2. Thomson Holidays (2015) Experience the magic of Walt Disney World with Thomson | Thomson Holidays. YouTube, 4 June (Blackboard > Module Site > Module Materials > Unit 5) – Activity 5.2 3. Saga Holidays (2014) Saga Holidays TV Ad - Nothing is too much trouble. YouTube, 24 December (Blackboard > Module Site > Module Materials > Unit 5) – Activity 5.2 4. Experian (2014) Mosaic animation. www.experian.co.uk (Blackboard > Module Site > Module Materials > Unit 5) 5. Cicchianni, M. (2010) Whirlpool consumer segmentation video. Vimeo, 11 October (Blackboard > Module Site > Module Materials > Unit 5) – Activity 5.4 6. Oxford Academic (2014) Marketing Case Insight 10.1: The Guardian/BBH. YouTube, 8 May (Blackboard > Module Site > Module Materials > Unit 5) – Activity 5.8 Study Book: Marketing 84 Bradford MBA Other: 1. Unit 5 audio and slides (Blackboard > Module Site > Module Materials > Unit 5 > Audio and Slides) – Activity 5.11 2. Unit 5 multiple-choice questions (Blackboard > Module Site > Formative Exercises > Multiple-Choice Questions > Unit 5) – Activity 5.12 Introduction This unit explains the process of market segmentation, which is one of the most important tools for marketers. Market segmentation is the process of breaking the marketing down into segments – groups of consumers with common characteristics or needs. Once the market is segmented, the organisation can choose its targeting strategy and choice of segments, i.e. how many segments to target, and which segment(s) it seeks to serve. Then the organisation must consider how to present – or position – its offer in the minds of its target customers so that it shows a unique, distinctive and desirable offer. Positioning sets the context for the marketing mix, which the marketers use to deliver the desired positioning. Objectives By the end of this unit, you should be able to:  describe the steps in the segmentation, targeting and positioning process  define and distinguish between segmentation, targeting and positioning  identify appropriate bases of segmentation for consumer and business markets  identify targeting strategies and use appropriate criteria to select target markets  understand the importance of positioning as a means of distinguishing an organisation’s offer in the eyes of customers  recognise how positioning links to the marketing mix. Unit 5: Market Segmentation and Positioning Bradford MBA 85 The segmentation process This unit details the segmentation process. Segmentation is the heart of the marketing manager’s responsibility – selecting the company’s choice of target customers. Few companies try to serve the entire market. The segmentation process has three stages:  segmentation  targeting  positioning. The order of the stages is fixed. The first stage is segmentation – breaking the market down into groups of customers/consumers with common characteristics, needs and/or wants. Different customers have different needs, wants and preferences. The second part of this process is targeting – examining the groups of consumers to determine which customer segments are the most attractive ones for your organisation, and deciding which and how many of these you will focus on. The final stage is positioning – ensuring your targeted customers are aware of your offer, and that your organisation is viewed favourably relative to competitors in the eyes of your target customers. The process of splitting the market into groups with common needs or characteristics makes sense from a consumer perspective. Consumers have different needs, habits, preferences and requirements. They differ in what they want to buy, how much they can or want to pay, where and how they will buy, and the promotional media they use or respond to (e.g. online, national newspapers, posters). Segmentation also makes sense from the organisation’s perspective. Consumers seek what best suits their needs, by evaluating options to find what is right for them. Most do not choose a fully customised item, but choose the offer which best matches their requirements from the range of available options. Suppliers try to find a way of meeting the needs of customers with common needs and wants, as is usually not cost effective to deliver products to meet individual requirements for all customers. Therefore, segmentation is about matching consumer requirements with financial returns for a supplier. Study Book: Marketing 86 Bradford MBA Activity 5.1 – stop and think What are the benefits a) for sellers and b) for buyers in identifying groups of consumers with common needs and wants? Activity 5.1 – stop and think answers: Defining segments in consumer markets Defining segments starts with understanding customers and their buying behaviour. Broadly speaking, there are three main segmentation criteria for consumer markets. These are profile bases, psychological bases and behavioural bases. Please refer to Baines and Fill (page 208) for a review of the main segmentation bases. Profile bases These are the most obvious bases, but often not the most useful. They describe people with similar demographic and/or geographic characteristics; people who share life-stage or geodemographic attributes. While these profile bases work for some segments, they are not always applicable. For example, not all retired people want passive and predictable holidays, such as cruises. Recognising this, Saga Holidays (a company that specialises in holidays for those over 50 years old) now also offers adventure holidays, such as trips up the Amazon. Nevertheless, demographic characteristics are commonly used to segment the market:  Lego uses demographic data on children’s ages to ensure that its products are safe and appropriate for different age groups. Age is important because children learn and play in different ways, and have different levels of dexterity as they age. Children’s toys often differ by gender too, as boys and girls may differ in their choice of toys. Unit 5: Market Segmentation and Positioning Bradford MBA 87  Club 18–30 holidays are geared toward young people going on holiday without their parents. These holidays, the company suggests, are ‘rites of passage’, i.e. they mark a change in life stage, from being a teenager to becoming an adult. Demographic segmentation does not work for all companies. Consumers of a similar age may differ in personality, have different interests, preferences and lifestyles. While their age and gender are the same, what they buy is influenced by a wider range of factors. This tells us that demographic segmentation has some limitations and that other factors may need to be considered. Geographic segmentation, such as urban or rural customers, those in flat or mountainous areas, or in different climatic regions, is another form of profile segmentation. Drivers in hilly, rural areas may opt for 4-wheel drive cars for practicality. Geographic data tends to be readily available, but once again it also does not fully predict or explain consumer choices. The main advantage of using profile bases is that it is easy to get profile data on consumers. Census or other data sources report on the number of customers, and provide various breakdowns, by age, gender, location, etc. These bases are characterised as being about who and where, representing both demographic (who) and geographic (where) criteria. Activity 5.2 – watch and reflect Watch: Club 18–30 TV (2014) Club 18-30 TV Episode 11: Best Holiday of Your Lives! YouTube, 13 August (Blackboard > Module Site > Module Materials > Unit 5) Thomson Holidays (2015) Experience the magic of Walt Disney World with Thomson | Thomson Holidays. YouTube, 4 June (Blackboard > Module Site > Module Materials > Unit 5) Saga Holidays (2014) Saga Holidays TV Ad - Nothing is too much trouble. YouTube, 24 December (Blackboard > Module Site > Module Materials > Unit 5) These three advertisements are for the 18–30 age group, the family market, and the ‘greys’. Look at how they adapt the offer and the advertising for the respective markets. Other profile bases include family lifecycle and geodemographics. Life stage or lifecycle approaches recognise that traditionally people go through life from being at home with their family, to being singletons, Study Book: Marketing 88 Bradford MBA starting life independently from their parents. Then, they are likely to form a relationship, and have children. Eventually, these children grow up and only the parents are at home. However, in the UK, this process is not as linear as it was in the past. Increasingly, there are ‘families’ where the ‘parents’ are not the natural parents, and some households have children from two families blending together. Other households have only one parent. Some young people have children young and start living independently from their parents, but without a partner. These variations can result in obvious complexities when segmenting based on lifecycle. Activity 5.3 – stop and think Unit 2 examined the marketing environment. Changes in the social landscape, such as the typical make up of families and households, mean that traditional family patterns are changing. Can you think of any similar demographic changes in your country? Use desk research sources to find some examples. Activity 5.3 – stop and think answers: The final form of profile segmentation is about geodemographic segmentation. This is a newer base of segmentation, which changes in IT have made possible. Geodemographic merges traditional demographic data, such as gender, age, occupation, etc., with details of where people live. These profiles are derived from merging and analysing different forms of secondary (desk) data, such as census data and geographic information. This results in detailed segment profiles based on large datasets. Unit 5: Market Segmentation and Positioning Bradford MBA 89 Several companies offer these services, including CACI which has Acorn (A Classification of Residential Neighbourhoods), and Experian which has its Mosaic system. Read: CACI Ltd (nd) How CACI use public and private sector data to describe communities (Blackboard > Module Site > Module Materials Unit 5) An optional, more detailed resource on UK geographic segmentation is The household acorn user guide (CACI Ltd 2013). Watch: Experian (2014) Mosaic animation. www.experian.co.uk (Blackboard > Module Site > Module Materials > Unit 5) If you wish to learn more about Mosaic, review the additional film resources in the Unit 5 Additional Learning Resources folder (Blackboard > Module Site > Module Materials > Unit 5 > Additional Learning Resources). Activity 5.4 – watch and reflect Watch: Cicchianni, M. (2010) Whirlpool consumer segmentation video. Vimeo, 11 October (Blackboard > Module Site > Module Materials > Unit 5) The video clip is about Whirlpool consumer segmentation. After watching the film note down whether you think the organisation segments its market based on profile attributes. Activity 5.4 – watch and reflect answers: Psychological bases The psychological segmentation bases are detailed in Baines and Fill (see Figure 6.4: 208). They use insight from Unit 2 on consumer behaviour. Study Book: Marketing 90 Bradford MBA Psychological segments build on the understanding of consumer behaviour. They consider attitudes, perceptions, lifestyles, psychographics and benefits sought by consumers. The focus is on who they (consumers) are and why they buy. Two of the main psychological bases of segmentation are psychographics and benefits sought.  Psychographics. This is segmentation based on understanding the values of different groups of customers. Activities, interests and opinions are important here. For example, people may differ in how they do certain tasks. Consider your own behaviour and the way you manage your purchase of groceries. You may set aside a time every day, week or month to purchase groceries. Alternatively, you may buy everything you need (e.g. toiletries, food) on an ad hoc basis as and when you need it, perhaps from convenience stores rather than supermarkets. Or you may be the type of customer that buys the same meals every week, and reorders the same items (usually online) to avoid the stress of shopping or deciding what to eat.  Benefits sought. The seminal article by Haley (1968) applies the benefits approach to toothpastes. This is a toiletry used by most people, but there are many product variants, seeking to appeal to those seeking different benefits. These include cavity prevention, tooth whitening and strengthening enamel. Activity 5.5 – stop and think Read: Baines and Fill (2014) page 216 on the segmentation of the Irish youth sports market based on benefits sought. Why do you think the Sport England geosegmentation uses names to distinguish between segments? How does the Sport England segmentation differ from the ‘benefits sought’ approach to sport participation cited in Baines and Fill on page 216? Activity 5.5 – stop and think answers: Unit 5: Market Segmentation and Positioning Bradford MBA 91 Behavioural criteria Behavioural criteria relate to how consumers act, i.e. what they do. The main forms of behavioural criteria are:  purchase/transaction  consumption/usage  media usage  technology usage. These segments also build on an understanding of consumer behaviour (Unit 2). They consider attitudes, perceptions, lifestyles, psychographics and benefits sought by consumers. You can see results on some of these issues in the TGI research from Kantar (2014), mentioned in Unit 2. Segmentation in business markets While the core focus of this module is on consumer markets there are key differences when applying segmentation in a business-to-business (B2B) market. In a B2B context, businesses tend to segment the market by combining the following two elements.  Organisation characteristics. These characteristics describe general background factors and are similar to the profile dimensions for consumer markets (e.g. organisation size, geographic location and business sector). These describe the nature of the business, but they do not predict what attributes each business favours.  Buyer characteristics. These characteristics focus on the nature of the decision making group/buying centre, to determine where power lies and how buyers operate. Further the analysis attempts to determine choice criteria, e.g. are the buyers looking for price, delivery, customisations, reliability, etc.? Often businesses may have similar characteristics but differ in choice criteria. However, many organisations typically stress similar choice criteria, even though they differ by industry sector, size or location. Targeting The second stage in the process is targeting. Arguably, this is the most important decision, as selecting the right customers is essential in terms of profitability and future growth. Targeting involves deciding which, and how many, market segments to target. Baines and Fill (2014: 224) mention the DAMP criteria to guide choices of target segments. Study Book: Marketing 92 Bradford MBA  Distinct – How different are the segments? Segments which have different needs or habits (or other differences) are likely to need different marketing mixes (i.e. products with differing characteristics, offered through numerous channels at varying prices).  Accessible – How easy is it to access (i.e. reach through communication) these segments uniquely? Sometimes, there are not appropriate communication or distribution channels to reach segments uniquely.  Measurable – Can you identify the segment and so measure its size?  Profitable – How profitable is this segment likely to be? Is it big enough to be profitable? Other criteria for identifying effective segments include growth, stability, level of competition, etc. These and other factors are outlined in Table 6.6 in Baines and Fill (2014: 225). Taking these factors into account forms part of the segment evaluation process and provides vital information on just how attractive a segment is (few organisations would choose to target an inaccessible, slow growing and highly competitive market segment) and which segment(s) to target. There are various approaches to targeting choices.  A concentrated or niche market targeting strategy fits organisations with a tightly defined market. Often these businesses choose to focus on a distinctive group of customers with common needs or characteristics that are not well served by competitors. For example, there are many specialist clothing stores, such as High and Mighty, which is for tall and ‘big’ men, and Long Tall Sally, which targets tall women. Baines and Fill comment that a niche targeting strategy is often chosen because resources are limited (e.g. the organisation only wants to serve a small market) but in some cases, it may be the market has its own size limitations (there are only a limited number of tall women).  A differentiated targeting strategy is also known as a multi-segment strategy. The Arcadia Group owns and manages several UK-based retail clothing brands (including Topshop, Topman, Dorothy Perkins and Burton). Each of these brands are designed to meet the needs of different market segments. Activity 5.6 – stop and think Go to: www.arcadiagroup.co.uk (Blackboard > Module Site > Module Materials > Unit 5) www.thisgirlcan.co.uk (Blackboard > Module Site > Module Materials > Unit 5) Unit 5: Market Segmentation and Positioning Bradford MBA 93 This activity asks you to compare two different targeting strategies. The first links to the retail group Arcadia’s webpage that details the company’s various brands. Once on the website, assess each of the different brands and note down the target market for each brand. Do you think each of the Arcadia brands targets distinct segments? Or is there a degree of crossover regarding who the different brands are targeting? (Is an Evans customer also likely to shop at Wallis?) The second example focuses on a 2014 Sport England campaign – This Girl Can – designed to increase women’s participation in exercise. Which targeting strategy is being adopted here? Use your understanding of social trends and consumer behaviour to identify why this non-profit campaign has been developed. Activity 5.6 – stop and think answers: Positioning The concept of positioning was developed by two advertising agency executives – Al Ries and Jack Trout (see Research Insight 6.4 in Baines and Fill: 233). These advertising executives encouraged marketing managers to consider whether their product was ‘top of mind’, and how their products and brands were perceived, relative to their competitors. Drawing on the work of Ries and Trout, Baines and Fill (2014: 719) define positioning as ‘the way that an audience of consumers or buyers perceives a product of the marketing communications process aimed at a target audience’. Activity 5.7 – stop and think Don’t ‘reflect’ on this activity! Answer immediately and on instinct. What brands come to mind in the following categories?  Coffee  Mobile phones Study Book: Marketing 94 Bradford MBA  Soft drinks  Computer chips  Broadcasters  Airlines Activity 5.7 – stop and think answers: Coffee: Mobile phones: Soft drinks: Computer chips: Broadcasters Airlines: Often one brand – or a small number of key brands – will stand out in each category. For certain technology products (e.g. mobile phones), many people would name Apple. The ‘top of mind’ answer will reflect either the market leader or an individual’s personal preference. Ideally, marketers would like their offers to be ‘top of mind’. The achievement of this ‘top of mind’ status is an enviable position; but a word of warning, the product/brand in question is unlikely to be ‘top of mind’ for all consumers. Apple may have this status for many, but you may prefer Samsung or another brand. However, it is not sufficient for a brand to be well known. Being well known may contribute to sales, but brand awareness alone is unlikely to be a sustainable and attractive business strategy. Good positioning normally is about being perceived as offering a product and/or service that meets the requirements of the consumers over and above (i.e. better) than competitor offerings. Organisations may use a perceptual map to demonstrate how consumers view brands on different dimensions/attributes, often using two dimensional charts. Developing and analysing a positioning or perceptual map may show that there are many organisations positioned in a similar Unit 5: Market Segmentation and Positioning Bradford MBA 95 manner, and clustered together on a perceptual map. It would be a bold move to try and enter such a market. Using price and quality variables is common (and convenient), but it is often not particularly illuminating. Most consumers want high quality at low prices, for example. Looking at benefits sought (or other segmentation dimensions) often allows organisations to identify gaps in the market, i.e. areas where there is no, or limited, competition. These gaps may translate into distinctive offers, with limited competitors. Figure 5.1: Coffee shop perceptual map (Source: http://media3.bournemouth.ac.uk/marketing/generalimages/fig10-1.gif) The perceptual map in Figure 5.1 shows that there are some substantial differences between the options currently available – maybe even potential opportunities (e.g. a coffee shop offering a wide selection and fast service). Reflecting on the map, McDonald’s changed its strategy and has increased the range of options it offers. However, so far, this has resulted in claims in slower service (Jargon 2014). McDonald's reportedly plans to re-launch its McCafe brand in 2017 to compete against competition other brands, such as Starbucks. (RTT Staffwriter, 2016). This is likely to be a brand re-positioning. Some students find it difficult to understand positioning. However, positioning is a simple concept. Mentally, people compare things all the time, including comparing different brands, and evaluating them on several key criteria, past experiences, advertising, word of mouth (e.g. others’ recommendations) or benefits, attributes or other criteria. Study Book: Marketing 96 Bradford MBA Marketers seek to communicate selected information to customers, but it is inaccurate to state that positioning is formed only from managed marketing communications. Consumers will form views on products even without the involvement of marketing communications, e.g. from our attitudes and prior experiences, or from word-of-mouth referrals. This builds on understanding of consumer behaviour. Activity 5.8 – watch and reflect Watch: Oxford Academic (2014) Marketing Case Insight 10.1: The Guardian/BBH. YouTube 8 May (Blackboard > Module Site > Module Materials > Unit 5) Watch the video interview with Agathe Guerrier, Strategy Director of Bartle Bogle and Hegarty, on changing customer behaviour and repositioning for The Guardian. Summary The market segmentation process has three core stages:  segmentation  targeting  positioning. The order is critical – positioning is the final part of this three-stage process. Segmentation is the first stage. The market is analysed to identify groups of customers with common needs and wants, profiles and behaviour. Broadly, these are profile bases of segmentation (e.g. demographic and geographic), which are largely describing ‘who’ the customers are, and psychological and behavioural bases of segmentation, which give more insight into consumers, in terms of who, how, where and when they buy. Clearly, these bases build on buying behavior. Marketers analyse this information on customers to group people (or organisations) into segments, with common behaviour, needs and wants. Segments are groups which are internally consistent (i.e. the people in the group are similar) but different from other groups. Organisations undertake substantial research and analysis to prepare these segment descriptors. Companies often prepare videos or visuals to help staff understand the differences between these groups of customers. Unit 5: Market Segmentation and Positioning Bradford MBA 97 Once the segments are identified, then the organisation determines which and how many segments to target. A company can focus on one segment, several segments, or the entire market. Ideally, this choice is the result of analysis of several criteria, such as market growth, market size and level of competition. This analysis should identify which segment(s) best meet the organisation’s objectives, resources and competences. Positioning is the final stage in the STP process. This is about creating a distinctive and memorable impression in the mind of the buyer, where the offer is clear and desirable to the target market. Clear positioning helps customers identify and choose between competitive offers. Customers form judgements about products in many ways. Organisations should help customers identify positive attributes and benefits by monitoring and managing positioning through the marketing mix. Activity 5.9 – audio and slides Listen to: the audio for this unit and view the accompanying slides (Blackboard > Module Site > Module Materials > Unit 5 > Audio and Slides) Activity 5.10 – multiple-choice questions The multiple-choice questions for this unit will enable you to test your knowledge and understanding of the key concepts covered. (Blackboard > Module Site > Formative Exercises > Multiple-Choice Questions > Unit 5) Additional Learning Resources CACI (2015) Understanding your customers using Acorn. YouTube, 19 February. https://www.youtube.com/watch?v=K8Hte8KXuf4 Accessed 15 December 2016. Nielsen (2015) Who is my most valuable consumer? www.nielsen.com. http://www.nielsen.com/us/en/solutions/segmentation.html Accessed 15 December 2016. References Arcadia Group (nd) Arcadia – Our brands. www.arcadiagroup.co.uk. Accessed 12 December 2016. Study Book: Marketing 98 Bradford MBA CACI Ltd (nd) How CACI use public and private sector data to describe communities. Acorn.caci.co.uk. http://acorn.caci.co.uk/downloads/AcornInfographic.pdf Accessed 12 December 2016. CACI Ltd (2014) The household acorn user guide. http://www.caci.co.uk/sites/default/files/resources/Household_Acorn_UG.p df Accessed 12 December 2016. Cicchianni, M. (2010) Whirlpool consumer segmentation video. Vimeo, 11 October. https://vimeo.com/15750678 Accessed 12 December 2016. Club 18–30 TV (2014) Club 18-30 TV Episode 11: Best Holiday of Your Lives! YouTube, 13 August. https://www.youtube.com/watch?v= gt9s7QU4PpA Accessed 12 December 2016. Experian (2014) Mosaic animation. http://www.experian.co.uk/marketingservices/knowledge/videos/mosaic-videos.html Accessed 12 December 2016. Haley, R.I. (1968) Benefit segmentation: a decision-oriented tool. Journal of Marketing 32(3), 30–35. https://archive.ama.org/archive/ResourceLibrary/JournalofMarketing/docu ments/4996557.pdf Accessed 12 December 2016 Jargon, J. (2014) McDonald’s Menu Problem: It’s Supersized. Wall Street Journal, 3 December. http://www.wsj.com/articles/mcdonalds-menuproblem-its-supersized-1417631056 Accessed 12 December 2016. Kantar Media, TGI (2014) What Makes The World’s Consumers Tick 2014. http://www.wpp.com/wpp/marketing/consumerinsights/what-the-worldthinks-2014/ Accessed 12 December 2016. Nielsen (2015) Nielsen PRIZM Premier Lifestage Groups. www.nielsen.com. http://www.nielsen.com/content/dam/ corporate/us/en/docs/solutions/segmentation/prizm-premier-segmentsmay-2015.pdf Accessed 12 December 2016. Oxford Academic (2014) Marketing Case Insight 10.1: The Guardian/BBH. YouTube 8 May. http://www.youtube.com/watch?v=beTQ5uU-U2M Accessed 12 December 2016. RTT Staffwriter (2016) McDonald's Plans Big Changes To McCafe Menu. http://www.rttnews.com/2722701/mcdonald-s-plans-big-changes-tomccafe-menu.aspx 12 December 2016. Saga Holidays (2015) Saga Holidays TV Ad - Nothing is too much trouble. YouTube, 24 December. http://www.youtube.com/watch?v=yLXFfP45A8U Accessed 11 December 2016. Unit 5: Market Segmentation and Positioning Bradford MBA 99 Thomson Holidays (2015) Experience the magic of Walt Disney World with Thomson | Thomson Holidays. YouTube, 4 June. http://www.youtube.com/watch?v=PKHKKGdBNDw Accessed 12 December 2016. Bradford MBA 101 Unit 6: Product and Service Key readings: 1. Baines and Fill (2014), Chapters 8 and 13 2. Rogowsky, M. (2014) Zipcar, Uber And The Beginning Of Trouble For The Auto Industry. www.forbes.com, 2 August (Blackboard > Module Site > Module Materials > Unit 6) 3. Nobel, C. (2011) Clay Christensen’s Milkshake Marketing. Harvard Business School, 14 February and watch the embedded presentation by Harvard Professor Clayton Christensen on milkshake marketing (Blackboard > Module Site > Module Materials > Unit 6) 4. InterContinental Hotels Group (nd) Our Brands. www.ihgplc.com (Blackboard > Module Site > Module Materials > Unit 6) – Activity 6.6 5. Parise, S., Whelan, E. and Todd, S. (2015) How Twitter Users Can Generate Better Ideas. MIT Sloan Management Review, 1 June (Blackboard > Module Site > Module Materials > Unit 6) – Activity 6.8 6. Millward Brown (2016) 2016 BrandZ Top 100 Global Brands. www.millwardbrown.com (Blackboard > Module Site > Module Materials > Unit 6) 7. Millward Brown and WPP (2016) BrandZ™ Top 100 Most Valuable Global Brands 2016. (Blackboard > Module Site > Module Materials > Unit 6) Key audio and video 1. Lusch, R.F. (2011) Robert F. Lusch discusses the past, present and future of service dominant logic. YouTube, 3 May (Blackboard > Module Site > Module Materials > Unit 6) – Activity 6.4 2. RKS Design (2012) cAir – redefining air travel for families. Vimeo, 9 October (Blackboard > Module Site > Module Materials > Unit 6) – Activity 6.5 3. Creating a Corporate Identity: Virgin’s Branding Strategy. YouTube, 25 October 2010 (Blackboard > Module Site > Module Materials > Unit 6) – Activity 6.12 Study Book: Marketing 102 Bradford MBA 4. Tipple, J. (nd) The role of a brand director at Virgin (Blackboard > Module Site > Module Materials > Unit 6) – Activity 6.12 Other: 1. Unit 6 audio and slides (Blackboard > Module Site > Module Materials > Unit 6 > Audio and Slides) – Activity 6.10 2. Unit 6 multiple-choice questions (Blackboard > Module Site > Formative Exercises > Multiple-Choice Questions) – Activity 6.11 3. Unit 6 live online tutorial (Blackboard > Module Site > Collaborate) – Activity 6.13 Introduction The marketing mix is the term used to describe the tools that the marketer changes to meet customer requirements. This is often called the four Ps, reflecting the names for the four key elements of the marketing mix – product, price, place (or distribution) and promotion (or marketing communications). The marketing mix for services has seven elements, adding people, physical evidence and process to product, price, place and promotion. This unit focuses on product. The product is normally the first of the marketing mix elements to be addressed in academic programmes and in commercial practice. Services can be products (or brands), too. However, services have unique characteristics. This unit provides background on products and product decisions. Most companies have several products, and need to manage both new products and products which have been on the market for some time, while simultaneously investigating potential new products. Marketers may adapt existing products to extend their lifecycle or to make them more relevant to the current market situation. This unit starts by defining, examining and distinguishing between products and services, then moves to identify and explain key aspects of product management, specifically, levels of products, service characteristics, introducing new products, managing the product portfolio and branding issues. Objectives By the end of this unit, you should be able to:  identify and distinguish differing types of products and services  detail key service characteristics Unit 6: Product and Service Bradford MBA 103  appreciate different layers of product  identify changes to the marketing mix over the product lifecycle  identify the stages involved in developing new products, and in their adoption  define brands and understand their benefits. What is a product Marketers develop and offer products to their customers. These can be either tangible products or intangible services. Types of products include:  physical goods, such as salt, steel, paper or cars  services, such as broadband services, bank accounts or dentistry  people, such as politicians or pop stars  events, such as the Tour de France, the Olympics, the World Cup, the Glastonbury festival  ideas and causes, such as Cancer Research, Movember Prostate Cancer. Products and services include both tangible and intangible aspects. Figure 6.1 identifies a range of different products and services. These cover a spectrum – or continuum – from being mainly services (such as education or entertainment) to mainly physical products (such as frozen food or fruit). Figure 6.1: Product and service spectrum (Source: Baines and Fill 2014: 279) Activity 6.1 – stop and think Refer to Figure 6.1. Which of the extremes is product – or tangible – dominant? Which of the extremes is service – or intangible – dominant? Study Book: Marketing 104 Bradford MBA Think about other products and services and consider where they fit along the product-service continuum. Activity 6.1 – stop and think answers: Baines and Fill (2014: 721) define a product is ‘anything that is capable of satisfying customer needs’, i.e. it can be a physical product, but also anything that is sold to customers. A service is ‘any act or performance offered by one party to another that is essentially intangible and where consumption does not result in any transfer of ownership’ (Baines and Fill 2014: 723). Recently, research on services marketing has introduced the concept of a service dominant logic (SDL) (e.g. Vargo and Lusch (2004)). This theory is based on the following view: “All firms are service firms; all markets are centered on the exchange of service, and all economies and societies are service based.” (www.sdlogic.net) The discussion and definitions regarding products and services seem straightforward. However, in recent years the distinction between products and services is becoming increasingly blurred. This issue is explored in the next section. Products or services Do you own a car? For decades, cars were a major – and often essential – purchase. However, many people do not own cars, but rent or lease them. A purchased car is a product; a leased or rented one is a service. Recently, car clubs, such as Zipcar, have allow people to use or rent cars when they want them, for short or longer periods. These alternatives are now proving challenging for car manufacturers. “Had it not been for car-sharing services, automakers would have sold about 500,000 more new cars over the past decade. And (research company) Alix believes another 1.2 million sales will be lost by 2021 as every new car added to the fleet of Zipcar, RelayRides and the like Unit 6: Product and Service Bradford MBA 105 leads to a remarkable 32 personal cars never being purchased by regular folks.” (Rogowsky 2014) Read: Rogowsky, M. (2014) Zipcar, Uber And The Beginning Of Trouble For The Auto Industry. www.forbes.com, 2 August (Blackboard > Module Site > Module Materials > Unit 6) Think about how the ideas expressed in the article fits with your use of cars. Key product and service terms and concepts Charles Revson (the creator of Revlon cosmetics) famously said: “In the factory we make cosmetics. In the drugstore we sell hope.” In other words, the producer makes products, whereas the customer or consumer seeks and buys benefits.  Features are discernible characteristics of the product, usually related to the product’s purpose, such a format, technical specification, colour, packaging, etc.  Benefits detail what customers seek from using the products. Benefits could be convenience, practicality, value for money or ease of use. Activity 6.2 – stop and think Hopefully the distinction between products and services and features and benefits should be straightforward. To reinforce your understanding just take ten minutes and select some advertisements or business brochures at random. Note whether they stress features or benefits. The service dominant logic identifies two key benefits.  Value-in-use – i.e. customers perceive value or benefits through using products. The following comments are examples of benefits which customers get from value-in-use – “It saves me time”, “I get things done quicker”, “I don’t have to spend time tracking down parts”, “My groceries are ordered online, and then they deliver to my door. It saves me time, and I don’t overspend.” A B2B example is “With this new software, we have moved from 35% operating efficiency to 85% operating efficiency”  Co-creation of value – i.e. customers are active in defining value, rather than passively waiting for suppliers to deliver this. A recent trend in the UK has been in companies making made-to-measure shirts. Customers take their own measurements, select the style and fit they Study Book: Marketing 106 Bradford MBA want, and the colour, collar, cuffs and fabric. They are therefore participating in a co-creation process. Read: Nobel, C. (2011) Clay Christensen’s Milkshake Marketing. Harvard Business School 14 February and watch the embedded presentation by Harvard Professor Clayton Christensen on milkshake marketing (Blackboard > Module Site > Module Materials > Unit 6) Classifications (types) of products Different types of products have different characteristics. There are two main types of tangible products.  Durables – are products that are designed to last some time, such as household products like washing machines.  Non-durables – these goods are short-lived. Indeed, they may be used once before being discarded or consumed. Many consumer non-durables are described as fast-moving consumer goods (FMCG) and include household products such as tinned and packaged foods or household cleaning products, such as soap and detergents. Activity 6.3 – stop and think What sort of buying behaviour – high or low involvement – would describe the purchases of the following (note your answer next to each example):  disposable razors  computers  shampoo  cars  a bar of chocolate  designer jewellery. Baines and Fill (2014: 284) define and distinguish between staple products and impulse and emergency purchases.  Staple products are products which are widely used and widely available. They are bought frequently and often habitually.  Impulse purchases are those which the consumer had not planned to buy. However, consumer needs were recognised, possibly at the point of sale (i.e. in store), by a display stand or after seeing in-store promotional materials. An example you may be familiar with is Wrigley chewing gum. It is widely available next to tills in petrol stations, newsagents, etc., and a high proportion of its sales are through repeat purchases, bought on impulse. Unit 6: Product and Service Bradford MBA 107  Emergency purchases are products which are unexpectedly required. Customers must assimilate the issues and resolve the problem quickly. For example, a consumer might get caught in a rainstorm, and need to buy an umbrella. As you’d expect in such circumstances, consumers often do not search widely for a suitable product, or have the chance to compare offers, when making an emergency purchase. For example, if your car tyre is badly damaged on a long-distance journey, you possibly will choose the most convenient tyre service option. Services Services are also ‘products’. Services are distinguished by ‘intangibility’. Services have grown in importance in recent decades. Companies like IBM have shifted their focus from selling tangible products to offering services. Figure 6.2 illustrates IBM’s turnover from 1993 to 2010. The figure clearly indicates that IBM’s turnover from services has increased. In contrast, revenue from systems and technology has declined, with software revenue increasing at a modest level. Indeed, this is similar to the shift from buying cars, to leasing or renting them. It is a shift to services. Figure 6.2: IBM turnover ($ millions) 1993–2010: Global Services, Systems and Technology, and Software (Source: Johnston et al 2012: 11) IBM benefitted by recognising the shift from product to service offerings. Similarly Rolls Royce (an organisation manufacturing aircraft engines) has also changed to focus on services, as mentioned in Chapter 1 of Baines and Fill, Market Insight 1.2, page 22. Rather than simply selling engines (the product) it now offers ‘power by the hour’ to major airlines. So, airlines pay for the service provided by the engines (i.e. the power to propel the planes) rather than paying for actual engines themselves. Other Study Book: Marketing 108 Bradford MBA organisations have also adopted this approach. One example already mentioned is Zipcar (see www.zipcar.co.uk for further details). Four key characteristics define services.  Intangibility, which means that it is difficult to touch some services. While we may use banks and see their physical location, we cannot see most of their money processing services. Likewise, we use many technologies which we cannot see or touch, although we can experience them, such as broadband services.  Inseparability – services involve interaction between a provider (e.g. a hairdresser or a surgeon) and a customer. This means that the production and consumption of a service often takes place at the same time.  Variability – while we can expect packaged products to be the same every time we buy them, services may vary depending on the situation and the people involved. You may go to a restaurant and have wonderful food and service, but the quality of cooking or service may vary depending on how busy the restaurant is, or how experienced the waiters are. You may visit a restaurant on several occasions, and have different experiences.  Perishability – some (but not all) services ‘perish’, whereas physical products are still available until consumers want to buy them. So, airlines cannot sell seats on a plane that has taken off, and theatres must sell seats before the start of the performance. Some academics also include ownership as a further characteristic of services. For example, customers do not ‘own’ a hotel room or a seat on a plane, but ‘rent’ its use for a period of time. These characteristics may differ between different services. For example, customers would be very concerned if automated cash machines gave out ‘variable’ amounts of cash (especially if they underpaid!). However, if a cash machine runs out of money (e.g. at a holiday weekend), then the service may not work, even though the machine is not broken. Activity 6.4 – watch and reflect Watch: Lusch, R.F. (2011) Robert F. Lusch discusses the past, present and future of service dominant logic. YouTube, 3 May. The video explains the development of the service dominant logic thinking. Unit 6: Product and Service Bradford MBA 109 Levels of product Marketers talk about three different forms – or levels – of product.  The core proposition (also called ‘core product’ or ‘core benefit’) can be functional (i.e. what the product needs to achieve) or emotional (i.e. what benefit you will get from using the product).  The embodied proposition is the tangible good or the actual service to deliver the benefit sought. This normally comprises of a series of elements, such as the design, materials, packaging, branding, etc.  The augmented proposition includes the above elements, plus additional pre- and post-purchase support and other services. Typically, these include guarantees, delivery, installation, training, advice and financing. Figure 6.3: Levels of product proposition (Source: Baines and Fill 2014: 280) Many products (and services) combine physical and intangible aspects as part of a ‘package’. Often if you buy new flooring – carpet, wooden flooring, tiles or linoleum – you will buy fitting (service) alongside your flooring (product). Similarly, an electronics retailer may deliver and install (i.e. provide services for) a new washing machine. Conversely, low cost airlines or hotels commonly charge for extras. So, Ryanair offers very low fares, but then charges for drinks or food on the plane. Activity 6.5 – watch and reflect Watch: RKS Design (2012) cAir – redefining air travel for families. Vimeo, 9 October (Blackboard > Module Site > Module Materials > Unit 6) Study Book: Marketing 110 Bradford MBA The clip shows an imaginary airline for parents travelling with young children. Note down the advantages and disadvantages of this airline compared with a large international airline, such as KLM, Air Canada or Malaysian Airlines. What do think are the airline’s core, embodied and augmented propositions? Activity 6.6 – stop and think Go to: InterContinental Hotels Group (nd) Our Brands (Blackboard > Module Site > Module Materials > Unit 6) Look at the various IHG hotel brands, and note how the organisation has formed the various offers delivered by the IHG brands. How are these brands designed to meet the needs of different market segments? Activity 6.6 – stop and think answer: Consumers seek a ‘bundle of benefits’ from their chosen product or service. The way the company bundles benefits makes their offer distinctive. However, failure in one – even small – aspect of the augmented product proposition may result in disappointment or dissatisfaction. Product ranges, lines and mix This short section identifies and explains key product management terminology. These terms have developed to help communicate a common understanding of the relationships and structures of products. Read: Baines and Fill (2014) Table 2, page 287. Look at the terms in Table 2 and relate these to your organisation. Are these terms widely used? Unit 6: Product and Service Bradford MBA 111 How does your organisation manage the product line depth (the number of variants) and the width (the number of product lines)? If you cannot relate these terms to your company, try looking at one or more of the company websites shown in the additional learning resources for Unit 6 (Blackboard > Module Site > Module Materials > Unit 6). Product lifecycle The product lifecycle is one of the best-known marketing theories. It is not without critics – including a famous article (Dhalla and Yuspeh, 1976) encouraging managers to ‘forget the product lifecycle’. However, understanding lifecycles helps guide several marketing decisions. The general pattern of the product lifecycle is shown in Figure 6.4. This charts the sales and profits over the period of the product lifecycle. The product lifecycle is separated into five stages.  Development – the organisation works on defining what should or should not be included in the embodied and augmented product propositions. It is at this stage there may also be some product development and testing of prototypes, both in the organisation and in the marketplace.  Introduction – the product is introduced into the market. As you can see, the company is not making a profit at this point, and sales are very low.  Growth – the sales of the product start to take off, and so the company can make a profit. Other competitors may enter the market at this stage.  Maturity – sales peak at maturity, and then start to decline. Typically, prices start to fall, and so do profits.  Decline – sales fall dramatically, as do profits. Read the above description and review how it is illustrated in Figure 6.4. Study Book: Marketing 112 Bradford MBA Figure 6.4: The product lifecycle (Source: Baines and Fill 2014) Lifecycles can be long, or short. The traditional Lego set has been around for years, but the company often develops topical ranges, for example around popular movies, and these tend to have shorter lifecycles. Companies can sometimes revitalise mature products and so extend the lifecycle. This may be easier than launching a new product. As Figure 6.4 shows, the level of costs and profits varies over the lifecycle. Companies need to manage the lifecycles of different products to ensure the long-term survival of the business. The products at differing stages are sometimes called yesterday’s breadwinners, today’s breadwinners and tomorrow’s breadwinners. This links to the models of portfolio analysis described in Unit 4 of this module. Activity 6.7 – stop and think Review the Apple website (http://www.apple.com/) and reflect on your own knowledge and perceptions of the organisation’s product portfolio. Focusing specifically on the iPhone, iPad, Apple Watch, iPod and iMac, plot where you think these products are on the product life cycle. What are the implications of this for Apple? Can the company guarantee future sales? Unit 6: Product and Service Bradford MBA 113 Activity 6.7 – stop and think answers: Developing new product propositions The discussion on the product lifecycle shows that companies must innovate in products or services to sustain sales and profits. New products can be radical innovations (‘big bang’ innovations) or minor adaptations (‘slow drip’ changes). New product development takes time and money. Many new products fail outright, or fail to meet sales or profit expectations. Sometimes a competitor can offer a superior version of the original product, have better access to distribution channels, or have promotional activities which communicate more clearly to the market. Indeed, many organisations find it difficult to think of new product ideas or develop new or improved products. Often ideas come from outside the organisation. Activity 6.8 – stop and think Read: Parise, S., Whelan, E. and Todd, S. (2015) How Twitter Users Can Generate Better Ideas. MIT Sloan Management Review, 1 June (Blackboard > Module Site > Module Materials > Unit 6) Reflect on whether (and how) your organisation could learn from its customers. The process of developing new products is commonly presented in a series of steps.  Idea generation – ideas may come from the market from marketing research, from customers, suppliers or even from competitors. Study Book: Marketing 114 Bradford MBA  Screening – organisations use a series of criteria to assess their new product options. Typically, the criteria consider whether the product is consistent with the organisation’s objectives, whether the product may be sufficiently profitable, and whether the organisations has the capabilities to further develop the product.  Business plans and market analysis – this stage involves more detailed evaluation of the market and profit potential.  Product development and selection – prototypes of products are developed and tested to see if they are viable. This is often a timeconsuming and expensive stage.  Test marketing – is when the product is launched in a limited part of the market, such as in a geographical region or a specialist distribution channel, to see how it performs.  Commercialisation – is when the product is launched. This requires detailed marketing plans for the launch of the product, including the expected sales during the launch period. Figure 6.5: Steps for developing a new product (Source: Baines and Fill 2014) Figure 6.5 shows a product development process. Not all ideas will proceed throughout the entire process. There is a ‘decay curve’ of new product ideas, where many ideas are screened out early on. Screening is key as it ensures an organisation’s limited resources – financial or human – are focused on products that stand the best chance of success. Unit 6: Product and Service Bradford MBA 115 New product diffusion Once a new product has been developed, it needs to be launched into the market. However, launching a new product is not the end of marketing’s involvement in new products, but merely a point where the focus changes. Only a few new products, such as a new Apple product, achieve high sales at the time of launch. Usually, products go through a process of diffusion, where communication about the products spreads to customers over time. This then is evident in the level of sales, which start off slowly, then build over time (Baines and Fill, Figure 8.7: 307). Research on new product adoption identifies five different types of adopters of new products:  Innovators – these buyers scan the environment for new products and are the first to buy. They are not worried by the risk of failure.  Early adopters – these buyers wait a short time, and then buy. They know prices will fall, but they enjoy having a new product.  Early majority – these buyers are more pragmatic, and wait until new entrants are in the market. Prices tend to fall to a market rate.  Late majority – these are the people who wait until most people have the item, and then buy, often when prices are falling.  Laggards – these are people who believe they do not need the product, or that it will deliver benefits. The product may be well at the end of its lifecycle before they buy. Branding Read: Baines and Fill (2014), Chapter 13 A brand can be defined as: “formed from multi-dimensional and emotional constructs which people use to embrace an abstract construct or set of associations on the mind”. (Baines and Fill 2014: 706) Brands offer benefits including: 1. The ability to allow organisations to distinguish their offerings through the development of unique and distinctive brand identities. These distinct identities may be communicated through the adoption of a distinctive brand name or logo, strong design attributes and the adoption of a brand personality (all of which may be conveyed via related promotional activities such as advertising). 2. To help consumers distinguish between competitive offers. Study Book: Marketing 116 Bradford MBA Brand identity includes the name and visuals – the colour, typeface logos, and indeed slogans. For example, you will be able to identify (and visualise) Coca-Cola, McDonald’s and Kellogg’s logos and packaging. You may also recognise the slogans or even audio earworms, such as that for ‘Intel inside’. Brand personality distinguishes the product from others in the mind of the consumer. Read: Millward Brown (2016) 2016 BrandZ Top 100 Global Brands (Blackboard > Module Site > Module Materials > Unit 6) Millward Brown and WPP (2016) BrandZ™ Top 100 Most Valuable Global Brands 2016. (Blackboard > Module Site > Module Materials > Unit 6) Companies can exploit their brand ‘equity’, by stretching or extending their brands.  Brand extensions are where companies extend the brand name and attributes to other related categories, such as Mars’ approach when it developed Mars bar ice creams.  Brand stretching is when the brand is extended to completely new categories, such as Caterpillar boots (stretching). Activity 6.9 – stop and think Think about the following options. Which do you think ‘work’ and which do not work? Why?  BBC university  Lego clothing  Google cars  Apple restaurants  McDonald’s hotels  Intel airlines. Summary The marketing mix comprises of product, price, place and promotion, although people, processes and physical evidence are additional elements of the extended marketing mix, which is commonly used for services. The first element of the marketing mix addressed in this module is product. Essentially, a product is a proposition – a combination of tangible and Unit 6: Product and Service Bradford MBA 117 intangible elements – which is designed to meet customer needs and wants. Three-level product analysis shows us that the product is a mix of features and benefits.  The core proposition (also called ‘core product’ or ‘core benefit’).  The embodied proposition is the tangible good or the actual service to deliver the benefit sought.  The augmented proposition includes the above elements, plus additional pre- and post-purchase support and other services. Additional features in the product must add value for customers, i.e. satisfy customer requirements more fully. For example, organisations may add additional packaging to protect a product, or add a brand logo, which helps consumers recognise the product on the supermarket shelf and which guarantees a level of quality or performance. Some products include value added services, such as home delivery, installation, or service guarantees. Additional features may cost more for the company and the customer. However, companies and customers will both benefit – companies hope to have high levels of customer satisfaction, which result in loyalty. Customers benefit from peace of mind, about their purchases. The product lifecycle concept identifies that products go through five stages:  Development – e.g. identifying product concepts and testing of prototypes, both in the organisation and in the marketplace (this relates to the new product development process).  Introduction – is when the product is introduced into the market. The organisation needs to recover the costs of new products as quickly as possible. New products tend to be expensive and sales levels are low.  Growth – is when product sales take off, and move to profit. Competitors will often also enter the market.  Maturity – sales peak at maturity, and then start to decline. Typically, prices and profits fall due to competition, and due to falling demand.  Decline – sales fall dramatically, as do profits. Many products will be discontinued. Companies monitor the lifecycles for all their products. Ideally, the company should have mature products, which deliver revenue and profit, which can be used to invest in new products. Companies must continue to update existing products, and develop new products to ensure long-term survival and (ideally) growth. Study Book: Marketing 118 Bradford MBA New products replace existing products or meet new market needs. There is constant pressure to develop and enhance products to achieve or sustain a competitive edge. (Think about the constant developments in communications technology, for example.) However, new product development is expensive for most organisations. Many new products are not successful in the marketplace. Companies manage the new product development process to identify those products which are most likely to succeed. The process of developing new products is commonly presented as having a series of steps, including:  Idea generation – from research, customers, suppliers or competitors.  Screening – evaluation against criteria, such as whether the idea is consistent with the organisation’s objectives, will result in profit and how well it fits the organisation capabilities.  Business plans and market analysis – a more detailed evaluation of the potential market and profit.  Product development and selection – where prototypes of products are developed and tested to identify problems in use.  Test marketing – launching in a limited part of the market, such as in a geographical region, to see how the new product performs in the market.  Commercialisation – the full launch. Very few ideas make it to full launch, and many of these will not be successful. Increasingly, organisations seek ways of involving customers in the new product development process to reduce the risk of failure. Branding is closely linked to positioning – a strong brand usually has a clear and distinctive positioning and strong customer loyalty. Brand names or distinctive design can add value to a product or product line. Strong brands have also emotional associations. Brands often use these associations to reduce the risks of failure of new products. Activity 6.10 – audio and slides Listen to: the audio for this unit and view the accompanying slides (Blackboard > Module Site > Module Materials > Unit 6 > Audio and Slides) Unit 6: Product and Service Bradford MBA 119 Activity 6.11 – multiple-choice questions The multiple-choice questions for this unit will enable you to test your knowledge and understanding of the key concepts covered. (Blackboard > Module Site > Formative Exercises > Multiple-Choice Questions > Unit 6) Review activity 6.12 Watch: Creating a Corporate Identity: Virgin’s Branding Strategy. YouTube, 25 October 2010 (Blackboard > Module Site > Module Materials > Unit 6) Tipple, J. (nd) The role of a brand director at Virgin (Blackboard > Module Site > Module Materials > Unit 6) These videos illustrate some key concepts from this unit. After watching the videos, reflect on how brands are managed in Virgin. Think about other brands that have successfully used brand extension and stretching. Consider how the organisations you have chosen are able to ensure that the success of this brand extension/stretching. Activity 6.13 – live online tutorial Read: Baines and Fill (2014) pages 300–301, Market Insight 8.4, ‘Unilever invites innovation’. Please also check out the Unilever open innovation portal on yet2.com (https://oiportal.yet2.com/res/help.jsf). Write down your answers to questions 1, 2 and 3 and be ready to discuss them during the live online tutorial (your module tutor will post details of when this tutorial will take place). Question 1: Why is product innovation risky and difficult? Question 2: What are the advantages to Unilever of opening up innovation processes in this way? What are the risks? Why has Unilever switched from a secret process to an open process? Question 3: Is new product development a better approach for Unilever than brand extension? Why? Live online tutorial: To access the tutorial, please go to Blackboard > Module Site > Collaborate. To test your sound settings for the Blackboard Collaborate virtual classroom, please go to the Blackboard Collaborate Support site at http://bit.ly/1etRu2Y. For further support materials and information about Blackboard Collaborate, please see the Blackboard Collaborate Support site at http://bit.ly/1jBpgUc Study Book: Marketing 120 Bradford MBA Additional learning resources Muir, J. and Reynolds, N. (2011) Product deletion: a critical overview and empirical insight into this process. Journal of General Management 37(1), 5–30. Spanier, G. (2015) Lad mags failed because ‘most men use moisturiser and take selfies now’. Brand Republic, 26 November. http://www.brandrepublic.com/article/lad-mags-failed-most-men-usemoisturiser-selfies-now/1374757 Accessed 12 December 2016. References marlenabraeu (2010) Creating a Corporate Identity: Virgin’s Branding Strategy. YouTube, 25 October. http://www.youtube.com/watch?v= iZZt7bgwffo. Accessed 13 December 2016. Dhalla, N.K. and Yuspeh, S. (1976) Forget the product life cycle concept! Harvard Business Review 54, January–February, 102–112. InterContinental Hotels Group (nd) Our Brands. https://www.ihgplc.com/our-brands Accessed 13 December 2016. Johnston, R., Clark, G and Shulver, M. (2012) Service Operations Management. 4th edition. Harlow: Pearson Education. Lusch, R.F. (2011) Robert F. Lusch discusses the past, present and future of service dominant logic. YouTube, 3 May. http://www.youtube.com/ watch?v=BegxLWmKapU Accessed 12 December 2016. MillwardBrown (2016) 2016 BrandZ Top 100 Global Brands. http://www.millwardbrown.com/brandz/top-global-brands Accessed 12 December 2016. Nobel, C. (2011) Clay Christensen’s Milkshake Marketing. Harvard Business School, 14 February. http://hbswk.hbs.edu/item/6496.html Accessed 12 December 2016. Parise, S., Whelan, E. and Todd, S. (2015) How Twitter Users Can Generate Better Ideas. MIT Sloan Management Review, 1 June, Summer 2015 Research Feature. http://sloanreview.mit.edu/article/how-twitterusers-can-generate-better-ideas/?utm_source=GenEnews&utm_ medium=email&utm_campaign=Wharton SOA Sept2015 Accessed 12 December 2016. RKS Design (2012) cAir – redefining air travel for families. Vimeo. http://vimeo.com/51083733 Accessed 12 December 2016. Unit 6: Product and Service Bradford MBA 121 Rogowsky, M. (2014) Zipcar, Uber And The Beginning Of Trouble For The Auto Industry. www.forbes.com, 2 August. http://www.forbes.com/sites/markrogowsky/2014/02/08/viral-marketingcar-sharing-apps-are-beginning-to-infect-auto-sales/ Accessed 12 December 2016. Tipple, J. (nd) The role of a brand director at Virgin. http://www.futurelearn.com/courses/the-secret-power-ofbrands/0/steps/3307 Accessed 12 December 2016. Vargo, S.L. and Lusch, R.F. (2004) Evolving to a new dominant logic for marketing. Journal of Marketing 68(1), 1–17. Bradford MBA 123 Unit 7: Price and Place Key readings: 1. Baines and Fill (2014), Chapters 8 and 12 2. Bertini, M. and Koenigsberg, O. (2014) When customers help set prices. MIT Sloan Management Review 55(4), 57–64 (Blackboard > Module Site > Module Materials > Unit 7) – Activity 7.5 3. Narus, J.A. and Anderson, J.C. (1988) Strengthen Distributor Performance Through Channel Positioning. Sloan Management Review 29(2), 31–40 (Blackboard > Module Site > Module Materials > Unit 7) – Activity 7.9 Key audio and video: 1. Pinnacle Financial Partners (2013) How to set a price. YouTube, 3 December (Blackboard > Module Site > Module Materials > Unit 7) – Activity 7.1 2. Consumer Reports (2014) Tesla vs. Car Dealers: What's the Deal? www.consumerreports.org (Blackboard > Module Site > Module Materials > Unit 7) – Activity 7.7 3. Sydo Pédago (2012) L’Or al Trade Marketing. YouTube, 24 September (Blackboard > Module Site > Module Materials > Unit 7) – Activity 7.8 4. Procter & Gamble (2014) Working Together in 2014: Nick Beresford, P&G UK. YouTube, 14 February (Blackboard > Module Site > Module Materials > Unit 7) – Activity 7.8 5. L’Or al (2013) Chris, National Trade Marketing Manager – L’Oreal Sales. YouTube, 15 February (Blackboard > Module Site > Module Materials > Unit 7) – Activity 7.8 6. Swarovski (2013) Meet Adriana, trade marketing manager at Swarovski. YouTube, 22 January (Blackboard > Module Site > Module Materials > Unit 7) – Activity 7.8 7. Tourism Business Portal (2014) Online distribution channels. YouTube, 24 April (Blackboard > Module Site > Module Materials > Unit 7) – Activity 7.10 Study Book: Marketing 124 Bradford MBA 8. Ogilvy (2014) Redefining Online Grocery. YouTube, 2 September (Blackboard > Module Site > Module Materials > Unit 7) – Activity 7.10 9. Future Value Network, Capgemini (2015) Future Value Chain 2022: Building Strategies for the New Decade (Blackboard > Module Site > Module Materials > Unit 7) – Activity 7.10 Other: 1. Unit 7 audio and slides (Blackboard > Module Site > Module Materials > Unit 7 > Audio and Slides) – Activity 7.11 2. Unit 7 multiple-choice questions (Blackboard > Module Site > Formative Exercises > Multiple-Choice Questions > Unit 7) – Activity 7.12 Introduction This unit addresses two elements of the marketing mix – price and place. Price is the element of the marketing mix that directly brings revenue into the organisation. Companies consider price in relation to costs, volume of sales and potential profits. Customers consider price in relation to the value the product/service delivers. Price is therefore both a specific amount charged for a purchase, and an amount which helps a customer determine whether the offer is ‘good value’. The idea of good value involves other elements of the marketing mix, such as product aspects (e.g. the augmented product), a premium presented through promotion, or convenience, e.g. home delivery or other value added services. Place addresses the processes of distributing products and services, either directly to buyers or through channel intermediaries. Customers want availability, and so companies use distributors or other intermediaries (e.g. retailers) to ensure the customers can buy products when and where they want to buy them. Availability ensures customers get products or services, when and where they want them. If products are out of stock, then the company will lose sales, and customers may switch to other brands. This is about managing relationships between consumers and intermediaries in the distribution system. Place also addresses new forms of distribution and retailing. Increasingly, goods and services are bought online, increasing the availability of products, and also making prices more visible. Objectives By the end of this unit, you should be able to: Unit 7: Price and Place Bradford MBA 125  define price, and understand its relationships with costs and value throughout the marketing mix  explain different approaches to pricing  identify the importance of managing distribution  distinguish between different forms of channel intermediaries and channel structures  identify key issues in managing distribution. Pricing in the marketing mix Price is the second element of the marketing mix in this module. This section examines the role (and importance) of pricing for the business and for the marketing mix. It details major pricing approaches and identifies influences on pricing decisions. Pricing is covered in other modules on the MBA, and will be familiar to those who have an accounting or finance background. The content here is at an introductory level, but is focused on understanding how marketers think about price within the marketing mix. Baines and Fill (2014: 720) define price as the amount a customer pays to receive a product or service. Price is normally a specified amount of money, which takes into account:  internal factors, such as the company’s need to make a profit, and the ambitions and uniqueness of its products  external factors, such as direct costs (e.g. for materials), competition, and how much customers will pay. However, customers consider price in relation to the benefits and perceived value of their purchases. They are often unaware of the supplier costs involved in their purchases. Price is commonly considered to be the easiest element of the marketing mix to change. So, there could be tactical discounts (e.g. as in the sales in retailers, or in Groupon offers where price reductions are offered via online coupons). These prices need to be set carefully for the seller to make a profit. Is free shipping – e.g. when buying online – really ‘free’? Before moving on, you should review whether free shipping offers are designed to increase sales or increase customer loyalty – or both. Think what a marketing oriented organisation would do. Consumers often see a link between price and quality, but this is complex in practice. Study Book: Marketing 126 Bradford MBA “The idea that price indicates quality (perceived quality) assumes that prices are objectively determined by market forces. In truth, people within firms set prices, often dispassionately, so as to try and achieve the maximum profit possible.” (Baines and Fill 2014: 318 ) Consumers tend not to have complete information on costs, and on pricing (even when using online price comparison sites), so they rely on cues, e.g. psychological pricing (i.e. just under a price point, such as £1 or $10), or bundled deals (e.g. a combined price for phone, TV, broadband). These deals suggest that customers are prepared to pay for added value. However, the recent growth in the UK discount retail market suggests that consumers are being much more critical about the quality/price equation in some purchases. Figure 7.1: The framework for price perception formation (Source: Baines and Fill 2014: 320) Review the table in Baines and Fill (2014: 320) which shows the framework for price perception formation, including antecedents (e.g. expectations, and issues which were identified in Unit 2 on buying behaviour), and influences on price perception, willingness to pay and purchase behaviour. Pricing terms, approaches and methods Baines and Fill comment that ‘costs should be substantially less than the price assigned to a proposition’. They further define and explain fixed and variable costs (see page 316). Understanding these is central to decisions about pricing and volume.  Fixed costs include manufacturing plant, and equipment, office buildings, salaries, etc.  Variable costs include variable labour costs, energy costs and mileage allowances. Unit 7: Price and Place Bradford MBA 127 Total costs are the sum of fixed and variable costs. Total costs should be less than the set price in order to achieve profit. Many organisations need to have sufficient volume of sales to make a contribution to profit. Price and volumes must be managed carefully, as changes in volume and price can impact on the total overall profit. Volumes routinely change over time (e.g. seasonality, fashions, trends, etc.). This links to two equations: Total revenue = volume sold × unit price Profit = total revenue – total costs The relationship between costs, volume, total revenue and profit is fundamental to business success. However, this is not always fully understood. Activity 7.1 – stop and watch Watch: Pinnacle Financial Partners (2013) How to set a price. YouTube, 3 December (Blackboard > Module Site > Module Materials > Unit 7) The video talks through the basics of pricing. Activity 7.2 – stop and think A cupcake business used a deal on Groupon (a website offering discount coupons) to increase its sales. It offered a box of 12 cupcakes, which normally cost £26 per box, at the discount deal price of £6.50. Normally, the cupcake maker sold 100 boxes of 6 cupcakes per month, but the offer was bought by 8,500 people. What problems and issues might arise with this offer? What sort of pricing approach is this? Activity 7.2 – stop and think answers: Study Book: Marketing 128 Bradford MBA Pricing objectives and approaches The discussion above identifies some factors influencing the pricing decision. This section focuses on how prices are set, by focusing on the pricing objectives and pricing approaches. As mentioned in Unit 4, objectives come before strategy, i.e. decide what you want to achieve, and then evaluate how to do this. Therefore, pricing objectives are key when setting prices. Typical pricing objectives include:  making the greatest profit (i.e. profit maximisation)  achieving the highest level of sales (sales maximisation)  pricing to achieve a specific level of sales, market share or profit  pricing to avoid a price war. Activity 7.3 – stop and think What are the pricing objectives for the situation described in Activity 7.2? Activity 7.3 – stop and think answers: Pricing objectives may change over time. A distinctive new product may seek to ‘skim’ the market for a short time (i.e. in the introductory phase of a new product) with the price initially set at a high level. Following this, the price may be reduced in order to achieve a higher level of sales. Baines and Fill (page 325) identify four pricing approaches, which place different emphases on the importance of costs and customer value and in achieving objectives.  Cost oriented pricing is usually internally (or product) driven, based on the material costs, with a margin for profit or risk. This is designed without real consideration of competition or what the market can bear. Some B2B pricing is based on cost plus, such as where there is a competitive bid against a tender. Read: Baines and Fill (2014) page 326 to see how to calculate mark-ups. Unit 7: Price and Place Bradford MBA 129  Demand oriented pricing considers the price sensitivity of demand. Prices are set in relation to what consumers see as an acceptable price. Companies may offer different prices and propositions for different customers. Baines and Fill (page 327) cite Emirates airlines, which offer different prices for business class and economy class. Low cost carriers tend to have simpler ‘class’ structure (usually based on one class, although easyJet has now introduced a ‘business’ option). Usually, low cost airlines manage their prices to maximise the ‘yield’ (essentially maximising passengers and revenue). Airlines model capacity levels over time to set prices.  Competitor oriented pricing sets prices to match or beat competitors’ prices This is slightly abdicating responsibility for prices, which can be dangerous. A company with high market share or ‘deep pockets’ can survive this competitive pricing challenge better than a single product company without a market share advantage. So, an independent bookshop may be unlikely to price match against Amazon’s prices, as it would probably not be profitable, due to its higher costs and lower sales.  Value oriented pricing is when a company sets prices based on customer perceptions of value. This is normally based on ‘adding value’ through additional features and services to differentiate the offers. These products should then support higher prices. This requires the company to understand what is important to customers, and how much they will pay for this. For example, a UK based chocolate retailer called Hotel Chocolat offers a ‘chocolate buying’ experience, in its designer stores. The products are designed to be visually impressive, and although some packaging is simple, all products can be gift wrapped. Hotel Chocolat also has high quality brochures detailing the different chocolates. The company can charge higher prices for a premium experience. Activity 7.4 – stop and think Match the above approaches – cost, demand, competitor and value oriented pricing – to the following examples.  Pricing of items for a bathroom conversion at a discount warehouse.  Pricing of a newly launched Apple device.  Setting hotel room prices to undercut a leading competitor.  Setting a price for an executive box at an international football match. Activity 7.4 – stop and think answers: Study Book: Marketing 130 Bradford MBA Activity 7.5 – read and reflect Read: Bertini, M. and Koenigsberg, O. (2014) When customers help set prices. MIT Sloan Management Review 55(4), 57–64 (Blackboard > Module Site > Module Materials > Unit 7) Think about whether this applies to your organisation or for personal buying. The article identifies that this can lead to better customer involvement. Are there potential problems with this approach too? Seek out examples of this. Pricing a new product Pricing new products typically use one of two key approaches.  Price skimming sees organisations changing a premium the aim being to achieve a good return on investment within a short time. This is common for innovative products, especially technology products. Innovators and early adopters are generally not price sensitive. As already indicated however, skimming strategies tend to be short term and the price will be lowered as competitors enter the market.  Market penetration pricing is where the product is priced at a low level to encourage purchase and to deter competitors from entering the market. Activity 7.6 – stop and think Sometimes companies continue these two options beyond the introductory period because of their competitive strategy. For example, mobile phones or tablets that feature Apple and Android operating systems (OS) have different approaches to pricing. Unit 7: Price and Place Bradford MBA 131 Identify the relevant pricing approach for Apple and for Android OS products. Explain why Apple and companies using Android OS choose these approaches. Activity 7.6 – stop and think answers: Finally, prices change, not only with the product lifecycle, but also as a result of changes in the external environment. One notable example of the latter has been how revenue from music has changed. In the past, bands made money through sales of their records or CDs (i.e. physical purchases of the recording). However, technology is changing to digital formats. Downloads are often relatively cheap, and sometimes free, or included as part of a streaming service. Bands are now seeing potential in additional merchandise sales, such as programmes, t-shirts, or ‘buy a memory stick with the live recording of the concert you attended’. This has the advantage of stimulating the purchase at the time. Pricing from a marketing perspective is complex, and constantly changing. It has to take account of the whole marketing mix. This section on pricing introduces some perspectives to help you appreciate the role of price from a marketing perspective. Marketing channels This section focuses on distribution, which includes decisions on whether organisations should sell direct (to their end customers) or through intermediaries, such as agents, wholesalers or retailers. These relate to Study Book: Marketing 132 Bradford MBA ‘routes to market’, i.e. how their products or services reach their customers and consumers. Most people give little thought as to how goods and services get to market, but they expect them to be available when and where they want to buy. Managing distribution is often about managing the availability of products to customers, by ensuring that they reach the target customers in a timely, efficient and effective manner. Many companies lose sales because they cannot get the goods available to their customers when and where they want to buy. At a simple level, distribution can be direct, with sales from the producer to customers. However, often distribution takes place through one or more levels of intermediaries. These are illustrated in Figure 7.2 below. Figure 7.2: Levels of intermediaries (Source: Baines and Fill 2014: 418–419) The top half of the diagram shows direct distribution, where sellers sell directly to their customers. This could be through personal selling or online sales, for example. However, this involves many interactions, for both suppliers and buyers. Traditionally, many B2B companies sell directly. However, this is changing. Dell (famously known for selling direct) has now combined direct and indirect channels via a multichannel strategy. In other words, Dell uses several different channels. The organisation has distribution arrangements with Ingram, an industrial distributor, and also Tesco, as well as selling directly. Unit 7: Price and Place Bradford MBA 133 Activity 7.7 – watch and reflect Watch: Consumer Reports (2014) Tesla vs. Car Dealers: What's the Deal? www.consumerreports.org (Blackboard > Module Site > Module Materials > Unit 7) Consider why Tesla chooses to have owned distribution channels. Intermediaries There are many different types of intermediaries. The names and roles differ by country and by industry. Some common forms are discussed in Baines and Fill (2014: 420–423). There are several benefits of using intermediaries.  Reducing cost and complexity – selling through intermediaries allows a supplier to focus on its strengths. Often it is too expensive for a supplier to operate a sales force to sell directly to end customers. For example, a UK based wire rope company sells through a direct sales team to international markets. Key sales staff and senior managers visit different countries, but the sales cycle can take time. The cost of selling (i.e. labour costs, travelling and other expenses) and the limited number of clients that can be seen in a visit limit the profit from sales. Some manufacturers will probably not sell enough of the products to cover the sales costs. However, if the manufacturers sell to a distributor, then fewer transactions are needed, and the cost of selling is lower. Distributors often sell products from several companies, and so often achieve a better return on sales effort.  Increasing value and competitive advantage – intermediaries help spread the risk for manufacturers. Most resellers/retailers ‘buy’ stock, which the retailer has to sell. Some resellers or retailers may buy on a sale or return basis (such as newspapers in the UK).  Routinisation – getting into a purchase routine can improve performance for the retailer (by ensuring the item is in stock) and the manufacturer (which has a good idea of expected orders, and so sales levels). This benefits both the retailer and the consumer as stock is available when and where needed. Some suppliers and retailers have live demand replenishment – e.g. companies can quickly increase production of ice cream in hot weather or soup in colder weather. Getting products available at the right time means that the retailer and the manufacturer both make money. This is called mutuality. Both parties – retailer and manufacturers – have to see a gain for this relationship to work. Study Book: Marketing 134 Bradford MBA  Specialisation – some intermediaries add value by adding additional services, such as financial service broker (financial advice) or car dealers (servicing vehicles). Channel levels The number of intermediary levels indicates the length of a channel. For example, Baines and Fill, page 425, Figure 12.4 shows one level between the supplier and the customer. However, channels can be longer than this – for example, a company can sell to an importer, which sells to a distributor, which in turn sells to a retailer, which then sells to the consumer. Each participant will add a margin to the purchase price. A longer channel means that the prices will usually be higher. Supermarkets tend to buy directly from suppliers to be able to offer their customers the lowest prices. A local independent shop may buy from a regional wholesaler, which may even buy from a national wholesaler. In addition to adding costs as the number of levels in the channel increase, then the manufacturer often finds it more difficult to control the product quality and availability. Some sectors are reducing the number of channel intermediaries used. This is called disintermediation. For example, in some countries, traditional insurance brokers are disappearing, as customers buy directly from insurance providers at cheaper rates. However, new forms of intermediaries are appearing. For example, new online price comparison sites for insurance are acting as intermediaries, taking commission for sales bought through their sites. So, in the insurance sector (in certain geographical markets), there has simply been a change in the nature/type of intermediaries. The above section introduces marketing channels and the roles and levels of intermediaries. A further issue in managing distribution is understanding whether channel members are working together for mutual gain, or whether they are entirely independent, where each business wants to generate income or profit from sales. Channel structure and control varies.  A conventional distribution channel consists of one or more independent producers, wholesalers and retailers. Each is a separate business seeking to maximise its own profits, perhaps even at the expense of the system as a whole.  A vertical marketing system (VMS) consists of producers, wholesalers and retailers acting as a unified system. One channel member owns the others, has contracts with them, or wields power. Unit 7: Price and Place Bradford MBA 135 Generally, there are three levels of distribution intensity:  Intensive, where the products are widely available in many outlets. This means that the products should be available in everywhere. This approach aims for maximum distribution coverage. Coca-Cola use this approach to ensure their product is available at the ‘arm’s reach of desire’.  Selective, where products are available in some stores, but not everywhere. An example would be Dyson electrical appliances, which sell through online and traditional channels. However, not all electrical retailers sell Dyson appliances.  Exclusive, where the products are available only in one wholesale or retail channel or organisation. Mercedes and BMW have exclusive dealers. These car manufacturers appoint high quality dealers to provide high levels of service. In return, the dealers get exclusivity in a geographical area. Activity 7.8 – watch and reflect Companies like Coca-Cola often have specialist managers for selling into intermediaries. Often these are called trade marketing managers. These combine the roles of channel managers, sales managers and channel customer support. Watch: Sydo Pédago (2012) L’Or al Trade Marketing. YouTube, 24 September (Blackboard > Module Site > Module Materials > Unit 7) Procter & Gamble (2014) Working Together in 2014: Nick Beresford, P&G UK. YouTube, 14 February (Blackboard > Module Site > Module Materials > Unit 7) L’Oréal (2013) Chris, National Trade Marketing Manager – L’Oreal Sales. YouTube, 15 February (Blackboard > Module Site > Module Materials > Unit 7) Swarovski (2013) Meet Adriana, trade marketing manager at Swarovski. YouTube, 22 January (Blackboard > Module Site > Module Materials > Unit 7) In contrast to a company such as Coca-Cola, Lulu Guinness (a fashion accessories designer) sells through small upmarket independent boutiques and on a TV shopping channel. Lulu Guinness says she sells through the TV shopping channel because she can reach more customers through the shopping channel, and sell far more bags than she could in her own stores or boutiques. Study Book: Marketing 136 Bradford MBA Once familiar with the range, customers can buy directly from Lulu Guinness (thus bypassing the shopping channel) or from the other independent stockists. Clearly, this could lead to a degree of channel conflict, but the TV shopping channel accepts that Lulu Guinness will retain her own shop and her network of independent retailers. Lulu Guinness also offers exclusive products that are sold through the TV shopping channel. Selling directly (through her shops, and the TV channel) is a multichannel strategy (as seen in the previous example of Dell). While suppliers and intermediaries try to work together, they each have self-interest (as per the norm when a conventional distribution strategy is adopted). The Lulu Guinness and TV shopping channel example shows that any potential conflict can be resolved through negotiations. However, a recent example of channel conflict arose when Amazon had a public dispute with Hachette, the book publisher. The dispute is now settled, but nearly 1,000 authors criticised Amazon for trying to force publishers to accept lower prices for ebooks. Activity 7.9 – read and reflect Read: Narus, J.A. and Anderson, J.C. (1988) Strengthen Distributor Performance Through Channel Positioning. Sloan Management Review, 29(2): 31–40 (Blackboard > Module Site > Module Materials > Unit 7) Review the channel positioning model for a company of your choice. Technology and channels Marketing channels are changing. Nowadays, customers may choose to buy online. New intermediaries and channels are being developed as a result. Example include the likes of Amazon and all manner of online auctions sites and purchasing through apps. Activity 7.10 – stop and watch Watch the following videos which show how distribution is changing: Tourism Business Portal (2014) Online distribution channels. YouTube, 24 April (Blackboard > Module Site > Module Materials > Unit 7) Ogilvy (2014) Redefining Online Grocery. YouTube, 2 September (Blackboard > Module Site > Module Materials > Unit 7) Unit 7: Price and Place Bradford MBA 137 Future Value Network, Capgemini (2015) Future Value Chain 2022: Building Strategies for the New Decade (Blackboard > Module Site > Module Materials > Unit 7) Summary This unit addresses two elements of the marketing mix – price and place. Price is the element of the marketing mix which will determine whether the company will be profitable or not. Marketers must determine a price which enables the business to make profit and which is deemed as good value by customers. Buyers consider the price relative to competing offers, and to the value delivered throughout the marketing mix. There are several ways of setting prices. Businesses should have clear objectives for their prices, such as profit maximisation, sales maximisation, pricing to achieve objectives (e.g. sales objective, market share objective or profit objective), or pricing at a level to avoid a sales war. Pricing can be demand oriented, which offers different prices for different segments; cost oriented, which is often internally driven to cover costs; and value oriented, which reflects the buyers’ perception of the ‘added value’ in the offer. Pricing of new products tends to be either designed to recover costs quickly i.e. market skimming – or the capture a large share of the market i.e. market penetration. Place addresses the distribution element of the marketing mix. This is how products and services are distributed in the market. Distribution is not just about placing the products in the market, but also about determining which routes to market (i.e. distribution channels) and support activities (i.e. channel positioning) will deliver the best sales and profits. Companies sell direct and/or use distributors to reach customers, seeking an appropriate level of coverage to reach customers and ensuring availability or sales support in the channels. Sales channels can use physical stores or virtual (i.e. online) stores. Companies must balance costs of distribution with the sales revenues. The number of levels in the channel influences the price and profit, as prices increase with increasing levels of channel intermediaries. Channel intermediaries – like the manufacturers – seek to make a profit. A key distribution decision is the level of market coverage. As mentioned, Coca-Cola seeks an intensive coverage level, with products available widely. Other products are only available in exclusive outlets, e.g. authorised outlets only. A third option is through selective outlets, where Study Book: Marketing 138 Bradford MBA products are available in some stores, but not everywhere. This is common for sales of electrical appliances, both online and in traditional channels. Selling through channels can involve designing the right offer to intermediaries, to facilitate effective sales approaches. Technology is fundamentally changing distribution channels. Some products are being sold direct rather than through intermediaries, and vice versa. Clearly, organisations must continually monitor their distribution channels. Activity 7.11 – audio and slides Listen to: the audio for this unit and view the accompanying slides (Blackboard > Module Site > Module Materials > Unit 7 > Audio and Slides) Activity 7.12 – multiple-choice questions The multiple-choice questions for this unit will enable you to test your knowledge and understanding of the key concepts covered. (Blackboard > Module Site > Formative Exercises > Multiple-Choice Questions > Unit 7) Additional learning resources Kirk, J. (2013) Android’s Penetration Vs. Apple’s Skimming Marketing Strategies, techpinions.com, 21 March. https://techpinions.com/androidss-penetration-vs-apples-skimmingmarketing-strategies/15255 Accessed 13 December 2016. Kunert, P. (2014) One-time direct sales giant Dell weds world's largest tech distie... in the UK. The Register, 22 September. http://www.theregister.co.uk/2014/09/22/ingram_dell/ Accessed 13 December 2016. Lam, B. (2014) There’s no such thing as free shipping, The Atlantic, 30 November. http://www.theatlantic.com/business/ archive/2014/11/theres-no-such-thing-as-free-shipping/383234/ Accessed 13 December 2016. PwC China/Hong Kong (2014) Retail Banking – Evolution or Revolution? YouTube, 24 March. https://www.youtube.com/watch?v=lkuEwHzRD5Q. Accessed 13 December 2016. Unit 7: Price and Place Bradford MBA 139 Rosenbloom, B. (2007) Multi channel strategy in business-to-business markets: prospects and problems. Industrial Marketing Management 36(1), 4–9. Tesco (2013) Tesco Homeplus Subway Virtual Store. YouTube, 10 January. https://www.youtube.com/watch?v=JcgfgO3Vzmw Accessed 13 December 2016. References Bertini, M. and Koenigsberg, O. (2014) When customers help set prices. MIT Sloan Management Review 55(4), 57–64. Future Value Network, Capgemini (2015) Future Value Chain 2022: Building Strategies for the New Decade. http://www.uk.capgemini.com/thought-leadership/2020-future-value-chainbuilding-strategies-for-the-new-decade Accessed 12 December 2016. L’Oréal (2013) Chris, National Trade Marketing Manager – L’Oreal Sales. YouTube, 15 February. https://www.youtube.com/watch?v=sp9spOv-cDc Accessed 12 December 2016. Narus, J.A. and Anderson, J.C. (1988) Strengthen Distributor Performance Through Channel Positioning. Sloan Management Review 29(2), 31–40. Ogilvy (2014) Redefining Online Grocery. YouTube, 2 September. www.youtube.com/watch?v=MQYSMk5TXNM. Accessed 125 December 20164. Pinnacle Financial Services (2013) How to set a price. YouTube. 3 December. https://www.youtube.com/watch?v=nc4NtiUB5Io Accessed 12 December 2016. Procter & Gamble (2014) Working Together in 2014: Nick Beresford, P&G UK. YouTube, 14 February. https://www.youtube.com/watch?v= jT6JLd0zjeM Accessed 12 December 2016. Swarovski (2013) Meet Adriana, trade marketing manager at Swarovski. YouTube, 22 January. https://www.youtube.com/watch?v=61X03peKBAo Accessed 12 December 2016. Sydo Pédago (2012) L’Or al Trade Marketing. YouTube, 12 December. https://www.youtube.com/watch?v=cX9d9_zQJnk Accessed 12 December 2016. Tourism Business Portal (2014) Online distribution channels. YouTube, 24 April. https://www.youtube.com/watch?v=xdXCFPS9RGw Accessed 12 December 2016. Bradford MBA 141 Unit 8: Marketing Communications Key readings: 1. Baines and Fill (2014), Chapters 11 and 17 2. Hiscox (nd) Advertising-UK advertising campaigns (Blackboard > Module Site > Module Materials > Unit 8) – Activity 8.2 3. Keller, K.L. (2001) Mastering the marketing communications mix: micro and macro perspectives on integrated marketing communications programmes. Journal of Marketing Management 17(7–8), 819–847 (Blackboard > Marketing module> Module Materials> Unit 8) 3. Vakratsas, S. and Ambler, T. (1999) How advertising works: What do we really know? Journal of Marketing 63(1), 26–43 (Blackboard > Marketing module> Module Materials> Unit 8) 4. Kumar, V. and Mirchandani, R. (2012) Increasing the ROI of social media marketing. MIT Sloan Management Review 54(1), 55–61 (Blackboard > Marketing module> Module Materials> Unit 8) 5. Schutte, S. (2014) 8 best and worst social media campaigns. realbusiness.co.uk, 11 February (Blackboard > Module Site > Module Materials > Unit 8) 6. Unilever (2014) The Dove Campaign for Real Beauty. www.dove.us (Blackboard > Marketing module> Module Materials> Unit 8) Key audio and video: 1. Barnardo's (2015a) Barnardo’s | Fostering and Adoption | Change a Life | 2015. YouTube, 24 August (Blackboard > Module Site > Module Materials > Unit 8) – Activity 8.1 2. Barnardo’s (2015b) Advertising campaigns. (Blackboard > Module Site > Module Materials > Unit 8) – Activity 8.1 3. Volvo LifePaint (2015) Volvo LifePaint. YouTube, 26 March (Blackboard > Module Site > Module Materials > Unit 8) – Activity 8.1 Study Book: Marketing 142 Bradford MBA 4. Hovis (2015) Hovis 1973 Boy On The Bike TV Advert. YouTube, 5 October (Blackboard > Module Site > Module Materials > Unit 8) – Activity 8.1 6. Adidas (2015) Germany Home Kit: Our Pitch Our Rules -- adidas Football. YouTube, 12 November (Blackboard > Module Site > Module Materials > Unit 8) – Activity 8.2 7. Under Armour (2014) Misty Copeland - I WILL WHAT I WANT. YouTube, 30 July (Blackboard > Module Site > Module Materials > Unit 8) – Activity 8.2 8. Sainsbury’s (2016) These potatoes are getting chippy. YouTube, 20 September (Blackboard > Module Site > Module Materials > Unit 8) – Activity 8.2 9. Three UK (2013) Three - The Pony #DancePonyDance. YouTube, 28 February, (Blackboard > Module Site > Module Materials > Unit 8) – Activity 8.2 10. Three UK (2014) Three - #SingItKitty - cat advert. YouTube, 20 February (Blackboard > Module Site > Module Materials > Unit 8) – Activity 8.2 11. Aldi UK (2012) Aldi Washing Up Liquid Advert 2. YouTube, 19 March (Blackboard > Module Site > Module Materials > Unit 8) – Activity 8.2 12. Asda (2013) We don’t match prices, we beat them – tasty treats. YouTube, 27 August (Blackboard > Module Site > Module Materials > Unit 8) – Activity 8.2 13. Waitrose (2013) Heston’s incredible ice cream ad. YouTube, 17 July 2013 (Blackboard > Module Site > Module Materials > Unit 8) – Activity 8.2 14. Android (2015) Android: Friends Furever. YouTube, 5 February. (Blackboard > Module Site > Module Materials > Unit 8) – Activity 8.3 15. Space City Productions (nd) Recent TV Adverts – Showreel. www.spacecity.co.uk (Blackboard > Module Site > Module Materials > Unit 8) 16. Bloomberg (2014) Inside the Quirky Ad Agency Obsessed With Mothers. www.bloomberg.com, 3 October (Blackboard > Module Site > Module Materials > Unit 8) 17. Ogilvy & Mather (2013) Digital Divas, www.ogilvy.com, May (Blackboard > Module Site > Module Materials > Unit 8) Unit 8: Marketing Communications Bradford MBA 143 Other: 1. Unit 8 audio and slides (Blackboard> Module Site > Module Materials > Unit 8 > Audio and Slides) – Activity 8.6 2. Unit 8 multiple-choice questions (Blackboard> Module Site > Formative Exercises > Multiple-Choice Questions > Unit 8) – Activity 8.7 3. Unit 8 live online tutorial (Blackboard > Module Site > Collaborate) – Activity 8.8 Introduction This unit focuses on the fourth topic in the marketing mix, marketing communications or promotion. Marketing communications is a more accurate description, especially in the new media environment, as marketers seek to engage consumers interactively. The Chartered Institute of Marketing defines marketing communications as incorporating ‘all forms of communication between an organisation and its customers, and potential customers’. Increasingly, this is being called integrated marketing communication (IMC), indicating that promotional activities should be consistent and activities should support each other. At one time, most communications to customers were from sales forces or through advertising. Now, with new forms of communications (e.g. social media), the range of communications is increasing with the growth of new social media. Helplines, websites and YouTube contents are also increasingly part of the marketing communications mix. Organisations are must blend marketing communications activities, choosing and using marketing communications tools to match the business requirements in an integrated way. This is important to maximise performance, whether for a new product launch or for a repositioning campaign. Further, the nature of the communications has changed with more organisations and consumers engaging in a two-way dialogue. Marketing communications strategies integrate with the corporate and marketing plans. Marketers are responsible for developing messages that will appeal to their target audiences, choosing the most effective media, messages and tools to reach them. Marketers are also required to measure the results. These form key elements of an effective marketing communications plan. Objectives By the end of this unit, you should be able to:  describe the nature, purpose and scope of marketing communications Study Book: Marketing 144 Bradford MBA  detail and discuss models of communication, and how these influence effectiveness of marketing communications  describe key tools in the marketing communications mix  identify the characteristics of the core tools, media and messages  select and use appropriate criteria for developing an appropriate communications mix  detail the steps in preparing and implementing a promotional – or marketing communications – plan. The promotional element of the marketing mix refers to how organisations communicate with existing and potential customers and other stakeholders. Marketing communications are used by both large and small businesses, and non-profit organisations, such as charities and public sector organisations. Potential customers cannot buy a product if they are unaware that it exists. Marketers need to communicate with customers to inform, educate and explain. However, marketers may also need to persuade consumers, or even to defend the company in certain situations. However, consumers will not buy products if they do not meet their needs, it is not available or it is priced at an inappropriate level. Marketing communications is only part of the total marketing mix. Promotional activities are sometimes considered as being unnecessary, and critics link promotional activity with some potentially negative elements associations with capitalism (e.g. over-consumption). However, marketing communications can help customers find, choose and use products. Indeed, customers – and potential customers – want and need such information. This is not new – examples can be seen even in ancient Roman times – and this continues to be important today where consumers are constantly exposed to marketing communications. Promotional activities are not always about selling things. Companies use advertisements when they recall (often faulty) products, and when they are addressing criticisms against organisations. Companies also inform consumers about products, their features and use, and even engage consumers in discussions about products. Indeed, users are increasingly contributing to the marketing communications activities. Marketing communications include several forms of communications, from advertisements, to customer comments and experiences. Most promotional activities are fully planned, designed and implemented by organisations, with measures put in place to evaluate how effective the various activities are. However, unplanned marketing communications may need to be managed too – these could come from social media, for Unit 8: Marketing Communications Bradford MBA 145 example. The dynamic and unpredictable nature of social media can be more complicated and companies need to monitor these in ‘real time’. Activity 8.1 – watch and reflect Watch: Barnardo's (2015a) Barnardo’s | Fostering and Adoption | Change a Life | 2015. YouTube, 24 August (Blackboard > Module Site > Module Materials > Unit 8) Barnardo’s (2015b) Advertising campaigns. (Blackboard > Module Site > Module Materials > Unit 8) Volvo LifePaint (2015) Volvo LifePaint. YouTube, 26 March (Blackboard > Module Site > Module Materials > Unit 8) Hovis (2015) 1973 Boy On The Bike TV Advert, YouTube, 5 October (Blackboard > Module Site > Module Materials > Unit 8) Consider what each of these advertisements is trying to communicate. Think about whether non-profit promotional work is the same or different from promotional work for profit seeking businesses. Reflect also on whether you think that these advertisements meet the requirements of the UK advertising regulator, i.e. that they are legal, decent, honest and truthful. Communication theory A clear understanding of communication theory is required to design and develop effective marketing communications. Baines and Fill (2014: 351) define communication as ‘the process by which individuals share meaning’. This means that the sender designs a message which the receiver can understand and interpret. Normally, there is a response too, which concludes the communications with an outcome – either successful or unsuccessful. This basic linear model from Baines and Fill, Figure 10.2, page 353, is presented below. Study Book: Marketing 146 Bradford MBA Figure 8.1: Basic linear model (Source: Baines and Fill 2014: 353) At the two extremes, are the source (or the message sender) and the receiver. The sender is normally the organisation which is communicating with the customer, and the receiver is the target audience. The source decides how to communicate the message (i.e. encodes it), using various ways of communicating, such as visual, verbal, motion, etc. The message, such as a written message, a photograph, a video, an audio message etc, is then developed and communicated to the receiver. When the receiver is exposed to the message and decodes (i.e. interprets) it, the receiver decides how to react. Throughout the process, external influences (called ‘noise’) limit the communication of the message. This could be a real ‘noise’, such as people chattering throughout a TV or cinema commercial. Alternatively, it could be anything that would distract the recipient from concentrating and understanding the message. Successful communication requires ‘shared meaning’ or understanding. Messages flow through to recipients in different ways, using many tools, as detailed in Baines and Fill. Two-step models of communication Two-step models of communication are where influential people (e.g. opinion leaders and opinion formers) have an impact on the communications process. Baines and Fill (2014: 718) define opinion leaders as ‘people who are predisposed to receiving information and then reprocessing it in order to influence others’. These opinion leaders are often sought out by companies and offered the products or services free or at a discounted Unit 8: Marketing Communications Bradford MBA 147 rate. The products provided may be used by opinion leaders, which in turn may prompt consumers to purchase the product(s) in question. For example, in April 2014 The Duchess of Cambridge (a member of the British royal family) was photographed wearing a dress by the designer, Diane Von Furstenberg. After the photo appeared in the newspapers in the UK, it quickly sold out as others sought to emulate the Duchess. Opinion formers are those who ‘exert personal influence because of their profession, authority, education, or status associated with the object of the communications process’. Opinion formers may therefore have expertise that can influence others. An example would be a mobile phone salesperson recommending an iPhone. The salesperson is likely to be knowledgeable about the benefits and drawbacks of the various phones on offer. He/she may also indicate that they have/use an iPhone. These factors may in turn influence our decision when buying a phone. Elements of marketing communications Marketing communications are often designed to achieve to communicate the brand values, so buyers feel more positively towards a company. Also, marketing communications may try to change behaviour, which is often referred to as a ‘call to action’ (CTA). Marketing communications have three core elements:  a set of tools, e.g. the different forms of communications, such as advertising, direct marketing, social media, etc.  the media, e.g. print or TV advertisements, telemarketing or direct mail in relation to direct marketing, Facebook, twitter in relation to social media  messages, i.e. what the company wishes to communicate to customers. Irrespective of the purpose of the communications and the tools used, marketing communications should look to gain the attention of and hopefully engage with the customers. There is a set of tools and differing forms of media that can be used to communicate the message. However, because customers are exposed to so many messages, they see and remember very few of the message they are exposed to. Messages which are distinctive and relevant are more likely to be seen and remembered. But this then begs the question – who do organisations seek to communicate with? Marketers target three different generic forms of audiences:  customers – both consumers and end-user organisations. Study Book: Marketing 148 Bradford MBA  channel members – different intermediaries in the route to market (e.g. a manufacturer may actively communicate with a large distributor in the hope that their product(s) will be listed by the distributor)  general stakeholders – those who are interested in, or could influence or be influenced by the organisation; these include current and future employees, local communities and shareholders, for example. When engaging with these audiences, the communication message(s) are generally designed to achieve one of four core tasks.  Differentiate – make the offer appear different (hopefully superior) to those of competitors in some way.  Reinforce – remind or reassure customers. Coca-Cola’s Christmas advertising is used to remind people to buy in some Coca-Cola for entertaining over the Christmas period.  Inform – to provide information on the product (or company), and any relevant features and benefits. It can also be used to show how to get more use from products, or where the product can be bought.  Persuade – to encourage people to try or buy a product or to persuade consumers to review their views of a company or product. These are referred to as the DRIP tasks. Activity 8.2 – stop and watch Watch at least four of the following advertisements and decide which of the DRIP tasks each advertisement is seeking to achieve. Watch: Adidas (2015) Germany Home Kit: Our Pitch Our Rules -- adidas Football. YouTube, 12 November (Blackboard > Module Site > Module Materials > Unit 8) Under Armour (2014) Misty Copeland - I WILL WHAT I WANT. YouTube, 30 July (Blackboard > Module Site > Module Materials > Unit 8) Sainsbury’s (2014) Get the Kids Cooking This Summer | Sainsbury’s Summer Sorted. YouTube, 16 July (Blackboard > Module Site > Module Materials > Unit 8) Three UK (2013) Three - The Pony #DancePonyDance. YouTube, 28 February (Blackboard > Module Site > Module Materials > Unit 8) Three UK (2014) Three - #SingItKitty - cat advert. YouTube, 20 February (Blackboard > Module Site > Module Materials > Unit 8) Unit 8: Marketing Communications Bradford MBA 149 Aldi UK (2012) Aldi Chocolate Bunny Advert. YouTube, 19 March (Blackboard > Module Site > Module Materials > Unit 8) Asda (2013) We don’t match prices, we beat them – tasty treats. YouTube, 27 August (Blackboard > Module Site > Module Materials > Unit 8) Waitrose (2013) Heston’s incredible ice cream ad. YouTube, 17 July (Blackboard > Module Site > Module Materials > Unit 8) Read: Hiscox (nd) Advertising-UK advertising campaigns (Blackboard > Module Site > Module Materials > Unit 8) Read: Keller, K.L. (2001) Mastering the marketing communications mix: micro and macro perspectives on integrated marketing communications programmes. Journal of Marketing Management 17(7–8), 819–847 (Blackboard > Marketing module> Module Materials> Unit 8) This article provides an insight into the challenges of managing the marketing communications mix. Marketing communications models The previous section outlined:  The core elements associated with marketing communications (i.e. tools involved, media that can be used and the message).  The likely audiences any communications may be directed toward.  The reasons why an organisation(s) may engage in marketing communications. Following on from this, the next section will consider how marketing communications work in practice. This is a complex issue, which is not fully understood despite much research. This section will identify and discuss some of the key models. AIDA is probably the best known of the models, as it describes the process that consumers go through from Awareness to Interest to Desire and finally to Action. However, while AIDA (and similar models) are somewhat logical, often the buying decision process is more complex and iterative. There are strong and weak theories of advertising. The strong theory of advertising assumes that advertising has a strong ability to influence our decisions to make new purchases, and that advertisements can increase the total sales. This fits with the step models (such as AIDA) too, through an approach that helps nudge people through the buying process. The Study Book: Marketing 150 Bradford MBA weak theory of advertising suggests that advertising is used defensively, to encourage repeat buying, following an initial purchase. The two models outlined above both indicate that consumer buying behaviour is a linear process (from initial awareness and interest through to purchasing the product/service). Baines and Fill, Figure 10.7, page 372, indicate that feelings, knowledge and behaviour are important, but buying can be nonlinear, with the buying process starting at any point. For example, we may simply buy something straight away with little or no prior awareness or knowledge of the product or service. Figure 8.2: Buying behaviour is nonlinear (Source: Baines and Fill 2014: 372) Activity 8.3 – stop and watch Watch: Android (2015) Android: Friends Furever. YouTube, 5 February. (Blackboard > Module Site > Module Materials > Unit 8) This is reported to be the most viewed viral video ever:  What is its appeal?  What outcomes does it seek to achieve?  Does it influence customers’ knowledge, feelings and/or behaviour?  Why do you believe this?  What do you think it is saying about the positioning of apple and google operating systems? Unit 8: Marketing Communications Bradford MBA 151 Activity 8.3 – stop and watch answers: Three core elements associated with marketing communications were outlined earlier in this unit. These were: a) the set of tools available b) the media and c) the message being conveyed. Baines and Fill (2014: 383) identify five main marketing communications tools:  advertising  sales promotion  public relations  direct marketing  personal selling. Advertising has traditionally been the main user of marketing media. These media include:  broadcast media (e.g. TV, radio)  print (e.g. in magazines or newspapers)  out-of-home (e.g. on billboards or on transport)  in-store (e.g. at point of purchase)  digital (e.g. online, on digital media, including social media)  other media, such as cinema and ambient media. Table 11.4 in Baines and Fill (2014: 390–392) presents an overview of each of the above categories. In terms of the message conveyed Baines and Fill (page 384) identify four core types of messages: Study Book: Marketing 152 Bradford MBA  informational, to give factual information or suggest ways of using the content  emotional, to make consumers feel more connected or committed to the brand or brand values  branded content, such as user-generated content. Figure 8.3: Tools, media and messages in marketing communications (Source: Baines and Fill 2014: 384) Marketing communications professionals must identify an appropriate blend of tools for their customers and the audiences to meet given objectives and situations. Choosing and using the right tools Read: Baines and Fill (2014), Figure 11.1, page 387. The previous section focused on advertising as a promotional tool. However, advertising is only part of the marketing communications mix. Figure 11.1 summarises the key attributes of the main marketing communications tools. Managers must understand the attributes of each communication tool to assess their suitability for a specific task. Some tools work quickly, whereas others take time to have an effect. Some are personal, whereas others are impersonal. Personal ones allow interaction, whereas this is limited with impersonal approaches. Interaction allows a dialogue – where questions can be asked and answered, by both buyer and seller. In some of these tools, the company has complete control over the message, whereas this is not the case with other tools. Unit 8: Marketing Communications Bradford MBA 153 Read: Vakratsas, S. and Ambler, T. (1999) How advertising works: What do we really know? Journal of Marketing 63(1), 26–43 (Blackboard > Marketing module> Module Materials> Unit 8) This is a ‘dense’ article, but adds considerable breadth and depth in 13 pages. It is essential reading. Activity 8.4 – stop and think Find examples of each of the tools in Figure 11.1 in Baines and Fill (2014: 387). Try to think about why organisations use each of these. Activity 8.4 – stop and think answers: Once you are aware of the key tools, you need to learn about the relative strength of tools. Read: Baines and Fill (2014), Table 11.2, page 389. Remember that these tools may be used together in a promotional campaign. Strong marketing communications combines tools to complement each other. These are selected based on the objective, the budget and the audience. They must also consider how credible different media are, and how well they fit with the primary tasks. Activity 8.5 – stop and think After reading Table 11.2 in Baines and Fill (2014: 369), recommend appropriate promotional approaches for the following options.  A new beauty product which needs demonstrations.  Computer sales to business users.  A premium hotel chain which wants to encourage repeat business from past customers. Study Book: Marketing 154 Bradford MBA  A dentist who is setting up a new surgery in your local area.  A supermarket chain which has a new online delivery option. Activity 8.5 – stop and think answers: Advertising media Baines and Fill (2014: 390–392) detail the various forms of advertising media, and give an overview of their attributes. Advertising aims to bring about a response. However, it is not always possible to track or record this response, because of the media characteristics. This is evident in the wellknown comment ‘Half the money I spend on advertising is wasted; the trouble is I don't know which half’ (This is attributed to various people, including John Wanamaker, and Lord Leverhulme, who were both early proponents of advertising). Lack of performance data is encouraging more companies to use direct response media. These media offer consumers the chance to respond to an advertising message, which can be tracked by the advertiser. Traditionally, direct mail, telemarketing and personal selling offered response tracking, but this has now extended substantially, and it is possible to track direct responses to TV, and online advertisements. Being able to track responses to advertisements has understandably resulted in a growth in the use of direct response advertisements. Further, direct response can involve consumers in creating and adding content. User generated content (UGC) is being used in many campaigns, such as the Dove Real Beauty campaign or the P&G Moms campaigns. Unit 8: Marketing Communications Bradford MBA 155 Space City is a London based advertising agency, which specialises in direct response television advertising. Have a look at some of its recent TV ads. Go to: Space City Productions (nd) Recent TV Adverts – Showreel. www.spacecity.co.uk (Blackboard > Module Site > Module Materials > Unit 8) You may also want to look at the case histories, which explain the objectives and outcomes. Further information regarding several forms of direct response advertising media, are detailed in Baines and Fill (2014: 393). Watch: Bloomberg (2014) Inside the Quirky Ad Agency Obsessed With Mothers. www.bloomberg.com, 3 October (Blackboard > Module Site > Module Materials > Unit 8) Why do you think the culture and environment of the Mother is given such a priority? Marketing communications messages In the previous section four conventional message types were outlined (i.e. informational, emotional, branded content, user generated content). Taking this a stage further Baines and Fill’s Table 11.6 (page 397) distinguishes between information based messages, and emotion based messages used in advertising. Information based advertising approaches include:  Factual – specific information, presented (normally) in standard text format.  Slice of life – presents people in a familiar environment, often with friends discussing the product. These range from food products to washing up liquids etc.  Demonstration – is commonly used for headache remedies or other mainstream health issues, or for beauty products. They feature a ‘before and after’ format, e.g. person has dandruff, which is remedied through a new shampoo.  Comparative – where there is comparison with one or more competitors. This is particularly common for technical products. You can see an example in this link: Emotion based messages include: Study Book: Marketing 156 Bradford MBA  Fear – an example may be the potential to face social embarrassment if you do not use a product. Examples may include mouthwash or deodorant.  Humour – used to attract attention, and encourage viewers to have a positive view of the product. Many classic UK ads are like this.  Sex – very commonly used in perfume ads, e.g. those from Chanel. Indeed, one Chanel advertisement was banned from being shown during daytime TV due to its overtly sexual nature. Recently, Maltesers developed a ‘racy’ ad during the 2016 Paralympics.  Music – catches attention and sets the mood for the advertising. Famous ads like this include the Levi’s Ring of Fire ad. Social media and marketing communications The discussion of the communication process has focused on what organisations ‘do’ to their customers. Increasingly, marketers view effective communications as a two-way rather than a one-way process. Feedback is an essential part of effective communications. Organisations need to be able to receive and respond to feedback from customers. Historically, feedback was largely seen in the form of consumers either deciding to buy or not, or letters of praise or (more commonly) complaint. New media (such as social media) often have more in common with twoway forms of communication, such as direct marketing or personal selling, than with advertising. Digital and social media allow more interaction and in real time. New media also has further benefits – it can be tracked, and consumers like using it. Baines and Fill (2014: 710) define digital marketing as ‘the process of marketing accomplished or facilitated through the application of electronic devices, appliances, tools, techniques, technologies and/or systems’. Baines and Fill (2014: 724) define social media marketing as ‘a form of marketing that utilizes social networking websites’. This definition encompasses a range of activities, such as managing email campaigns and facilitating social networks, as well as setting up consumer websites. Although the internet has been around for several decades, the speed of change in technology means that academic frameworks for digital marketing are relatively sparse. However, companies are increasingly moving promotional budget to digital media. This reflects consumers increasing engagement with digital media. How many times a day do you check your personal smartphone? Unit 8: Marketing Communications Bradford MBA 157 Read: Kumar, V. and Mirchandani, R. (2012) Increasing the ROI of social media marketing. MIT Sloan Management Review 54(1), 55–61 (Blackboard > Module Site > Module Materials > Unit 8) This sets out a seven-step process for social media marketing campaigns. Key techniques in digital marketing Baines and Fill (Figure 17.2: 607–608) detail and discuss a range of digital marketing activities. Social media networks are becoming increasingly important for consumers and marketers. Consumers are increasingly likely to share content (e.g. information, opinions, photos, videos) with others using social media (e.g. Facebook, Twitter, LinkedIn, Pinterest, YouTube). The ease of access through smartphones is fuelling this. Digital divas are ‘hyperconnected’ consumers, sharing ideas with many others. They are very effective in sharing recommendations, and stimulating trends. This is a two-step communication model. Watch: Ogilvy & Mather (2013) Digital Divas, www.ogilvy.com, May (Blackboard > Module Site > Module Materials > Unit 8) The success of a social media campaign can support brands, and gain attention for them in an increasingly cluttered environment. However, negative views spread quickly too. Further, although social media offers new opportunities, there are many challenges integrating social media with other forms of marketing communications. “The advent of social media has turned marketing practice upside down. Many previously held beliefs no longer hold.” (Baines and Fill 2014: 622) Read: Schutte, S. (2014) 8 best and worst social media campaigns. realbusiness.co.uk, 11 February (Blackboard > Module Site > Module Materials > Unit 8) Marketing communications planning This section summarises the decisions to be made in the marketing communications planning process, and then presents an integrated model of marketing communications planning. Marketers must address the following:  Who should receive the messages i.e. who to target  What the messages should say, and how the message is communicated Study Book: Marketing 158 Bradford MBA  What the resulting and lasting impression should be from the advertising  What the budget should be  How to deliver the messages i.e. which media to use  How receivers will respond  How to control the process  What the desired outcomes are. These decisions are all part of the integrated marketing communications (IMC) framework. Figure 8.4: The integrated marketing communications planning framework (Source: Baines and Fill 2014: 401) This diagram shows the similarities between overall marketing planning process and the communications planning process (e.g. context analysis is important, as is the need to consider the resources available and how any activities will be evaluated). Further links between the overall marketing plan and communications plan may also be evident when considering the objectives, the segmentation, targeting and positioning within the overall marketing strategy (e.g. the use of suitable media to position the product/service correctly). Finally, marketing communications planning needs to consider the push and pull strategies highlighted in Figure 8.4. The type of communication media used will be influenced by the strategy adopted.  A push strategy involves the supplier ‘pushing’ the product to the next level in the distribution system. The manufacturer hopes that once the intermediaries have bought the stock, they will ‘push’ the product on to their customers. This type of approach is heavily dependent on Unit 8: Marketing Communications Bradford MBA 159 personal selling to the intermediaries, trade promotions to stimulate sales, or advertising in the trade press.  A pull strategy is when the manufacturer focuses on selling to the end consumer in order to develop consumer demand (or ‘pull’) for the product, which will encourage intermediaries to stock the product. Manufacturers may use tools such as advertising (on television, in the press and on posters) to stimulate consumer demand. Academics used to consider these two strategies as being exclusive options, but increasingly suppliers use a blend of push and pull strategies. Companies like Coca-Cola have strong brand marketing (e.g. advertising) and major trade marketing activities (e.g. selling into the distribution channels), i.e. push and pull strategies. Integrated marketing communications The final topic in this unit is on integrated marketing communications (IMC), which is a process associated with the coordinated development and delivery of a consistent marketing communications message(s) to a target audience. The aim of an IMC approach is to get ‘synergy’ through integrating the planning, management and use of these tools, with the end result being a consistent message, irrespective of the media. Achieving a consistent, integrated message needs consideration and co-ordination of all the issues raised in the unit. One of the most successful examples of IMC is the Dove Real Beauty campaign, which has a consistent target market, message, look and feel all over an extended period in time. Read: Unilever (2014) The Dove Campaign for Real Beauty. www.dove.us (Blackboard > Marketing module> Module Materials> Unit 8). Think about how well Unilever delivers a central message consistently and across channels. Summary Unit 8 focuses on the fourth topic in the marketing mix – promotion. There are various forms of ‘promotion’, such as the traditional elements of the promotional mix – advertising, personal selling, sales promotion and publicity. Historically, companies promoted their goods to customers. Their sales teams called on customers. Today, a more accurate term for ‘promotion’ is Study Book: Marketing 160 Bradford MBA integrated marketing communications (IMC), which spans a broader range of ways in which organisations and customers interact. This term also fits better with the new media environment, where often consumers initiate conversations and communicate with companies, customers and the wider community, especially through social media. Customers are less likely to be passive recipients of promotional efforts in the current marketplace. Organisations need to blend marketing communications activities, choosing and using marketing communications tools to match the business requirements in an integrated way. This requires an understanding of communications theory, such as the importance of source credibility, selecting an appropriate message in the right medium for the target customer. Organisations must also monitor any ‘noise’ – interruptions, such as competitor advertising – that means the message is not received or believed. Opinion leaders and opinion formers are important in two-step communications processes. Two-step models of communication are where influential people (e.g. opinion leaders and opinion formers) have an impact on the communications process.  Opinion leaders are those who actively seek information, and then communicate to others. The animation on digital divas is an example of this.  Opinion formers are those who have some form of expertise or influence, which others respect. These opinion formers can influence others. Marketing communications planning makes decisions about the following areas:  tools e.g. personal selling, advertising, sales promotion, direct marketing, social media, etc.  media e.g. print or TV advertisements, Facebook, Twitter etc.  messages i.e. what the company wishes to communicate to customers. Organisations make decisions on these based on product characteristics (e.g. whether it is a new or existing product, or whether it is a consumer or B2B product, or whether it is a service), type of product (e.g. convenience good or a shopping good), task (e.g. launching a product or trying to gain market share), market (selling to B2B customers or consumers) and budget. Messages are generally designed to achieve one of four DRIP tasks:  Differentiate – the offer from competitors.  Reinforce – remind or reassure customers. Unit 8: Marketing Communications Bradford MBA 161  Inform – educate on the company or product, or where and how to buy.  Persuade – to create preference or change customer views. New media (such as social media) is increasingly important in marketing communications. Customers and organisations are increasingly involved in more interactive content.  New media tends to be less expensive than traditional advertising.  New media is easier to measure.  Many consumers like using it, and then generate and distribute content. Push and pull strategies highlight the importance of marketing communications to the trade channels (e.g. distributors or retailers) and to the end customers or consumers. A balance between these two approaches is normally most effective. Marketing communications must be fully integrated to ensure consistency and effectiveness. Activity 8.6 – audio and slides Listen to: the audio for this unit and view the accompanying slides (Blackboard > Module Site > Module Materials > Unit 8 > Audio and Slides) Activity 8.7 – multiple-choice questions The multiple-choice questions for this unit will enable you to test your knowledge and understanding of the key concepts covered. (Blackboard > Module Site > Formative Exercises > Multiple-Choice Questions > Unit 8) Activity 8.8 – live online tutorial Read: Baines and Fill (2014): 399, Market Insight 11.3, ‘Red Bull Sponsors the Fastest Human’. Write down your answers to the questions below and be ready to discuss them during the live online tutorial (your module tutor will post details of when this tutorial will take place). Question 1: Which forms of marketing communications does Red Bull use? Study Book: Marketing 162 Bradford MBA Question 2: How should Red Bull build on the success of this event? How can they maximise exposure from events like this? Question 3: How might this event have damaged Red Bull's reputation if this event had been unsuccessful? Question 4: What other communication activities and events could Red Bull add to their marketing communications programme? Live online tutorial: To access the tutorial, please go to Blackboard > Module Site > Collaborate. To test your sound settings for the Blackboard Collaborate virtual classroom, please go to the Blackboard Collaborate Support site at http://bit.ly/1etRu2Y. For further support materials and information about Blackboard Collaborate, please see the Blackboard Collaborate Support site at http://bit.ly/1jBpgUc Additional Learning Resources Bahadur, N. (2014) Dove ‘Real Beauty’ Campaign Turns 10: How A Brand Tried To Change The Conversation About Female Beauty. Huffington Post, 6 February. http://www.huffingtonpost.com/2014/01/21/dove-realbeauty-campaign-turns-10_n_4575940.html Accessed 11 December 2016. BBDO Belgium (2015) Stalker viewed your profile. YouTube, 22 January. https://www.youtube.com/watch?v=YkZRU47TBEM Accessed 15 December 2016. Qualman, E. (equalman) (2015) Social Media Revolution 2015 #Socialnomics. YouTube, 26 January. https://www.youtube.com/watch?v=0eUeL3n7fDs Accessed 11 December 2016. Ghosh, S. (2014) Samsung ads poke fun at Apple's iPhone 6. Marketing, 12 September. http://www.marketingmagazine.co.uk/article/1311818/ samsung-ads-poke-fun-apples-iphone-6. Accessed 11 December 2016. Nanji, A. (2015) The Staggering Scale of What Happens Online in a Minute [Infographic]. www.marketingprofs.com, 16 September. http://www.marketingprofs.com/charts/2015/28430/what-happens-onlinein-a-minute-infographic Accessed 11 December 2016. think with Google (2016) YouTube Proved Effective at Driving Sales for Snickers. www.thinkwithgoogle.com, April. https://www.thinkwithgoogle.com/intl/en-gb/case-studies/youtube-provedeffective-driving-sales-for-snickers.html Accessed 15 December 2016. Unit 8: Marketing Communications Bradford MBA 163 Turkington, M. (2012) Levi's 501 - Ring of Fire. Vimeo.com. https://vimeo.com/48118408 Accessed 15 December 2016. The Webby Awards (2016) Danny Macaskill: Cascadia. www.webbyawards.com. http://webbyawards.com/winners/2016/onlinefilm-video/branded-entertainment/viral-branded/danny-macaskill-cascadia/ Accessed 15 December 2016. References Aldi UK (2012) Aldi Chocolate Bunny Advert, YouTube, 19 March. http://www.youtube.com/watch?v=uUr7rnDuRm4&list=UUtbCLKu58bBQn vuZWjTTvHA Accessed 11 December 2016. Android (2015) Android: Friends Furever. YouTube, 5 February. https://www.youtube.com/watch?v=vnVuqfXohxc Accessed 11 December 2016. Asda (2013) We don't match prices, we beat them - tasty treats. YouTube, 27 August. https://www.youtube.com/watch?v=87nB09sqR3w&list=UUC4 mmbgZTljy5DSMVWMwWfw Accessed 11 December 2016. Baltic Social (nd) Social Media Marketing – Facebook. Vimeo, https://vimeo.com/14829864 Accessed 11 December 2016. Barnardo's (2015a) Barnardo’s | Fostering and Adoption | Change a Life | 2015. YouTube, 24 August. http://www.youtube.com/watch?v= QblRQi85KP8. Accessed 11 December 2016. Barnardo’s (2015b) Advertising campaigns. http://www.barnardos.org.uk/what_we_do/advertising_campaigns.htm Accessed 11 December 2016. Bloomberg (2014) Inside the Quirky Ad Agency Obsessed With Mothers. www.bloomberg.com, 3 October. http://www.bloomberg.com/news/videos/ 2014-10-03/inside-the-quirky-ad-agency-obsessed-with-mothers Accessed 11 December 2016. Hiscox (nd) Advertising-UK advertising campaigns. http://www.hiscoxgroup.com/news/advertising.aspx Accessed 11 December 2016. Hovis (2015) Hovis 1973 Boy On The Bike TV Advert. YouTube, 5 October. http://www.youtube.com/watch?v=w4EjJt52ZQ&feature=youtu.be Accessed 11 December 2016. Study Book: Marketing 164 Bradford MBA Keller, K.L. (2001) Mastering the marketing communications mix: micro and macro perspectives on integrated marketing communications programmes. Journal of Marketing Management 17(7–8), 819–847. Kumar, V. and Mirchandani, R. (2012) Increasing the ROI of social media marketing. MIT Sloan Management Review 54(1), 55–61. Ogilvy & Mather (2013) Digital Divas. www.ogilvy.com, May. www.ogilvy.com/ - /The-Work/Galleries/May-2013-Digital-Divas.aspx Accessed 11 December 2016. Sainsbury’s (2014) Get the Kids Cooking This Summer | Sainsbury’s Summer Sorted. YouTube, 16 July. https://www.youtube.com/watch?v= AREns-Hn9us&list=UUgY-h0zGG5EOa3f_k22wMJg Accessed 11 December 2016. Samsung Mobile (2015) It Doesn't Take a Genius — The Live Stream #NoteTheDifference. YouTube, 10 September. http://www.youtube.com/watch?v=vA8xPyBAs_o Accessed 11 December 2016. Schutte, S. (2014) 8 best and worst social media campaigns. realbusiness.co.uk, 11 February. http://realbusiness.co.uk/article/25493-8best-and-worst-social-media-campaigns. Accessed 11 December 2016. Space City Productions (nd) www.spacecity.co.uk/showreel. www.spacecity.co.uk. http://www.spacecity.co.uk Accessed 11 December 2016. Three UK (2013) Three - The Pony #DancePonyDance. YouTube, 28 February. http://www.youtube.com/watch?v= Ekr05T9Iaio&feature=youtu.be Accessed 11 December 2016. Three UK (2014) Three - #SingItKitty - cat advert. YouTube, 20 February. http://www.youtube.com/watch?v=SXy6JElmgHU Accessed 11 December 2016. Unilever (2014) The Dove Campaign for Real Beauty. www.dove.us. http://www.dove.us/Social-Mission/campaign-for-real-beauty.aspx Accessed 11 December 2016. Vakratsas, S. and Ambler, T. (1999) How advertising works: What do we really know? Journal of Marketing 63(1), 26–43. Volvo LifePaint (2015) Volvo LifePaint. YouTube, 26 March. http://www.youtube.com/watch?v=CfWzeGlaFvI&list=PLUqM01q0yFwwFi 04LCvVBFrNrTFLkehvM Accessed 11 December 2016. Unit 8: Marketing Communications Bradford MBA 165 Waitrose (2013) Heston’s incredible ice cream ad. YouTube, 17 July. https://www.youtube.com/watch?v=LchLmmN23JI Accessed 11 December 2016. Bradford MBA 167 Unit 9: Revision Key audio and video: 1. Concluding the module (Blackboard > Module Site > Module Materials > Unit 9) – Activity 9.1 Introduction This unit integrates the learning from the previous eight units and demonstrates how the various concepts, models and frameworks can be used in the analysis of a marketing success story. Please note: when completing the assessment for this module, you are not required to undertake a full marketing plan. Rather you are asked to undertake a series of specific tasks as detailed in the assignment briefing. Pay attention to the mark allocation, as this should guide the level of detail required for each section. Objectives By the end of this unit, you should be able to:  understand and evaluate the factors that contribute to a successful marketing strategy, including: - background analysis, understanding the market environment and competitors and insight on target customers - the development of a clear, distinctive and desirable positioning strategy - the selection of an appropriate, clear and distinctive integrated marketing mix. Activity 9.1– watch and reflect Watch: Concluding the module (Blackboard > Module Site > Module Materials > Unit 9) Study Book: Marketing 168 Bradford MBA Successful marketing Successful marketing results from a good understanding of the key principles and practices associated with marketing; these principles and practices should be well integrated into a cohesive marketing strategy. Looking at this element of success in a little more detail, Abell’s (1978) article on strategic windows (Unit 3) stresses the importance of having a fit between the marketing environment and the marketing strategy. The strategy adopted must be contextualised to the company and its marketing environment. Its success is dependent on the selection of appropriate market segments, and positioning the product/brand in a unique and distinctive manner. All elements of the marketing mix (the 4 or 7 Ps) should then be managed in such a way to maximise the potential success of the organisation (i.e. offer the right product at the right price in relevant locations, using suitable promotional tools to communicate with customers). The assignment Question 1 This element of the assignment involves setting the context.  Select and research a company, brand or non-profit organisation of your choice. Briefly introduce your chosen organisation, explaining why you consider it to be a marketing success story. (10 marks) It is important that you start thinking about which companies (or non-profit organisations) are suitable examples as early as possible. In some respects, this is like the new product development process. You should seek out several options, and then choose which one offers the best opportunity for you to show your knowledge and understanding of the subject area. To choose your brand or organisation, you should start by scanning the business press and other media sources for examples which demonstrate marketing success. Naturally you should also draw on your own knowledge, experience and expertise. After some initial evaluation, you should then narrow down the possible options for your assignment to a shortlist.  When evaluating the shortlist, you may wish to consider whether the examples are ‘success stories’ – you will first need to identify why you consider your choice to be a success. Look at the marketing metrics (see Unit 4). Which of the criteria discussed allow you to show the success of your choice? You will need to do research to gather this data. You should seek out relevant materials from the online library. Unit 9: Revision Bradford MBA 169  You should also consider some aspects of the marketing environment, e.g. PEST, SWOT, competitor analysis. How have these contributed to the success of the chosen brand? Did the company see a strategic window, for example?  How does your organisation’s strategy and/or implementation contribute to its success? Use marketing models and frameworks (segmentation, 4/7 Ps) to structure your analysis, and evaluate whether there is clear evidence of the organisation managing these area/activities.  Before selecting your choice of success story, think about whether you can obtain sufficient information and data on your chosen examples. Consider how well the aspects contributing to success can be identified individually (e.g. whether you can gain insights into areas such as the target market and the marketing mix adopted by your shortlisted organisations). After reviewing your shortlist you should be in a position to make a choice of organisation/brand for your assignment. Once you have made your choice you need to build a case for the organisation selected. What makes it a success? Is it sales, profit, distinctiveness, being a market leader? The organisation that forms the basis of your marketing success story is likely to have a marketing orientation, i.e. a deep understanding of and commitment to customers. However, please note sometimes companies are successful without this focus, but this would not then be an example of a marketing success story. An organisation is likely to be deemed a marketing success because it meets/satisfies customer needs, and delivers profit (or meets other goals) for the chosen brand or organisation. You should also consider whether your success story is contemporary. If you chose an organisation which has demonstrated success in the last three years your analysis will have more resonance with the current marketing environment. This first question is worth 10 marks. So, it needs to be clear, compact, but convincing. This is the foundation for your assignment. A strong foundation will enable you to build a stronger case for your success story. Question 2  Detail and discuss the key factors which have led to the marketing success of your chosen organisation. Your answer should show an appreciation of the core theories in this module (e.g. an understanding of the changing marketing environment, segmentation, market positioning and the marketing mix). (60 marks) Study Book: Marketing 170 Bradford MBA The following section outlines the various issues you may wish to consider when answering this part of the assignment. Environmental analysis: as previously indicated there is a clear relationship between changes to the external environment in which an organisation operates and the needs of the market. Marketing success can in part be attributed to identifying and responding to changes in the external environment and the subsequent market needs. When tackling this question, you should evaluate the changes in the environment in which your chosen organisation operates (PESTEL analysis may come in useful) and how your brand or organisation has taken the environment into account when developing its marketing strategy. You should use market data, literature and research sources to support your discussion on the nature of the environment the organisation operates in and the needs of the market. To help answer this part of the question you may wish to consult a number of the library databases (e.g. Euromonitor Passport, Key Note, MarketLine Advantage, Thomson Research). Buying behaviour: your assignment should consider how customers make buying decisions. This could include: a) the type of buying decision (e.g. low or high involvement, new task or repeat purchase, etc.,); b) the steps in the buying process; c) the cues customers respond to; d) the criteria used when evaluating options; and e) the social aspects of buying (e.g. who else contributes to the purchase decision partners – friends or other departments within an organisation). A good starting point is with some desk-based research (e.g. consulting relevant newspaper articles, trade publications, internet sources, academic papers, databases). You can undertake a mini-research activity, with a survey, a focus group or even through observing people buying/engaging with your selected product. Please note, original data collection is not a requirement of the assignment, but it may add depth to your work. Competitor analysis: marketing does not take place in a vacuum and so you may wish to consider: a) what is the nature of the competitive environment the organisation faces; b) what competitive changes/trends have helped or hindered your chosen brand or organisation; and c) how well has the organisation/brand recognised and dealt with any changes to the competitive environment in which it operates? Have changes in the competitive environment the brand or organisation opened an entirely new opportunity – sometimes called a white space or a blue ocean. Alternatively, has the organisation implemented more modest (incremental) changes to enable the organisation to do something different/better than its competitors (or even both)? Unit 9: Revision Bradford MBA 171 You also need to consider the strengths the organisation possesses and the opportunities the organisation has been able to exploit. Remember that these come from the SWOT analysis. Strengths and weaknesses are controllable factors; opportunities and threats come from the changing environment, so SWOT and 5 forces give substance to your assessment. How well did the organisation read this situation? Did it see the potential well? What threats did the organisation/brand face and how were these threats managed? Remember that it is your responsibility to explain – not just tell the reader – about how the organisation deals with these issues, and how this has contributed to the success story. Think also about the organisation’s strategy, and its mission, vision, values, goals and strategies. Clearly, Baines and Fill’s Chapter 5 is a valuable resource when looking at the strategic options. Perhaps your organisation used the Ansoff strategies to identify an appropriate growth strategy. If this is the case, you may consider how risky the strategy was. Consider which (if any) of the three generic strategies – cost leadership, differentiation and focus – are relevant to your example. The information collected up until this point provides sound background information. Progressing on from this, there is a need to consider a series of key marketing decisions.  Which and how many segments have been targeted?  How was the organisation/product/brand positioned?  How was the marketing mix developed, implemented and managed? Market segmentation: when considering the issue of segmentation there is a need to consider: a) how the market has been defined; b) which segmentation criteria was/is used; c) how big were/are the segment(s); and d) how attractive were/are the segments? Is the focus on a niche market, several segments or full market coverage. Remember to give details, and explain your thinking. Positioning: once a segment(s) and target market(s) are identified you can consider the position of the organisation/brand. This can be illustrated through the use of a perceptual map. You can show the shifts in the positioning (if appropriate) on the perceptual map. Remember that this is a critical part of your analysis. The positioning is delivered through the marketing mix. Marketing mix: you need to detail the attributes of the mix elements, and look for consistency across each element of the mix. During the assignment it is advised that you discuss each element of the mix (4 or 7 Ps as deemed applicable). Study Book: Marketing 172 Bradford MBA Product: key ‘product’ issues include: the types of products; the core, embodied and augmented proposition; the stages in the product lifecycle. If you are investigating a service, then review the intangibility, perishability, variability, inseparability and lack of ownership. If your success story is a new product, you may add some insights from the product development process and how this has led to success. For example, was there co-creation in innovation? How easy was it for the company to attract innovators and early adopters? Was there a segment whose needs had not been met previously? Price: this does not only relate to the marked price, it also takes into account the value offered, either compared to other brands/offerings or as value-in-use. It may be that your chosen product or service earns money in a different way (i.e. has a different revenue stream). Place: what are the distribution channels? Does the organisation or brand have strength (power) in these? Or a unique distribution channel? Such issues may contribute to the success of the organisation’s/brand’s marketing activities. Promotion: what promotional tools are/have been used, why, when and to what effect? Remember that there are several promotional tools – it is not only advertising. Has the organisation used other forms of promotion such as personal selling, sales promotions, publicity or social media? Have these promotional activities contributed to the success of the organisations; if so, how? You may want to include examples of some promotional materials in your assignment. Add these sparingly and be sure to identify what is good or effective in the promotional materials you insert into the assignment. As you may be aware, the challenge with question two is to gather and review relevant information from a variety of sources and build a clear and coherent case for your chosen success story. Managing word count is key. Plan and edit your work to keep within word count, but without losing the detail required. Question 3  Building on your success story, evaluate the future challenges facing your chosen organisation, and make two or three recommendations on areas the organisation should address for continuing success. (30 marks) The final task is a ‘stretch’ objective. It offers two levels of stretch – first, it takes you outside the process of simply reporting on your research findings asking you to analyse marketing information and then use it to Unit 9: Revision Bradford MBA 173 construct potential (and hopefully original) recommendations. This should link with earlier analysis and discussions. You may wish to set up a Google alert for your chosen brand or company. This facility enables you to be notified of emerging issues facing the chosen organisation/brand or its competitors. You could also set this up for the industry sector, although be specific, as you may get overloaded with data. Your tutor will provide some guidance on general questions. Bradford MBA 175 Appendix: Module Descriptor Subject Area: Marketing (Distance Learning) Credit Rating: 10 Module Code: MAR7014-A Academic Year: 2016/7 Teaching Period: January Intake Programmes Module Level: FHEQ Level 7 (Masters) School: School of Management Module Co-ordinator: Keith Hanning Additional Tutor(s): Prerequisite(s): None Corequisite(s): None Aims: To provide the student with a comprehensive understanding of the concepts and principles of marketing and their applications. Study hours Lectures: 0.00 Directed Study: 95.00 Seminars/Tutorials: 5.00 Other: 0.00 Laboratory/Practical: 0.00 Formal Exams: 0.00 Total: 100.00 Study Book: Marketing 176 Bradford MBA Learning outcomes 1. Demonstrate knowledge and understanding of the key concepts and principles of marketing 2. Demonstrate the ability to apply these to a practical marketing situation 3. Demonstrate refined analytical, problem-solving and creative skills Outline syllabus The marketing concept and orientation; Marketing environment and marketing planning; Consumer and organisational buying behaviour; Market segmentation, targeting and positioning; The marketing mix; Product concepts, service concepts, product portfolio, product life cycle, Branding, communications mix; Marketing channels, retailing, distribution; Pricing and value, cost, competitor and marketing-orientated methods; International approach to marketing