Marketing

4.1 The role of marketing

Marketing - the management task that links the business to the customer by identifying and meeting the needs of
customers profitably – it does this by getting the right product at the right price to the right place at the right time

Marketing and its relationship with other business functions

1. Finance – this department needs to fund the increased promotion budget

2. Human resources–additional employees arelikely to be required if the additional marketing and promotion
activity is successful.These employees will be required in operations, administration, finance – and marketing
itself
3. Operations – Market research data will be used by operations to determine the preferences of consumers for the
future product mix.

Market characteristics

1. Market size – the total level of sales of all producers within a market
Can be measured by volume of sales (units sold) pr value of goods sold (revenue)

It is important because
 Marketing manager can assess whether a market is worth entering or not
 Businesses can calculate their own market share
 Growth or decline of the market can be identified

2. Market growth – the percentage change in the total size of a market (volume or value) over a period of time
Pace of growth depends on
 Economic growth
 Changes in consumer incomes
 Technological change
 If the market is saturated or not

3. Competitors and ease of entry

Ease of entry – the lack of barriers for the establishment of new competitors in a market
 The scope for product/service differentiation is important

4. Differentiated or homogenous products

Homogenous products – goods that are physically identical or viewed as identical by consumers

5. Segmentation – dividing a market into distinct groups of consumers who share common tastes and requirements
Target marketing – focusing marketing activity on particular segments of the market
Mass marketing – selling to the whole market using a standardized product and the same marketing activities

Differences between marketing goods and marketing services

Consumer goods – tangible physical product marketed to end users

Consumer services – intangible provision of an activity to end users

 Services are consumer immediately; they cannot be stored (off peak charging low prices)
 Services cannot be taken back to be repaid or replaced – quality must be right first time
 Consumers find it hard to compare service quality  promotion of services must be informative and detailed
 People are important to successful marketing of services

Both benefit from creating and building brand recognition into marketing activitiies

Building trust
 Entrepreneur has to sell confidence and trust in themselves and their ability to perform services as described
Time for delivering the service
Deliverability
 Convince customers that quality results can be delivered within a given period of time
Relationships
  Marketing service-based business relies more on building long term relationships with consumers

Perceived value

Product orientation – an inward-looking approach that focuses on making products that can be made or have been made
for a long time – and then trying to sell them
 Businesses invent and develop product in the belief that they will find consumers to purchase them
 Efficiently producing high-quality goods
 Belief that If business produces an innovative product of a good quality, then it will be purchased

Market orientation – an outward looking approach basing product decisions on consumer demand, as established by
market research
Advantages
 Chances of a newly developed product failing in the market are much reduced – but not eliminated – if market
research has been undertaken first
 If products meet customers’ needs, they are more likely to survive longer and make higher profits
 Constant feedback from customers
Limitations
 If business attempts to respond to every passing customer trend, then it may overstretch its resources and not
end up doing anything particularly well
 Can be expensive

Social marketing

Social marketing – this approach considers not only the demands of the consumers but also the effects on all members of
the public involved in some way when firms meet these demands

Social marketing has following implications

 It is an attempt to balance company profits, consumer wants and society’s interests
 there may be a difference between short-term consumer wants (low prices) and long-term consumer and society
welfare (protecting the environment and paying workers fair wages). Social marketing considers long term
welfare
 this concept gives a competitive advantage
 if successful, can lead to firm being able to charge higher prices, as benefitting society becomes a USP
Differences between commercial and social marketing

Social marketing – “social good”

Commercial marketing – “financial return”

Market share and leadership

Market share – the percentage of sales in the total market sold by one business
'
fir m s sales ∈time period
market share %= × 100
total market sales∈time period
 can be measured in units (volume) pr sales (value in the market)

Market leadership – when a business has the highest market share of all firms that operate in that market

The importance of market share and market leadership

There are many ‘internal’ measures of marketing success such as customer satisfaction, brand awareness, loyalty and profit
margins but market share can be benchmarked against the competition.

Other reasons why market share is important are:

 Being ‘market leader’ with the highest market share can be used in advertising and promotional material.
 Sales are higher than competitors’  higher profits
 Market leaders are in a strong bargaining position with both suppliers and retailers. These strong bargaining
positions could lead to lower costs and longer credit periods from suppliers and higher selling prices to, and
shorter payment periods from, retailers.
  Recruitment of high-class employees is often easier for market-leading businesses as people would rather work
for ‘winners’ than unsuccessful businesses.
 Financing might become easier if investors and banks become convinced that the status of being market leader
with the highest market share adds to the stability and profit potential of the business.

However

 being market leader puts pressure on a business and key staff to continue to do as well if not better in future.
 The business media will look for any sign of slippage in position and will gleefully report that a business is losing
market share and losing touch with its consumers.
 too much emphasis on market share could take attention away from profitability.

Marketing objectives

1. For-profit organizations

Marketing objectives – the goals set for the marketing department to help the business achieve its overall objectives

Examples of for-profit organisations’ marketing objectives include an increase in:

- average number of items purchased per customer visit

- frequency that a loyal customer shops
- percentage of customers who are returning customers (customer loyalty)
- customer satisfaction
- brand identity
- market share
- total sales (volume or value – or both)

To be effective, marketing objectives should:

 Fit in with the overall aims and mission of the business

 Be determined by senior management
 Be realistic, motivating, achievable, measurable and clearly communicated to all departments in the
organisation.

Marketing objectives are important for the following reasons:

 They provide a sense of direction for the marketing department.

 Progress can be monitored against these targets.
 They form the basis of marketing strategy.

2. Non-profit making organisations

Not-for-profit organisations are distinguished from profit-maximising organisations by three characteristics.

 most not-for-profit organisations do not have external shareholders providing risk capital for the business
 they do not distribute dividends, so any profit (or surplus) that is generated is retained by the business as a
further source of capital
 their organisational objectives usually include some social, cultural, philanthropic, welfare or environmental
dimension.

What are the differences in marketing in non-profit-making organisations compared to marketing in profit-seeking ones?

 The importance of maintaining high ethical standards to avoid alienating the public
 Constant feedback on the success of charity campaigns – and future issues to be addressed – to maintain public
interest and awareness
 Free publicity, with the aim of capturing the public’s imagination,
 Marketing objectives for not-for-profit organisations include:

 Maximise revenue from trading activities

 Increase recognition of the organisation by society
 Promote the work and aims of the organisation to a wide audience.

Marketing strategies

How innovation, ethical considerations and cultural differences may influence marketing practices and strategies in an
organisation
Innovation

Innovation

 guerrilla marketing and internet marketing.

Ethical considerations

Cultural differences

 Failing to respond to cultural differences can lead to bad feeling and bad publicity whereas responding to local
tastes and sensibilities can encourage consumers to accept a new brand as being designed for their needs.

4.2 Marketing planning

marketing planning: the process of formulating appropriate strategies and preparing marketing activities to meet
marketing objectives

The main elements of a marketing plan are:

 details of the company’s (SMART) marketing objectives

 sales forecasts to allow the progress of the plan to be monitored

 marketing budget

 marketing strategies to be adopted to achieve the marketing objectives

 detailed action plans showing the marketing tactics to be used to implement the strategies.

Role of marketing planning

Roles Limitations
 Plans provide focus to the work of the marketing  Plans that are not revised to meet changing
department and a ‘road map’ of the stages to be taken in internal or external conditions – such as the
implementing marketing strategies. arrival of new competitors – will become
 Marketing strategies linked to SMART objectives will outdated.
increase the likelihood of the marketing campaign’s  Plans are insufficient on their own – they need
success. to be reviewed constantly and the final
 The budget should be planned in advance with the finance outcome must be judged against the original
department and should be adequate to achieve the objectives to aid future decision-making.
campaign’s objectives.  Marketing plans need to be based on an up-to-
 Helps achieve integration of different business functions date assessment of the market and consumer
as all departments will need to be involved in the planning preferences or it will be inappropriate for
process. current conditions.
 Planning ahead helps to ensure that the marketing mix is
appropriate and fully integrated.

Marketing mix

marketing mix: the key decisions that must be taken in the effective marketing of a product

The four Ps are:

 Product –This might be an existing product, an adaptation of an existing product or a newly developed one.
 Price - If set too low, then consumers may lose confidence in the product’s quality; if too high, then many will be
unable to afford it.
 Promotion - must be effective and targeted at the appropriate market – telling consumers about the product’s
availability and convincing them that ‘your brand’ is the one to choose. Packaging is often used to reinforce this
image.
 Place - refers to how the product is distributed to the consumer.

An appropriate marketing mix will ensure that these marketing decisions are interrelated.

coordinated marketing mix: key marketing decisions complement each other and work together to give customers a
consistent message about the product

An appropriate marketing mix

The most appropriate marketing-mix decisions will be:

 coordinated and consistent with each other

 targeted at the appropriate consumers.
 based on marketing objectives that are achievable within the marketing budge

Differences between market segments and target markets

market segment: a sub- group of a market made up of consumers with similar characteristics, tastes and preferences

target market: the market segment that a particular product is aimed at

- research the whole market and identify specific consumer groups within it (market segments)
- business decides which of these segments are going to be target markets

Market segmentation and consumer profile

market segmentation: identifying different segments within a market and targeting different products or services to them

- form of niche marketing

consumer profile: a quantified picture of consumers of a firm’s products, showing proportions of age groups, income levels,
location, gender and social class

Identifying different consumer groups

Successful segmentation requires a business to have a very clear picture of the consumers in the target market it is aiming
to sell in.This is called the consumer profile.
 Three commonly used bases for segmentation are

1.Geographic differences

2. Demographic differences

 age, sex, family size and ethnic background can all be used to separate markets.
 An individual’s social class may have a great impact on their expenditure patterns. The wealthy will have very
different consumption patterns from the ‘working class’.

3.Psychographic factors

 differences between people’s lifestyles, personalities, values and attitudes.

Advantages Limitations
 Businesses can define their target market precisely  Research and development and production costs
and design and produce goods that are specifically might be high as a result of marketing several
aimed at these groups leading to increased sales. different product variations.
 It helps to identify gaps in the market – groups of  Promotional costs might be high as different
consumers that are not currently being targeted – and advertisements and promotions might be needed
these might then be successfully exploited. for different segments – marketing economies of
 Differentiated marketing strategies can be focused on scale may not be fully exploited.
target market groups. This avoids wasting money on  Production and stock-holding costs might be higher
trying to sell products to the whole market – some than for the option of just producing and stocking
consumer groups will have no intention of buying the one undifferentiated product.
product.  By focusing on one or two limited market segments
 Small firms unable to compete in the whole market are there is a danger that excessive specialisation
able to specialise in one or two market segments. could lead to problems if consumers in those
 Price discrimination can be used to increase revenue segments change their purchasing habits
and profits. significantly.

Difference between niche market and mass market

niche market: a small and specific part of a larger market

niche marketing: identifying and exploiting a small segment of a larger market by developing products to suit it

mass market: a market for products that are often standardised and sold in large quantities

mass marketing: selling the same products to the whole market with no attempt to target groups within it

Advantages of niche marketing Advantages of mass marketing

 Small firms may be able to survive and thrive in markets
 Small-market niches do not allow economies of scale to be achieved.
that are dominated by larger firms.
Therefore, mass-market businesses are likely to enjoy substantially
 If the market is currently unexploited by competitors, then
lower average costs of production.
filling a niche can offer the chance to sell at high prices and
 Mass-market strategies run fewer risks than niche strategies. As
high profit margins – until the competitors react by entering
niche markets contain relatively small numbers of consumers, any
too. Consumers will often pay more for an exclusive product.
change in consumer buying habits could lead to a rapid decline in
 Niche market products can also be used by large firms to
sales. This is a particular problem for small firms operating in only
create status and image – their mass-market products may
one niche market with one product.
lack these qualities.
 Product positioning

product position map or perception map: a graph that analyses consumer perceptions
of each of a group of competing products in respect of two product characteristics

 The first stage is to identify the features of this type of product considered to
be important to consumers – as established by market research.These key
features might be price, quality of materials used, perceived image…
 The second stage, based on qualitative market research, is to position each of the competing products on the
graph according to consumers’ perceptions of them.

This product-positioning analysis could be used in a number of ways:

 It identifies potential gaps in the market.This could be the segment that the business should aim for.
 manager is then made aware of the key feature(s) of the product that should be promoted most heavily.
 brands a firm can easily see if a repositioning of one of them is required.

Unique selling point/proposition (USP)

unique selling point/ proposition (USP): a factor that differentiates a product from its competitors, such as the lowest cost,
the highest quality or the first- ever product of its kind; USP could be thought of as ‘what you have that competitors don’t’

The benefits of an effective USP include:

 effective promotion which focuses on the differentiating feature of the product or service
 opportunities to charge higher prices due to exclusive design/ service
 free publicity from business media reporting on the USP
 higher sales than undifferentiated products
 customers more willing to be identified with the brand because ‘it’s different’.

How organisations can differentiate themselves and their products from competitors

Form of differentiation Benefits Limitations

Do low prices integrate with the rest of the marketing mix?
Consumers have limited spending power and
Low/lowest prices low prices will always attract a high proportion
of them towards the product. Could consumers perceive the product/brand to be of low quality
too?
Trust is difficult for a newly formed business to establish so other
forms of differentiation might be necessary.
Customers are careful to spend their limited
Trust incomes wisely and will study each purchase
to make sure they’re making a ‘safe’ decision. Trust – and with it, company image – can be damaged greatly by
issues such as environmental disasters or a series of poor feedback
on social media. It is always very difficult to re-establish trust.
Ethical stance In some communities, consumers are very keen In some markets low prices are more important than ethical
to support companies that adopt an ethical positions.
stance by purchasing their products. This
ethical approach might lead to higher costs and A lack of genuine ethical position – rather than just an ethical
prices but some customers will ‘pay the promotion campaign, for example – could lead to a loss of trust if
 difference’ because they share the company’s consumers discover that
values. the business was really only adopting a ‘window dressing’ show of
ethical behaviour.
Consumers’ lack of time or dislike of the
shopping experience means that more
convenient ways
These methods of ‘convenient shopping’ are now so widespread
Convenience to browse and purchase could create effective
that it is difficult to gain true, long- lasting differentiation.
differentiation. Free delivery, click and collect,
and streamlined online shopping processes are
examples of convenient ways to shop.
If these are the result of research and
development (R&D) that leads to patented R&D is an expensive and time-consuming process and does not
products or processes, then it can be difficult always lead to successful innovative products.
for competitors to copy this form of
Product features differentiation. As with Constant development might be needed to stay ahead of
competitors so a business needs to continue to commit resources
USPs (see above) it can lead to a reputation for into developing innovative products that differentiate the business
innovative, cutting-edge products that can and its brands effectively.
command premium prices.

4.3 Sales forecasting

sales forecasting: predicting future sales levels and sales trends

quantitative sales forecasting methods

1.Extrapolation

 involves basing future predictions on past results

 when actual results are plotted on a time-series graph, the line can be
extended (extrapolated) into the future along the trend of the past data
 assumes that sales patterns are stable and will remain so in the future

2. Moving averages

 allows the identification of underlying factors that are expected to influence future sales.
o trend, seasonal variations, cyclical variations and random variations.
 moving average method is used to analyse these.
 ‘smooths out’ the fluctuations in time-series data and allows managers to identify the trend more easily.

seasonal variations: regular and repeated variations that occur in sales data within a period of 12 months or less

cyclical variations: variations in sales occurring over periods of time of much more than a year – they are related to the
business cycle
random variations: may occur at any time and will cause unusual and unpredictable sales figures, e.g. exceptionally poor
weather

add the years and divide by the number of years, write the value down in the middle year

3. Four-period moving average

trend: underlying movement of the data in a time series

Calculating variations
Seasonal variations = actual results – moving average

Cyclical variation
o Find variation (sales-trend)
o Add the variations
o Divide by the number of years

Moving average method

 Plot the trend
 Extrapolate into future

Quarterly moving average

 Add 4 quarters (1+2+3+4) to next 4 quarters (2+3+4+1)
 Divide by 8
 Write in the middle of the quarters added up
 Seasonal variation  sales – trend
 Average seasonal variation  adding variation of each quarter of different years

Benefits of sales forecasting

 The operations department would know how many units to produce and what quantity of materials to order and
the appropriate level of stock to hold.

 The marketing department would be aware of how many products to distribute and whether changes to the
existing marketing mix were needed to increase sales.
 Finance could plan cash flows with much greater accuracy and make accurate profit forecasts.
 Strategic decision-making – such as developing new products or entering new markets – would become much
better informed.

Limitations of sales forecasting

 Time consuming
 Complex calculation

 Forecasts further than 1–2 years into the future become less accurate as the projections made are entirely based
on past data – no consideration is taken of qualitative factors
  Newly or recently established businesses will have insufficient data to base moving averages on

Advantages of moving average forecasting

 Useful for identifying and applying the seasonal variation to trend forecasts

 accurate for short-term forecasts in stable economic conditions

 Identifies the average seasonal variations for each time period and this can assist in planning resources

4.4 market research

market research: process of collecting, recording and analysing data about customers, competitors and the market

Tries to analyse consumers reaction to:

• different price levels

• alternative forms of promotion
• new types of packaging
• different methods of distribution.

Why organisations carry out market research:

1. To reduce the risks associated with new product launches

2. To predict future demand changes

3. To explain patterns in sales of existing products and market trends

4. To assess the most favoured designs, flavours, styles, promotions and packages for a product

Market research can, therefore, be used to discover information about:

• market size and consumer tastes and trends

• the product and its perceived strengths and weaknesses
• the promotion used and its effectiveness
• competitors and their claimed unique selling propositions
• consumers’ preferences for packaging/ distribution the product.

How organisations carry out market research

Sources of market research data

primary research: the collection of first-hand data that are directly related to a firm’s needs

secondary research: collection of data from second-hand sources

 Qualitative research and quantitative research – the differences

qualitative research: research into the in-depth motivations behind consumer buying behaviour or opinions

quantitative research: research that leads to numerical results that can be presented and analysed

Methods of primary research

1. Surveys - detailed study of a market or geographical area to gather data on attitudes, impressions, opinions and
satisfaction levels of products or business, by asking a section of a population

 directly asking consumers or potential consumers – usually by means of a questionnaire – for their opinions and
preferences.
 can be used to obtain both qualitative and quantitative research.

There are four important issues for market researchers to consider when conducting consumer surveys:

 Who to ask: The more closely this sample reflects the characteristics of the survey population, the less chance of
sampling error.
 What to ask:The construction of an unbiased and unambiguous questionnaire is essential if the survey is to
obtain useful results.
 How to ask
 How accurate is it? Assessing the likely accuracy and validity of the results is a crucial element of market
research surveys.

Questionnaire design

open questions: those that invite a wide-ranging or imaginative response

 lead to results which will be difficult to collate and present numerically/statistically, but they might provide a
useful insight into consumers’‘thinking’ about a product

closed questions: questions to which a limited number of preset answers is offered

 questions lead to results which are easy to present and analyse, but offer little scope for explaining the reasoning
behind consumers’ answers

it is advisable to undertake an initial pilot survey to test the quality of the questions. Other principles to follow include:

 Make the objectives of the research clear so that questions can be focused on these.

 Write clear and unambiguous questions.

 Try to make sure that the questions follow each other in a logical sequence.
 Use language that will be readily understood.
 Include some questions that will allow a classification of results by gender, area lived in, occupation and so on.

2. Interviews

 conducted by an interviewer usually either in the street or in the respondent’s home.

 Skilled interviewers will avoid bias in the way in which they ask question, follow up questions can be asked if
required
 This can be an expensive method

3. Focus groups - a group of people who are asked about their attitude towards a product, service, advertisement or new
style of packaging
  Questions are asked and group are encouraged to actively discuss their responses about a product, advertising,
packaging and so on.
 These discussions are often filmed and this is then used by the market research department as a source of data.
 Information is often believed to be more accurate and realistic than the responses to individual interviews or
questionnaires
 the risk of researchers leading or influencing the discussion too much, leading to biased conclusions.

4. Observations – a qualitative method of collecting and analysing information obtained through directly or indirectly
watching and observing others in business environments’

 marketing specialists are able to identify actions and watch how customers or potential customers respond to
various stimuli.
 One of the most common ways - cookies on computers
 relatively inexpensive
 if the observer is completely unseen, customers often behave naturally and do not try to demonstrate their ‘ideal
selves’ instead of their true actions.
 time-consuming and does not provide qualitative evidence explaining consumers’ behaviour
 if observed becomes distracted, the results can be distorted, ethical question

5. Test marketing – marketing a new product in a geographical region before a full-scale launch
takes place after a decision has been made to produce a limited quantity of a new product but before a full-scale, national
launch is made.

 involves promoting and selling the product in a limited geographical area and then recording consumer reactions
and sales figures.
 It reduces the risks of a new product launch failing completely
 the evidence is not always completely accurate if the total population does not share the same characteristics
and preferences as the region selected.

Sources of secondary data

 is never completely up to data

 may not provide answers to specific questions the business wants answers to
 is available to competitors too

1. Market intelligence analysis reports

 extremely detailed reports on individual markets and industries produced by specialist market research agencies.
 very expensive, not the most up to date versions, but they are usually available at local business libraries

2. Academic journals

 focus on the science and techniques involved in market research.

3. Government publications

4. Local libraries and local government offices

5. Trade organisations
  produce regular reports on the state of the markets their members operate in.

6. Media reports and specialist publications (Object to bias)

7. Internal company records

• customer sales records

• guarantee claims from customers
• daily, weekly and monthly sales trends
• feedback from customers on product, service, delivery and quality.

8. The internet

Ethical considerations of market research

 Researchers should have the permission of the people who they will be studying to conduct research.
 Data collection methods should not cause physical or emotional harm to the respondents.
 Objectivity versus subjectivity in research is another important consideration. Researchers should be sure their
own personal biases and opinions do not get in the way of interpreting research results.
 Many types of research, such as surveys or observations, should be conducted on the assumption that findings
are kept anonymous.
 Researchers should not take advantage of easy-to-access groups of people simply because they are easy to
access.
 Interview responses or small parts of observations should not be taken out of context.

Sample size and sampling techniques

sample: group of people taking part in a market research survey selected to be representative of the target market overall

sampling error: errors in research caused by using a sample for data collection rather than the whole target population

1. Quota sampling - gathering data from a group chosen out of a specific sub-group, e.g. a researcher might ask 100
individuals between the ages of 20 and 30 years

 The population is first segmented into mutually exclusive sub-groups.

 Then the interviewer or researcher uses his or her judgement to select people from each segment based on a
specified proportion
 Selection may therefore be biased
 not everyone gets a chance of selection.

2. Random sampling - every member of the target population has an equal chance of being selected

To select a random sample the following are needed:

 a list of all of the people in the target population

 sequential numbers (randomly generated) given to each member of this population

3. Stratified sampling - this draws a sample from a specified sub-group or segment of the population and uses random
sampling to select an appropriate number from each stratum
  recognises that the target population may be made up of many different groups with many different opinions.
 These groups are called strata or layers of the population and for a sample to be accurate it should contain
members of all of these strata –
 may also be used when a product is designed to appeal to just one segment of the market

4. Cluster sampling – using one or a number of specific groups to draw samples from and not selecting from the whole
population, e.g. using one town or region

 When a full list of potential sample members is not available or the target population is too geographically
dispersed, then cluster sampling will take a sample from just one or a few groups – not the whole population.
 may not be fully representative of the whole population.
 Random methods can then be used to select the sample from this group.

5. Snowball sampling - using existing members of a sample study group to recruit further participants through their
acquaintances

 The first respondent refers a friend who then refers another friend . . . and so the process continues.
 cheap and can be operated through social networking sites.
 likely to lead to a biased sample, as respondent’s friends are likely to have the same lifestyle and opinion

6. Convenience sampling - drawing representative selection of people because of the ease of their volunteering or selecting
people because of their availability or easy access

 The advantages are the availability and the quickness with which data can be gathered.
 The disadvantages are the risk that the sample might not represent the population as a whole, and it might be
biased by volunteers.

Results from data collection

 4.5 The fours Ps – product, price, promotion and place
PRODUCT
“ the end result of the production process sold on the market to satisfy a consumer need”
The term products can be both
 consumer durables – manufactured products that can be reused and are expected to have a reasonably
long life, such as cars.
 Single use products such as chocolate

Product life cycle

“the pattern of sales recorded by a product from launch to withdrawal from the market”
The stages of the product life cycle is

Introduction – when the product has just launched.

 Low sales
 High cost per customer
 Financial losses
 Innovative customers
 Few (if any competitors)

Growth – if the product is effectively promoted and well received by the market, then sales should grow significantly
 Increasing sales
 Cost per customer falls
 Profit rise
 Increasing number of customers
 More competitors

Maturity or saturation – sales fail to grow, but they do not decline significantly
either
 Profits are high
 Stable number of competitors

Decline – when sales decrease significantly

 When newer competitor’s products are most likely to cause declining sales
and profits
 When the product is unprofitable/ its replacement is ready for market, it
will be withdrawn

Extension strategies
“marketing plans that extend the maturity stage of the product before a brand new one is needed”

Types of extension strategies and evaluation

The product life cycle and the marketing mix

Product life- Place
Price Promotion Product
cycle phase (distribution outlets)
• High levels of
• May be high compared • Restricted outlets –
informative advertising to
to competitors possibly high-class
Introduction make consumers aware of • New model launched
(skimming) outlets if a skimming
the product’s arrival on
or low (penetration) strategy is adopted
the market
• Consumers need to
be convinced to make • Planning of product
• If successful, an initial • Growing numbers
repeat purchases – brand improvements and
penetration pricing of outlets in areas
Growth identification will help to developments to
strategy could now lead indicated by strength of
establish consumer maintain consumer
to rising prices consumer demand
loyalty, appeal
persuasive advertising
• Brand imaging continues
– growing need to stress
• Competitors likely to be • Highest geographical
the positive differences
entering market – there range of outlets as • New models, colours,
with competitors’
Maturity will be a need to keep possible – developing accessories, etc. as part
products
prices at competitive new types of outlets of extension strategies
Extensive advertising to
levels where possible
remind customers of the
product
• Lower prices to sell off
• Advertising likely to be • Prepare to replace
stock – or if the product
very limited – may just be • Eliminate unprofitable with other products –
Decline has a small ‘cult’
used to inform of lower outlets for the product slowly withdraw from
following, prices could
prices certain markets
even rise

The relationship between the product life cycle, investment, profit and cash flow

development introduction Growth maturity decline

Investment level High research and High costs on Average to high costs Lower costs on Very low costs on promotion
development costs promotion on promotion promotions, maybe cost
on extension strategy
Profit None None or negative Some profit and High profit Decreasing profit
rising High profit margin prices falling further, hitting gross
Some profit margin By the end, prices made profit margins
competitive, lower
margins
Cash flow Negative (only out of Negative, but improving positive Positive Positive but decreasing cash flow
business) with sales
Heacy promotional
expenses

Boston Consulting Group matrix

“a method of analyzing the product portfolio of a business in terms of market share and market
growth”
- Allows analysis of the existing product portfolio + what future strategies the firm
could take next
- Size of each circle represents total revenue earned by each product

The model consists of four sectors:

Stars
 high market growth and high market share.
 They are successful products in the market and generate high amounts of
income for the business. (they are growing)
 However, they need high levels of investment to sustain their rapid growth and status in the market
Cash cows
 low market growth (because they have already reached their peak) and high market share (because a
lot of people are buying it).
  They compromise well-established products in a mature market and, as a result, businesses will invest
less to hold to their market share.
 The product sales are high and very profitable so they generate a good amount of cash for the business
Problem child
 high market growth and low market share
 consumes resources, generates little return
 concern to businesses because of the large amount of money needed to increase their share in the
market
Dogs
 low market share and low market growth
 they operate in markets that are not growing or in declining markets and therefore little income for
business
 may need to be replaced shortly

Boston Consulting Group matrix and strategic analysis

These strategies can only be undertaken if the business has a balanced portfolio of products. The 4 strategies include:
 Building – supporting the problem child with additional advertising or further distribution outlet with
finance could be obtained from established cash cow products
 Holding – continuing support for star products so they can maintain their good market position
 Milking – taking the positive cash flow from established products and investing in other products in the
portfolio
 Divesting – identifying the worst performing dogs and stopping the production and supply of these
(note that it affects workforce etc.)

Evaluation of the Boston Consulting Matrix

This analytical tool has relevance when:
 Analyzing the performance and current position of existing products
 Planning action to be taken with existing products
 Planning the introduction of new products
However, it does not guarantee business success as
 It cannot tell a manager what will happen next to any product
 It is only a planning tool and simplifies a complex set of factors determining product success
 It assumes that higher rates of profit are directly related to higher market share which is not always the
case

Branding
brand – an identifying symbol, name, image or trademark that distinguishes a product from its competitors

brand development – measures the infiltration of a product’s sales, usually per thousand population: if 100 people in 1000
buy a product, it has a brand development of 10

brand value/equity – the premium that a brand has because customers are willing to pay more for it than they would for a
non-branded generic product

Branding attempts to increase

 brand awareness – extent to which a brand is recognized by potential customer and is correctly
associated with a particular product – can be expressed as a percentage of target market
 brand loyalty – the faithfulness of consumers to a particular brand as shown by their repeat purchases
irrespective of the marketing pressure from competing brands
the importance of branding
 promotes instant recognition of the company and product
 helps differentiate the company and its products from rivals
 aids in employee motivation
 customers know what to expect from the company and products
 an emotional attachment can develop between the brand and customers  customer loyalty

Types of branding:

Family branding
“a marketing strategy that involved selling several related products under one brand name”
- mars bar was the original product – now joined by mars ice cream, energy drinks and muffins
Advantages
 Marketing economies of scale when promoting brand
 Makes new product launches easier
Disadvantages
 Poor quality of one product under the bran may damage them all

Product branding
“Each individual product in a portfolio is given its own unique identity and brand image”
- Toyota created lexus brand of luxury cars
Advantages
 Each product is perceived as its own unique and separate brand – unconnected in the consumers’
minds with the parent company
Disadvantages
 Loses the positive image of a strong company brand

Company or corporate branding

“The company name is applied to products and this becomes the brand name”
- Disney products
Advantages
 Similar to family branding – but now applies to all products under company’s brand name
Disadvantages
 poor quality of one product may damage image of company

Own-label marketing
“Retailers create their own brand name and identity for a range of products”
- Walmart has numerous own brands (life – men’s wear, metro 7 – women’s wear)
Advantages
 Often cheaper than name-brand products
 Often little spent on advertising – in-store promotions used instead
 Each own-brand label appears to different consumer groups and tastes
Disadvantages
 Consumers often perceive products to have a lower-quality image

Manufacturers’ brand
“Producers establish the brand image of a product or a family of products, often under the company’s name
- Coca cola, Levi’s
Advantages
 Successful branding by manufacturers establishes a unique personality for the product which many
consumers want to be associated with – and will pay premium prices to purchase
Disadvantages
 The brand has to be constantly promoted

The importance of packaging

 Protection - from damage and during transport from manufacturer to the retailer
 Attracting customers - extensive market research on colors schemes, design, materials
 Promotion and information – gives information about the product (list nutritional information, how to
use the product, details on special offers…)
 Differentiation and brand support – by displaying logos or color schemes it can help customers identify
the brand, if the product packaging changes, it may alter the brand perception of the company, may delay
consumer’s purchase until they identify with it
Evaluation of packaging
 Packaging must be integrated with the rest of the marketing mix to send consumers a consistent
message about the product
 Packaging is also a concern of the environment

PRICE
“Price is the amount paid by consumers for a product”
The price will
  Impact the consumer demand for the product
 Influence the revenue and profit made by a business due to the impact on demand
 Reflect marketing objectives of the business and help establish the psychological image and identity of
a product
 Determine value added

Factors determining the price decision

 Costs of production
 Competitive conditions in the market
 Competitors’ prices
 Marketing objectives
 Price elasticity of demand
 Whether it is new or an existing product

Pricing strategies
Cost-plus pricing – adding a fixed mark-up for profit to the unit price of a product
- Often used by retailers who take the price they pay producer or wholesaler for a product, and add a percentage
mark up
Advantages
 It is a simple and quick method of calculating the selling price of a product
 It is a good way to ensure that a business covers its costs and makes a profit
Disadvantages
 It fails to consider market needs or costumer value when setting prices
 Since competitors’ prices are not considered, a firm could lose sales if it sets a selling price that is
higher than its competitors’

Penetration pricing – setting a relatively low price often supported by strong promotion in order to achieve a high volume
of sales
- Firms attempt to use mass marketing and gain a large market share
- If product gains large market share, the prices can be increased
Advantages
 Low prices should lead to high demand – important to establish high-market share for new products
Disadvantages
 Profit margins might be very low – prices might have to rise in the future and there could be consumer
resistance to this

Market skimming – setting a high price for a new product when a form has a unique or differentiated product with low
price elasticity of demand
- aims to maximise short-run profits, before competitors enter the market with a similar product, and to project an
exclusive image for the product.
- If rivals do launch similar products, it may be necessary for the price to be reduced over a period of time.
Advantages
 High profit margins will help pay for development costs of new product
Disadvantages
 The high prices may discourage some consumers from buying the product
 High prices might encourage competitors to enter the market

Psychological pricing – setting prices that take account of customers’ perception of value of the product
- common for manufacturers and retailers to set prices just below key price levels in order to make the price
appear much lower than it is ($999 is used instead of $1001).
- Also refers to the use of market research to avoid setting prices that consumers consider to be inappropriate for
the style and quality of the product.

Advantages
 Prices reflect what consumers expect, meaning that the price will be consistent with other aspects of
the marketing mix
Disadvantages
 Price level and demand for the product need to be consistently reviewed as “consumer expectations”
may change over time

Loss leaders– product sold at a very low price to encourage consumers to buy other products
 - widely used by supermarkets. Selling milk or bread at very low prices – perhaps below cost price – will encourage
consumers into the stores to buy other goods on which the supermarket makes a higher profit margin

Advantages
 Increases market share
 Makes a loss on one product but more on other products
Disadvantages
 Cheaper generic alternatives may be sold by rival firms so the profit-making complementary products
will not be purchased

Price discrimination – when selling the same product to different consumers at different prices
- Airline operators
Advantages
 Uses price elasticity knowledge to charge different prices in order to increase total revenue
Disadvantages
 consumers may switch to lower-priced market
 consumers paying higher prices may object and look for alternatives

Promotional pricing – special low prices to gain market share or sell off excess stock
- tends to operate for limited periods only to boost sales at times of low demand or to support the opening of a
new store.
Advantages
 attracts new customers who may continue to buy when price is restored to original
 encourages multibuys
 allows selling out of season stock
Disadvantages
 if this method is used frequently, consumers may suspect that higher non-discounted prices can never
be justified
 low prices can be associated with low quality

Predatory pricing – deliberately undercutting competitors’ prices in order to try to force them out of the market
Advantages
 increases demand for the business
 may reduce the number of competitors and increase monopoly power
Disadvantages
 it is illegal in many countries and fines can be imposed

price leadership – exists when one business sets a price for its products and ither firms in the market set the same or similar
prices
Advantages
 small businesses know what price they have to “aim to set”
 price leader may have lower unit cost do it remains more profitable than competitors with even lower
prices
Disadvantages
 can be perceived as being predatory
 only works for undifferentiated products

PROMOTION
“The use of advertising, sales promotion, personal selling, direct mail, trade fairs, sponsorship and public relations to inform
consumers and persuade them to buy”
Promotional objectives aims to
 increase sales by raising consumer awareness
 encourage retailers to stock
 develop or adapt the public image of the business
 create brand image or personality of the product

Above-the-line promotion
“a form of promotion that is undertaken by a business by paying for communication with consumers”
  advertising à a form of above-the-line promotion
there are two types of advertising
1. informative advertising – they give information to potential purchasers of a product, rather than just
create a brand image (price, technical specifications), effective when promoting a new product that
consumers are unlikely to be aware of
2. persuasive advertising – involves the attempt of creating a distinct image or brand identity for the
product

Advertising decisions – which media to use

 cost – TV and radio can be very expensive per minute, cost will depend on the time of the day and size
of potential audience
 the profile of the target audience in terms of age, income, interest etc. – the media should be
adjusted to this
 the type of product and message to be communicated – information that needs to be referred to is
easier to absorb written, while viewing products may be better visually
 the other aspects of the marketing mix
 law and other constraints

Below-the-line promotion
“promotion that is not directly paid-for means of communication but based on short-term incentives to purchase”
 sales promotion - incentives such as special offers or special deals directed at consumers or retailers to
achieve short-term sales increases and repeat purchases by consumers
Method explained Possible limitations
 Increased sales gained from price reductions will
Price promotions – temporary reductions in price, also affect gross profit on each item sold.
known as price discounting. They are aimed at encouraging  There might be a negative impact on the rand’s
existing customers to buy more and attracting new reputation from the discounted price.
customers to buy the product.

 They may simply encourage consumers to buy what

they would have bought anyway.
Money-off coupons – these are a more versatile and  Retailers may be surprised by the increase in demand
better-focused way of offeringa price discount. Coupons can and not hold enough stocks, leading to consumer
appear on the back of receipts, in newspaper advertisements disappointment.
or on an existing product pack.  Proportion of consumers using the coupon might be
low if the reduction it offers is small.

 The discount offered by such schemes cuts the gross

Customer loyalty schemes such as air profit on each purchase.
miles or customer loyalty cards – focused on encouraging  There are administration costs to inform consumers of
repeat purchases and discouraging consumers from loyalty points earned and these may outweigh the
shopping with competitors. Information stored through benefits from increased consumer loyalty.
loyalty cards provides a great deal of information about  Most consumers now have many loyalty cards from
consumers’ buying preferences. different retailers, so their ‘loyalty’ impact is reduced.

 These involve the consumer filling in and posting off a

form and this might be a disincentive.
Money refunds – these are offered when the receipt is  Delay before a refund is received may act as a
returned to the manufacturer. disincentive.

 There could be substantial reduction in gross profit

margin.
 Consumers may consider that if this scheme is able to
operate, are they paying a ‘normal’ price that is too
BOGOF – ‘buy one get one free’ − this encourages high?
multiple purchases, which reduces demand for competitors’  Is the scheme being used to sell off stock that cannot
products too. be sold at normal prices – impact on reputation?
 Current sales might increase, but future sales could
fall as consumers have stocked up on the product.

Point-of-sale displays – maximum impact on consumer  The best display points are usually offered to the
behaviour is achieved by attractive, informative and well- market leaders – products with high market share.
positioned displays in stores.
  New products may struggle for best positions in stores
– unless big discounts are offered
to retailers.

Public relations – the use of free publicity provided by • This is not easily controllable as some ‘free publicity’ might
newspapers, TV and other media to communicate with and not be positive towards the company or its products, e.g.
achieve understanding of the public. newspaper reviews.
Sponsorship – payment by a company to team owners or • The success of the sponsorship is largely out of the
event organisers so that the company’s name becomes company’s control. If the team loses every match or the event
associated with the team or event. is a failure, this might reflect badly on the sponsor.

The promotion mix

“the combination of promotional techniques that a firm uses to communicate the benefits of its products to customers”

There are eight stages in deciding on a promotional mix

1. decide on the image of the product
2. develop a profile of the target market
3. decide on the message to communicate
4. set an appropriate budget
5. decide how the messages should be communicated
6. establish how the success of the promotional mix is to be assessed
7. undertake the promotional plan and the mix elements of it
8. measure its success
How the promotional mix changes over the life cycle of a product
Stage of the
Promotional options
cycle
 Informative advertising and PR to make consumers aware of the product
 Sales promotion offering free samples or trial periods to encourage consumers to test the
Introduction product

 Focus shifts to ‘brand’ building and persuasive advertising

 Sales promotion to encourage repeat purchases
Growth  Attempt to develop brand loyalty

 Advertising to emphasise the differences between this product and competitors

Maturity  Sales promotion incentives to encourage brand development and loyalty

Decline –  Minimal advertising

assuming no  Sales promotion – there may be little additional support for the product if the intention is to
extension withdraw it
strategy

The impact of changing technology on promotional strategies

internet marketing – refers to advertising and marketing activities that use internet, email and mobile communications to
encourage direct sales via electronic commerce

Benefits Limitations
Lack of skill – Large businesses will have dedicated teams of
Improved audience reach – Internet promotion has a global people monitoring social media. Small businesses or newly
audience and this reduces the unit cost of reaching potential set up enterprises may be led by people who do not have the
consumers compared to traditional forms of promotion. skills to choose the appropriate social media.

Targeted marketing – Social networking websites give Time investment –managing a social media account day to
advertisers the ability to target audiences based on site day is a time investment many small businesses omit to
users’ personal interests and what their friends like ‘smart’ make.
marketing. In addition, social networking enables word of A successful social media campaign counts on almost
mouth to promote products beyond what advertising alone constant interaction between a company and its customers.
does. Not responding to customers’ questions can be damaging to
reputation and followers could quickly lose interest.
Interactivity –businesses can interact with potential
customers using conversation threads and forums  deeper
Negative feedback – While it is beneficial for businesses to
interest in your product.
get feedback from their customers, social media makes the
feedback public. If a customer has a bad experience with a
Performance metrics – Some IT-based promotional services product, he or she is likely to share the experience on the
provide feedback and assessment services to their social network profile. This could quickly damage the brand’s
advertisers. With these forms of measurement, businesses image unless it is responded to quickly and satisfactorily.
can track which type of advertisements are attracting the
most web traffic. Also consumer profile and demographic
Performance metrics – When a business uses an email
information help direct future promotional efforts.
marketing program, the business can track how many emails
are sent, how many people opened the email and the number
Speed of transmission –One well-placed, critical feedback of sales generated as a result. Social media does not offer the
comment can be responded to almost immediately with same measurability. Business owners find themselves
instant updates. Social networking also gives businesses the wondering if it is worth investing time and dedicating human
ability to notify followers instantly about product updates, resources.
new product launches and even product recalls. Live, current
content through social media makes business advertising
Security issues
seem dynamic and makes products more attractive,
especially to younger consumers.

Viral marketing
“the use of social media sites or text messages to increase brand awareness or sell products”
 marketing managers try to identify individuals with high social-networking potential – called influencers
– and create viral messages that appeal to them and have a high chance to be passed on to many people
who are impressed that the influencer contacted them about the product
Guerrilla marketing
“an unconventional way of performing marketing activities on a very low budget”
 it is about taking the consumer by surprise and making a memorable impression and creating a social
buzz via the new media forms
 relevant for new businesses or small businesses with limited promotion budgets
The risks of guerrilla marketing
 the created image may be negative
 not perceived well by older generations as it is untraditional

PLACE
“place are concerned with how products should pass from manufacturer to the final customer”

Channel of distribution – the chain of intermediaries a product passes through from producer to final consumer
  Large supermarkets perform the function of wholesalers as well as retailers, as they hold large stocks in
their own central warehouse (vertical marketing)
 Businesses are increasingly using a variety of
different channels
 Agents – a business with the authority
to act on behalf of another firm
 Integration of services where a complete package
is sold to consumers

4.6The extended marketing mix (service-based)

+
People
Process
Physical evidence

Marketing mix – people

 the employees and managers of a

business and how they relate to
customers and communicate with
them.
 Well-trained, confident and well-
motivated employees who deal
with customers in an efficient,
speedy manner also help to
create customer loyalty

Marketing mix – process

process: procedures and policies that are

put in place to provide the service or the
product to the consumer

 consumer experience
 Processes must change for
businesses to remain competitive
(online)
 The speed and efficiency of
service delivery are determined
by the ‘process’ that has been put
in place
 All services need to be
underpinned by clearly defined
and efficient processes.This will avoid delays in providing the service and promote a consistent customer
experience.
 Everybody in the organisation knows what to do and how to do it.
  Short waiting times, quality information given to customers and the helpfulness and knowledge of employees are
all expectations of customers that should be met if the process is effective and well tested.

Marketing mix - Physical evidence

physical evidence: the ways in which the business and its products are presented to customers

 refers to the way the business’s goods or service ‘appears from the outside’
o where the service is being delivered from
 location, the appearance and state of repair/decoration of retail shops
o the appearance of employees and how they dress and act.
 Can help distinguish business from its competitors
 Can be used to support charging of a premium price for service and establish a positive customer experience

intangible products: a non- physical product – a service – provided to a consumer such as an insurance policy or a car
repair

tangible products: a physical object that can be touched such as a building, car, tablet computer, or clothing

 the packaging is a key part of physical evidence.

 This should be customer-tested and updated when needed

It is important that the physical environment is consistent with the other elements of the marketing mix.

To the customer or potential customer, the physical environment has to feel right and be in line with their expectations.

Customers use other senses apart from sight to make judgements about the physical environment they find themselves in.

4.7 International marketing

international marketing: selling products in markets other than the original domestic market

globalisation: the growing trend towards worldwide markets in products, capital and labour, unrestricted by national
barriers

Methods of entry into international markets

Exporting

- Can be undertaken directly (selling g to a foreign customer) or indirectly (through an intermediary  agent or
trading company based in the country)

o Profit is not ‘shared’ with another business

o Complete control of marketing strategy rests with the exporting business
o No knowledge gains from businesses/partners based in international markets
o May be import tariffs imposed by governments to protect markets for products produced nationally

International franchising

o gives each franchised unit local knowledge

o Franchisees contribute to the capital cost by purchasing a franchise licence

 o Some operational issues are now the responsibility of the local franchisee

o Some loss of centralised control

o Careful selection of each franchisee is essential as damage to business brand name in one country
could spread globally

Joint ventures

o local knowledge will be obtained – customs, laws, culture, etc.

o Capital injection will be shared
o Management responsibilities and risk will be shared
o Management problems due to clash of business cultures or personalities
o Profits will be shared
o Loss of complete control of operations and marketing strategy

Licensing

- involves the business allowing another firm in the country being entered to produce its branded goods or
patented products under licence, which will involve strictly controlled terms over quality
- goods do not have to be physically exported, saving on time and transport costs – and making food products
fresher too.

o Reduces capital costs of setting up own operations

o Licensee will benefit from local knowledge
o Loss of control over quality and marketing strategy
o Profit margin may be reduced compared to maintaining complete control and eliminating a third part in
the production/marketing of products

Direct investment in subsidiaries

o Gives complete control over the operations of the subsidiary

o Local subsidiary will have managers with local knowledge
o Existing operations will allow quicker entry to the market than setting up new facilities
o Culture clash is possible
o May be strict local laws
o Valuation of foreign subsidiaries may be difficult

Opportunities and threats posed by entry into international markets.

Opportunities Threats
 Develop marketing operations in expanding markets when
 Differences in consumer needs and wants  increased costs of
the domestic market is saturated/mature
adapting products and their marketing
 Potential to increase profits through rapid sales growth and
to meet these differences
low costs in emerging markets.
 Differences exist in the legal environment,
 Spreading risks between different markets at different
 High levels of competition from national producers, which may receive
stages of the economic cycle
subsidies or ‘special treatment’ from national governments.
 Poor trading conditions in the home market 
 Growth of the either copies of branded products or branded products
international marketing can allow sales to continue to
sold through unauthorised channels  undermining the reputation
grow.
and profit margins for well-known brands
 Economics of scale in production and marketing

Strategic and operational implications of international marketing

pan-global marketing: adopting a standardised product across the globe as if the whole world were a single market –
selling the same goods in the same way everywhere

Pan-global marketing may continue to be important for two groups of products in particular:

 upmarket brands with international appeal for their exclusivity (same product as international celebrities is the
key promise made by these brands)
 mass-appeal brands (economies of scale)

Advantages

 A common identity for the product can be established  aids consumer recognition
 Cost reduction can be substantial (particularly important for firms that have
to spend huge sums on developing new products that may have only a short product life cycle one marketing
agency and advertising strategy to be used for the whole world or region)
 It recognises that differences between consumers in different countries are reducing

Disadvantages

 it might still be necessary to develop different products to suit cultural or religious variations. Market
opportunities could be lost by trying to sell essentially the same product everywhere.
 Legal restrictions can vary substantially between countries.
 Brand names do not always translate effectively into other languages  might cause offence or unplanned
embarrassment for the company
 Setting the same price in all countries will fail to take into account different average income levels that exist.

Global localisation

global localisation: adapting the marketing mix, including differentiated products, to meet national and regional tastes and
cultures

 the opposite of standardisation and is the business strategy that responds to the drawbacks of a pan-global
strategy.

It offers all of its franchisees and branches around the globe the benefits and security offered by a giant multinational
corporation. However, it differentiates most aspects of its marketing mix between different countries and markets. For
example:

 In China, it sells products that are not available in other countries to suit local consumers’ tastes.
 Price levels are varied between different countries to reflect different average incomes.
 Advertisements always contain local ‘ethnic’ people.

Benefits

 Local needs, tastes and cultures are reflected in the marketing mix of the business [ higher sales and profits.
 The products are more likely to meet local, national and legal requirements than if they are standardised
products.
 There will be less local opposition to multinational business activity.

Limitations

 The scope for economies of scale is reduced.

 The international brand could lose its power and identity if locally adapted products become more popular than
the ‘international’ product

 There will be additional costs of adapting products, advertisements, store layouts, etc. to specific local needs

Implications of globalisation in international marketing

 multinational companies: businesses that have operations in more than one country

Marketing opportunities of globalisation Marketing threats of globalisation

 There is greater opportunity for selling goods in other
countries  gives the chance of higher sales, economies of
 increased competition. Wider consumer choices will drive firms that are
scale and improved profitability.
not internationally competitive out of business. (or price
 Increased competition gives firms the incentive to become
competitiveness)
more internationally competitive.
 Pan-European/global strategies can fail to consider the cultural and
 Pan-European or pan-global marketing strategies can be
taste differences between consumers of different nations.
used to create a global brand identity. This saves on the
 significant transport and communication problems. The risk of
costs of ‘different markets – different products’.
unethical practices by managers with delegated authority thousands of
 There is a wider choice of locations – the opportunity to set
kilometres from head office can lead to problems.
up operations in other countries and become a
 Businesses are now increasingly at risk of foreign takeovers,
multinational. These locations offer, usually, lower costs and
 Increasing activity from anti-globalisation pressure groups may result in
direct access to local markets.
bad publicity for multinationals in particular and for those firms found
 Greater freedom to arrange mergers and takeovers and
guilty of environmental damage in foreign countries.
joint ventures with firms from other nations as restrictions
on foreign acquisitions are reduced.

4.8 E-commerce
The buying and selling goods and services on the internet

Marketing mix Impact of technology and e-commerce

 Banners, pop-ups, text messages, web pages, blogs, viral marketing.
 Using the internet and other IT-based systems for promotion not only saves costs when aiming to
reach huge numbers of potential customers but also allows for directed, targeted marketing at
Promotion groups of consumers or even individuals.
 Promotional materials and packaging might have to be adjusted to meet legal and cultural
demands in the different countries being sold to

 The internet is transforming the buying/shopping experience. The growth of e-commerce means
that a smaller proportion of all traded goods is now being sold through traditional channels such
as shops.
Place  A key issue with e-commerce is the importance of an effective and rapid logistics system to
transport products internationally.

The effects of changing technology and e-commerce on the marketing mix

Marketing mix Impact of technology and e-commerce

 Individual requirements can be built into the product or service to suit different needs. Examples
include airline tickets (time/class of seat/luggage/car hire) and PCs assembled to match the
individual specification of each customer.
 Businesses selling over the internet can afford to stock a much wider range of products than
Product nearly all shops could justify
 Product design may have to be adjusted to meet the legal and cultural demands of the different
countries that products will now be sold to

 Markets are now much more competitive as prices can be compared so rapidly – in both B2B and
B2C in particular. Competitive pricing is much more likely to be used than cost plus which means
customers are now more in control.
Price  Price discrimination through geographical separation of markets is now more difficult, given the
global reach of e-commerce.

Types of e-commerce
 Business to business (B2B)
 Transactions conducted directly between a supplying business and a purchasing busines

Business to consumer (B2C)

 Transactions conducted directly between the company and consumers who are the end users of its products and
services

Consumer to consumer (C2C)

 A business model based in e commerce that creates a facility that allows consumers to trade with each other
(ebay, cost effectiveness, lack of quality control, no payment guarantees)

The features of e-commerce

 Ubiquity (accessible at home, work, everywhere, 24/70
 Customization – personalization
 Global reach

The benefits and limitations of e-commerce

1. To businesses

Benefits Limitations
 Some countries have low-speed internet
 It is relatively inexpensive
connections; and in poorer countries, computer
 Businesses can reach a worldwide audience for a
ownership is not widespread.
small proportion of traditional promotion budgets.
 Consumers cannot touch, smell, feel or try on tangible
 Accurate records can be kept on the number of
goods before buying
‘clicks’ or visitors, and the success rate of different
 Product returns may increase as consumers may
web promotions can be quickly measured.
be dissatisfied with their purchase once it has been
 Selling products on the internet involves lower fixed
received.
costs than traditional retail stores – no need for
 The website must be kept up to date and user friendly
expensive locations – and these cost savings could be
– good websites can be expensive to develop.
passed on in lower prices.
 Worries about internet security
 There is scope to make cost savings and manage
 Expensive IT infrastructure is needed with suitable
supply chains by using B2B e-commerce.
qualified employees.

2. To consumers

Benefits Limitations
 Must have a reliable internet connection.
 consumers can quickly compare prices from many
 Not able to see, touch, try on products before they are
suppliers worldwide and there is huge product
delivered – time and expense of sending back items that
choice online.
fail to come up to expectations.
 Online stores are open 24/7
 Concern over credit card fraud and loss of personal
 Prices are often lower than for same
information,
goods/services from traditional retailers.
 Concern over the sale of fraudulent counterfeit goods
 No time or money are spent travelling to physical
online.
stores and no time spent queuing.
 Delays in receiving goods – speed of delivery will depend
 Ability to sell to other consumers]
on international/national transport infrastructure.