Marketing
Marketing can be described as the process of defining, anticipating, creating, and fulfilling customers’ needs and wants for products and services. There are seven basic functions of marketing: (1) customer analysis, (2) selling products and services, (3) product and service planning, (4) pricing, (5) distribution, (6) marketing research, and (7) opportunity analysis.
Customer Analysis
Customer analysis the examination and evaluation of consumer needs, desires, and wants involves administering customer surveys, analyzing consumer information, evaluating market positioning strategies, developing customer profiles, and determining optimal market segmentation strategies. The information generated by customer analysis can be essential in developing an effective mission statement. Customer profiles can reveal the demographic characteristics of an organization’s customers. Buyers, sellers, distributors, salespeople, managers, wholesalers, retailers, suppliers, and creditors can all participate in gathering information to successfully identify customers’ needs and wants. Successful organizations continually monitor present and potential customers’ buying patterns
Selling Products and Services
Successful strategy implementation generally rests on the ability of an organization to sell some product or service. Selling includes many marketing activities, such as advertising, sales promotion, publicity, personal selling, sales force management, customer relations, and dealer relations. These activities are especially critical when a firm pursues a market penetration strategy. The effectiveness of various selling tools for consumer and industrial products varies. Personal selling is most important for industrial goods companies, whereas advertising is most important for consumer goods companies.
For example, the J.M. Smucker Company has $5.5 and 4.8 billion in revenue in 2012 and 2011, respectively, and spent $119 and $115 million in advertising during those two years, comprising 2.1 and 2.4 percent of revenues, respectively. About 3 percent of revenues is normal for companies to spend on advertising although this can vary across industries. J.M. Smucker has a product portfolio that includes coffee, peanut butter, fruit spreads, jams, shortening and oils, baking mixes, canned milk, flour, syrups, pickles, and more. One aspect of ads recently is that they generally take more direct aim at competitors, and this marketing practice is holding true in our bad economic times. Nick Brien at Mediabrands says, “Ads have to get combative in bad times. It’s a dog fight, and it’s about getting leaner and meaner.” Ads are less lavish and glamorous today and are also more interactive. Table 6-4 lists specific characteristics of ads in response to the economic hard times many people nationwide and worldwide are facing.
Marketers spent about $3 million per 30-second advertising spot during the 2012 Super Bowl. Advertising can be expensive, and that is why marketing is a major business function to be studied carefully. Without marketing, even the best products and services have little chance of being successful Chief marketing officers (CMOs) such as Eduardo Conrado at Motorola now spend more than 50 percent of their budget on technology to manage activities like online marketing and social media.16 Marketing is becoming technical with software to track and target customers and manage customer relationships, predict consumer behavior, run online storefronts, analyze social media, manage websites, and craft targeted advertisements. IBM in response to this trend is shifting its attention from CIOs to CMOs as their primary clients.
Marketing can be described as the process of defining, anticipating, creating, and fulfilling customers’ needs and wants for products and services. There are seven basic functions of marketing: (1) customer analysis, (2) selling products and services, (3) product and service planning, (4) pricing, (5) distribution, (6) marketing research, and (7) opportunity analysis.
Customer Analysis
Customer analysis the examination and evaluation of consumer needs, desires, and wants involves administering customer surveys, analyzing consumer information, evaluating market positioning strategies, developing customer profiles, and determining optimal market segmentation strategies. The information generated by customer analysis can be essential in developing an effective mission statement. Customer profiles can reveal the demographic characteristics of an organization’s customers. Buyers, sellers, distributors, salespeople, managers, wholesalers, retailers, suppliers, and creditors can all participate in gathering information to successfully identify customers’ needs and wants. Successful organizations continually monitor present and potential customers’ buying patterns
Selling Products and Services
Successful strategy implementation generally rests on the ability of an organization to sell some product or service. Selling includes many marketing activities, such as advertising, sales promotion, publicity, personal selling, sales force management, customer relations, and dealer relations. These activities are especially critical when a firm pursues a market penetration strategy. The effectiveness of various selling tools for consumer and industrial products varies. Personal selling is most important for industrial goods companies, whereas advertising is most important for consumer goods companies.
For example, the J.M. Smucker Company has $5.5 and 4.8 billion in revenue in 2012 and 2011, respectively, and spent $119 and $115 million in advertising during those two years, comprising 2.1 and 2.4 percent of revenues, respectively. About 3 percent of revenues is normal for companies to spend on advertising although this can vary across industries. J.M. Smucker has a product portfolio that includes coffee, peanut butter, fruit spreads, jams, shortening and oils, baking mixes, canned milk, flour, syrups, pickles, and more. One aspect of ads recently is that they generally take more direct aim at competitors, and this marketing practice is holding true in our bad economic times. Nick Brien at Mediabrands says, “Ads have to get combative in bad times. It’s a dog fight, and it’s about getting leaner and meaner.” Ads are less lavish and glamorous today and are also more interactive. Table 6-4 lists specific characteristics of ads in response to the economic hard times many people nationwide and worldwide are facing.
Marketers spent about $3 million per 30-second advertising spot during the 2012 Super Bowl. Advertising can be expensive, and that is why marketing is a major business function to be studied carefully. Without marketing, even the best products and services have little chance of being successful Chief marketing officers (CMOs) such as Eduardo Conrado at Motorola now spend more than 50 percent of their budget on technology to manage activities like online marketing and social media.16 Marketing is becoming technical with software to track and target customers and manage customer relationships, predict consumer behavior, run online storefronts, analyze social media, manage websites, and craft targeted advertisements. IBM in response to this trend is shifting its attention from CIOs to CMOs as their primary clients.
Product and Service Planning
Product and service planning includes activities such as test marketing; product and brand positioning; devising warranties; packaging; determining product options, features, style, and quality; deleting old products; and providing for customer service. Product and service planning is particularly important when a company is pursuing product development or diversification
One of the most effective product and service planning techniques is test marketing. Test markets allow an organization to test alternative marketing plans and to forecast future sales of new products. In conducting a test market project, an organization must decide how many cities to include, which cities to include, how long to run the test, what information to collect during the test, and what action to take after the test has been completed. Test marketing is used more frequently by consumer goods companies than by industrial goods companies. Test marketing can allow an organization to avoid substantial losses by revealing weak products and ineffective marketing approaches before large-scale production begins.
Pricing
In late 2012, J.C. Penney abandoned its month-long specials that cut prices of select items by 20 to 29 percent, and instead implemented permanent price cuts on a large amount of merchandise in their stores. Penney’s pricing strategy gave consumers two options: everyday low prices and clearance sales on certain items. Penney’s price change strategy came as the company’s stock price had dropped 40 percent in recent months. To support the new pricing strategy, Penney’s began offering free haircuts every Sunday for children aged 5 to 12. Free is a good price and this program exists in 949 of Penney’s 1,100 stores totaling about 1 million haircuts per month. “It definitely drove new people and reintroduced J.C. Penney to existing customers who didn’t know about the latest changes,” said Jan Hodges, senior vice president of Penney’s salon services. But in an about-face after losses, Penney’s fired CEO Ron Johnson, brought back his predecessor Myron “Mike” Ullman, and began a “we’re listening” campaign on Facebook to
woo customers back into the stores.
Five major stakeholders affect pricing decisions: consumers, governments, suppliers, distributors, and competitors. Sometimes an organization will pursue a forward integration strategy primarily to gain better control over prices charged to consumers. Governments can impose constraints on price fixing, price discrimination, minimum prices, unit pricing, price advertising, and price controls. For example, the Robinson-Patman Act prohibits manufacturers and wholesalers from discriminating in price among channel member purchasers (suppliers and distributors) if competition is injure
Distribution
Distribution includes warehousing, distribution channels, distribution coverage, retail site locations, sales territories, inventory levels and location, transportation carriers, wholesaling, and retailing. Most producers today do not sell their goods directly to consumers. Various marketing entities act as intermediaries; they bear a variety of names such as wholesalers, retailers, brokers, facilitators, agents, vendors or simply distributors.
Distribution becomes especially important when a firm is striving to implement a market development or forward integration strategy. Some of the most complex and challenging decisions facing a firm concern product distribution. Intermediaries flourish in our economy because many producers lack the financial resources and expertise to carry out direct marketing. Manufacturers who could afford to sell directly to the public often can gain greater returns by expanding and improving their manufacturing operations Successful organizations identify and evaluate alternative ways to reach their ultimate market. Possible approaches vary from direct selling to using just one or many wholesalers and retailers. Strengths and weaknesses of each channel alternative should be determined according to economic, control, and adaptive criteria. Organizations should consider the costs and benefits of various wholesaling and retailing options. They must consider the need to motivate and control channel members and the need to adapt to changes in the future. Once a marketing channel is chosen, an organization usually must adhere to it for an extended period of time.
Marketing Research
Marketing research is the systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services. Marketing research can uncover critical strengths and weaknesses, and marketing researchers employ numerous scales, instruments, procedures, concepts, and techniques to gather information. Marketing research activities support all of the major business functions of an organization. Organizations that possess excellent marketing research skills have a definite strength in pursuing generic strategies. The president of PepsiCo said
Looking at the competition is the company’s best form of market research. The majority of our strategic successes are ideas that we borrow from the marketplace, usually from a small regional or local competitor. In each case, we spot a promising new idea, improve on it, and then out-execute our competitor
Cost/Benefit Analysis
The seventh function of marketing is cost/benefit analysis, which involves assessing the costs, benefits, and risks associated with marketing decisions. Three steps are required to perform a cost/benefit analysis: (1) compute the total costs associated with a decision, (2) estimate the total benefits from the decision, and (3) compare the total costs with the total benefits. When expected benefits exceed total costs, an opportunity becomes more attractive. Sometimes the variables included in a cost/benefit analysis cannot be quantified or even measured, but usually reasonable estimates can be made to allow the analysis to be performed. One key factor to be considered is risk. Cost/benefit analysis should also be performed when a company is evaluating alternativeways to be socially responsible.
The practice of cost/benefit analysis differs among countries and industries. Some of the main differences include the types of impacts that are included as costs and benefits within appraisals, the extent to which impacts are expressed in monetary terms, and differences in the discount rate. Government agencies across the world rely on a basic set of key cost/benefit indicators, including the following:
1. net present value (NPV)
2. present value of benefits (PVB)
3. present value of costs (PVC)
4. benefit cost ratio (BCR) = PVB / PVC
5. Net benefit = PVB – PVC
6. NPV/k (where k is the level of funds available)
Product and service planning includes activities such as test marketing; product and brand positioning; devising warranties; packaging; determining product options, features, style, and quality; deleting old products; and providing for customer service. Product and service planning is particularly important when a company is pursuing product development or diversification
One of the most effective product and service planning techniques is test marketing. Test markets allow an organization to test alternative marketing plans and to forecast future sales of new products. In conducting a test market project, an organization must decide how many cities to include, which cities to include, how long to run the test, what information to collect during the test, and what action to take after the test has been completed. Test marketing is used more frequently by consumer goods companies than by industrial goods companies. Test marketing can allow an organization to avoid substantial losses by revealing weak products and ineffective marketing approaches before large-scale production begins.
Pricing
In late 2012, J.C. Penney abandoned its month-long specials that cut prices of select items by 20 to 29 percent, and instead implemented permanent price cuts on a large amount of merchandise in their stores. Penney’s pricing strategy gave consumers two options: everyday low prices and clearance sales on certain items. Penney’s price change strategy came as the company’s stock price had dropped 40 percent in recent months. To support the new pricing strategy, Penney’s began offering free haircuts every Sunday for children aged 5 to 12. Free is a good price and this program exists in 949 of Penney’s 1,100 stores totaling about 1 million haircuts per month. “It definitely drove new people and reintroduced J.C. Penney to existing customers who didn’t know about the latest changes,” said Jan Hodges, senior vice president of Penney’s salon services. But in an about-face after losses, Penney’s fired CEO Ron Johnson, brought back his predecessor Myron “Mike” Ullman, and began a “we’re listening” campaign on Facebook to
woo customers back into the stores.
Five major stakeholders affect pricing decisions: consumers, governments, suppliers, distributors, and competitors. Sometimes an organization will pursue a forward integration strategy primarily to gain better control over prices charged to consumers. Governments can impose constraints on price fixing, price discrimination, minimum prices, unit pricing, price advertising, and price controls. For example, the Robinson-Patman Act prohibits manufacturers and wholesalers from discriminating in price among channel member purchasers (suppliers and distributors) if competition is injure
Distribution
Distribution includes warehousing, distribution channels, distribution coverage, retail site locations, sales territories, inventory levels and location, transportation carriers, wholesaling, and retailing. Most producers today do not sell their goods directly to consumers. Various marketing entities act as intermediaries; they bear a variety of names such as wholesalers, retailers, brokers, facilitators, agents, vendors or simply distributors.
Distribution becomes especially important when a firm is striving to implement a market development or forward integration strategy. Some of the most complex and challenging decisions facing a firm concern product distribution. Intermediaries flourish in our economy because many producers lack the financial resources and expertise to carry out direct marketing. Manufacturers who could afford to sell directly to the public often can gain greater returns by expanding and improving their manufacturing operations Successful organizations identify and evaluate alternative ways to reach their ultimate market. Possible approaches vary from direct selling to using just one or many wholesalers and retailers. Strengths and weaknesses of each channel alternative should be determined according to economic, control, and adaptive criteria. Organizations should consider the costs and benefits of various wholesaling and retailing options. They must consider the need to motivate and control channel members and the need to adapt to changes in the future. Once a marketing channel is chosen, an organization usually must adhere to it for an extended period of time.
Marketing Research
Marketing research is the systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services. Marketing research can uncover critical strengths and weaknesses, and marketing researchers employ numerous scales, instruments, procedures, concepts, and techniques to gather information. Marketing research activities support all of the major business functions of an organization. Organizations that possess excellent marketing research skills have a definite strength in pursuing generic strategies. The president of PepsiCo said
Looking at the competition is the company’s best form of market research. The majority of our strategic successes are ideas that we borrow from the marketplace, usually from a small regional or local competitor. In each case, we spot a promising new idea, improve on it, and then out-execute our competitor
Cost/Benefit Analysis
The seventh function of marketing is cost/benefit analysis, which involves assessing the costs, benefits, and risks associated with marketing decisions. Three steps are required to perform a cost/benefit analysis: (1) compute the total costs associated with a decision, (2) estimate the total benefits from the decision, and (3) compare the total costs with the total benefits. When expected benefits exceed total costs, an opportunity becomes more attractive. Sometimes the variables included in a cost/benefit analysis cannot be quantified or even measured, but usually reasonable estimates can be made to allow the analysis to be performed. One key factor to be considered is risk. Cost/benefit analysis should also be performed when a company is evaluating alternativeways to be socially responsible.
The practice of cost/benefit analysis differs among countries and industries. Some of the main differences include the types of impacts that are included as costs and benefits within appraisals, the extent to which impacts are expressed in monetary terms, and differences in the discount rate. Government agencies across the world rely on a basic set of key cost/benefit indicators, including the following:
1. net present value (NPV)
2. present value of benefits (PVB)
3. present value of costs (PVC)
4. benefit cost ratio (BCR) = PVB / PVC
5. Net benefit = PVB – PVC
6. NPV/k (where k is the level of funds available)
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