Tag: Principles of Marketing

Modern approach to marketing is referred to as the marketing concept which has developed gradually passing through different stages called Marketing Management Philosophies

The Production Concept

This concept lays emphasis on production and assumes that consumers will always respond to products that are made available to them. This concept developed when there was a period of manufacturing dominance and there was no competition. It was producers market and hence production problems were of more importance than anything else.

The major task of the management was to strive constantly to increase production and there were no selling or marketing problems. The production concept may boost the sales in the initial stages but it invites the criticism that it is impersonal in its approach and ignores the interests of the consumers.

The Product Concept

With the passage of time, it was realized that it is not only the quantity of production but also the quantity of the product that is important. The product concept assumes that the consumers will respond favourably to the best quality products that are reasonably priced and hence the major task of the management is to improve the quality of the product it offers to successfully attract and hold customers. Enterprises which rely too much upon the product concept may face difficulties due to the tendency on the part of such enterprises “To look to often in a mirror when they should be looking out of the window.”

The Sales Concept

With the development in technological field, the competition had grown and the market had become more complex. During 1920’s and 30’s the selling activity became more important and marketing was regarded merely as a selling activity, giving rise to the sales concept. The selling concept assumes that the consumers will generally not buy enough of the firm’s products unless their interest is stimulated in its products through substantial selling and promotional activities. In this concept the focus is on the product, the means are selling and promoting and the objective is maximization of profits through sales volume. The drawback of the sales concept is that it ignores the customer’s interest and a firm which follows this concept may face difficulties in the long run.

The Marketing Concept

The modern approach to marketing is referred to as the marketing concept. The essence of the marketing concept is that the customer and not the product is the centre of entire business activity. It is also referred to as the customer-oriented approach to business. This concept explains the rationale for a firm’s existence in terms of its ability to satisfy some aspects of consumer needs and recognizes the purpose of the business as to ‘create a customer’.

In the words of Stanton, “The marketing concept is a philosophy, an attitude, or a course of business action. The customers want satisfaction in the economic and social justification of a company’s existence. Consequently all company’s activities in production, engineering and finance, as well as marketing, must be devoted to, first, determining what the customers wants are and then, satisfying these wants while making a reasonable profit.

According to the marketing concept, the main task of the enterprise is:

(i) To adopt the enterprise in such a way so as to deliver the desired satisfaction more effectively and efficiently than its rivals.

(ii) To determine the actual needs, wants and preferences of customers, and

In this concept, the focus is on the customer needs, the means are integrated marketing and the objective is maximization of profits through customer satisfaction.

Characteristics of Marketing Concept

Customer orientation

The marketing process begins with knowing the customers’ desires until a business can create a product or offer a service that can meet and satisfy them. Happier customers lead to higher profits.

Integrated approach

Coordinated collaboration between various departments within a business (marketing, production, finance, etc.) is crucial to meeting the customers’ needs.

Long-term perspective

Creating long-lasting relationships with consumers with consistent service and quality that they can trust ensures profits, retaining customers, and attracting new customers over a long period of time. This makes a business into a trusted and well-known brand.

Profitable sales volume

Earning a profit over a long period of time is a tell-tale sign of whether a business’s marketing efforts were a success. Not only does a business want to increase profits, but they want it to happen consistently long-term.

The Social Marketing Concept

In the words of Philip Kotler, the social marketing concept is a management orientation that holds that the key task of the organization is to determine the needs and wants to target markets and to adopt the organization to delivering the desired satisfaction more effectively and efficiently than its competitors in a way that preserves or chances the consumer’s and society’s well being.

The societal marketing concept aims at serving the target markets in such a way as to deliver not only maximum customer satisfaction, but also long-run individual and social benefits. It must concentrate on customer’s needs and interests in addition to their wants and desires. Thus, this concept lays more emphasis on the social responsibilities of business as the latest trend in marketing.

Price is the stimulator that converts the procrastination of buyers into the desired choice, that suggests value that moves someone to take certain risks, that encourages them to spend the money to incur shopping and travel costs.

Pricing decisions have an impact on all phases of the Supply/Marketing channels. Suppliers, sales people, distributors, competitors and customers all are affected by the pricing system.

Price also gives a perception of quality. For example, a hotel chain, servicing the tourist package holiday market, will offer cheap prices to its customers. The customers will have a lower expectation of service quality than those offered at full premium price package. Since any offering is merely perceived as a bundle of diverse values, the opposite course, in product choice, is to agree to sacrifice service quality in favour of a lower price.

1. Price allocates recourses: In a free-market economy and to some extent in a controlled economy, the resources can be allocated and reallocated by the process of price reduction and price increase. Price is used as a weapon, to realise the goals of a planned economy, and to allocate resources towards sectors, which have priority from the planning point of view.
2. Price is essential to marketing: Price is a matter of great importance to both the buyer and the seller in the market place. In money economy without prices there can be no marketing. Price denotes the value of a product or service expressed in monetary terms. Only when a buyer and a seller agree on the price, does exchange and transfer of ownership take place.
3. Price determines the general standard of living: Price influences consumer purchase decisions. It reflects the purchasing power of money and thus reflects the general standard of living. The lower the prices in an economy, the greater will be the purchasing power in the hands of the consumer and the higher will be the standard of living.
4. Price regulates demand: Price is the strongest ‘P’ of the four “Ps” of the marketing mix. The marketing manager can regulate the demand of a product by increasing or decreasing its price. To increase demand, reduce the price and to decrease demand increase the price.

However, as an instrument to control demand, price should be used by those who are familiar with the dangers involved in using price as a mechanism to control demand, as the damage done by improper pricing can ruin the effectiveness of a well-conceived marketing programme.

5. Price is a competitive weapon: Price is an important weapon to deal with competition. Any company whether it is selling high-, medium- or low-priced products, has to decide as to whether its prices will be above, below or equal to the prices set by the competitors. This is a basic policy issue and affects the entire planning process.
6. Price is a determinant of profitability: Price influences the sales revenue of a product, which in turn determines the profitability of the firm. Price thus is the basis of generating profits for the firm. A change in the price mix of the marketing mix can be made more easily than a change in any other element of the marketing mix.

Thus, price changes are used more frequently for defensive and offensive strategies of a firm. The impact of price rise and fall is reflected instantly in the rise and fall of the profitability of a product, all other variables remaining the same.

Thus, price is a powerful marketing instrument. Every marketing plan involves a pricing decision. As such all-marketing planners should make accurate and planned pricing decisions.

Scope

Price is the stimulator that converts the procrastination of buyers into the desired choice, that suggests value that moves someone to take certain risks, that encourages them to spend the money to incur shopping and travel costs.

Pricing decisions have an impact on all phases of the supply/marketing channels. Suppliers, sales people, distributors, competitors and customers all are affected by the pricing system.

Price also gives a perception of quality. For example, a hotel chain, servicing the tourist package holiday market, will offer cheap prices to its customers. The customers will have a lower expectation of service quality than those offered at full premium price package. Since any offering is merely perceived as a bundle of diverse values, the opposite course, in product choice, is to agree to sacrifice service quality in favour of a lower price.

Price, of course, is not the only marketing tool available to the formulation of a marketing strategy. The price of money is only one of many interdependent references used to make a purchase that may favour or inhibit purchase. In fact, price often is not the decisive factor. The inherent belief that price is the main determinant of buyer choice, will lead a business to react to any sales-led crisis by discounting to distributors or final customers or both.

Unless sales responds strongly, this strategy will compound disaster, in that continued low sales at the lower price known as price war, will make an even smaller contribution to fixed overheads. But even if a sale goes up, gross margins will remain squeezed and a higher total income cannot be generated.

Worse, the extra sales may be the result of pipeline-filling by the distributors or by final customers stocking up ahead. Such increases may only be temporary, to be later compensated by a downward re-adjustment. Worse still any significant increase in sales that will come at the expense of other suppliers, and is likely to encourage retaliation by the most badly hit competitor. This, in turn, usually leads to a general price war, which quickly drives the weakest suppliers from the market and leaves even the strongest on permanently reduced margins.

In the early 1980s, People Express gained a significant market share in the air travel market through much curtailed prices. Other airlines, as a reaction, cut also their prices in order to maintain passenger loads. The final result was not an increased share of the market for People Express, but was adversely affected, falling into near bankruptcy. The condition deteriorated in 1986, it was taken over by one of its competitors.

A workable marketing strategy must take full account of the following factors, in addition to price:

(i) Perceived quality

(ii) Conforming quality

(iii) Time and place availability costs

(iv) Time expenditure costs

(v) Risk costs

(vi) Learning costs

(vii) Search effort costs

(viii) Design compromise costs.

The market strategy must be planned in terms of the way customers perceived value and react to differing stimuli affecting them.

Product Diversification is a strategy employed by a company to increase profitability and achieve higher sales volume from new products. Diversification can occur at the business level or at the corporate level.

Business-level product diversification: Expanding into a new segment of an industry that the company is already operating in.

Corporate-level product diversification: Expanding into a new industry that is beyond the scope of the company’s current business unit.

Diversification Strategies

There are three types of diversification techniques:

1. Concentric diversification

Concentric diversification involves adding similar products or services to the existing business. For example, when a computer company that primarily produces desktop computers starts manufacturing laptops, it is pursuing a concentric diversification strategy.

2. Horizontal diversification

Horizontal diversification involves providing new and unrelated products or services to existing consumers. For example, a notebook manufacturer that enters the pen market is pursuing a horizontal diversification strategy.

3. Conglomerate diversification

Conglomerate diversification involves adding new products or services that are significantly unrelated and with no technological or commercial similarities. For example, if a computer company decides to produce notebooks, the company is pursuing a conglomerate diversification strategy.

Product Diversification Techniques

There are a number of ways to engage in product diversification, including the options noted below. Product diversification can be expensive, especially when launching it broadly in a new market. Consequently it can make sense to launch in several test markets to determine customer acceptance before rolling out a new concept more broadly.

Renaming

An existing product could be renamed, perhaps along with somewhat different packaging, and sold in a different country. The intent is to remain true to the original purpose of the product, but to adjust it to match the local culture.

Repackaging

The manner in which a product is presented can be altered to make it available to a different audience. For example, a household cleaning product could be repackaged and sold as a cleaning agent for automobiles.

Resizing

A product could be repackaged into a different size or standard selling quantity. For example, a product normally sold as a single unit could be packaged into a quantity of ten and then sold through a warehouse store.

Repricing

The price of a product can be adjusted, along with other improvements, to reposition it for sale through a new distribution channel. For example, a watch movement could be inserted into a platinum casing and sold through jewelry stores, rather than its original positioning as a sport watch.

Product Extensions

It may be possible to sell several versions of the same product, perhaps by adding additional features or by offering the product in different colors. For example, a smart phone may be offered in several colors.

Brand Extensions

It may be possible to extend an existing brand at the low or high end, or fill in a hole somewhere in the middle of the product line. For example, a car company decides to build a sports car that is positioned at the top end of its product line.

Benefits of Product diversification

There are several benefits to product diversification. Companies may employ product diversification for several reasons, from avoiding profit loss to the anticipation of a societal shift. Therefore, the strategy offers a variety of advantages depending on a company’s specific situation. Here are a few benefits companies can enjoy from diversifying their products:

Risk mitigation: If an industry downturn occurs, product diversification can mitigate a company’s financial risk. When companies can effectively expand the market of a product line, they can broaden the scope of what purposes their products accomplish. This can help alleviate any potential impacts from industry-related challenges.

Brand strength: Product diversification can help companies build robust brands with strong visibility. Consumers are more likely to identify and remember brands that offer more variety and options within their products or services. This can be an enormous benefit for companies seeking to increase their profits and improve brand loyalty.

Protection and stability: Oftentimes, product diversification is employed as a defensive strategy to stave off competitors from encroaching on a brand’s market ownership. When companies increase the variety and options of a particular brand, they can broaden their stable hold on a market and gain more protection against such competition-related challenges.

Resourcefulness: If companies find relative accomplishment and profitability with their original products, they can use product diversification as a method to maximize their resources and continue to achieve success in the same capacity.

Product improvement is the process of making meaningful product changes that result in new customers or increased benefits realized by existing customers. The two most popular ways to make product improvements are to add new product features or improve existing ones.

Product improvement is the process of making significant changes to the product that result in new customers or increased benefits from existing customers. The two most common methods of making improvements to the product are to add new functions to the product or to improve existing ones.

Product improvement is the process of making changes to your product that improve product engagement or retention and move the needle on your business.

• You can make two types of product improvements.
• Create a new feature.
• Enhance existing functionality.

The Product Improvement Workshop is an interactive session and is intended for intact team participation. Participants will apply the concepts presented to develop product improvement recommendations for a real customer product. A one-day follow-up session is scheduled for 4-6 weeks after the workshop to assess the team’s progress.

• Failure Mode Effects Analysis.
• Product improvement roadmaps.
• Recommendation and follow-up review one day after the workshop.

Match or outperform competition

One of the main drivers for product improvements is to stay equal or ahead competition products and offerings. This is certainly common in the technology sector, software, banking where product initiatives by competitors are generally matched off or improved upon. This is to ensure that no competitor has a long-term advantage in terms of a particular product offering.

Meet changing consumer needs

Over time customer needs will change and potentially new segments will emerge. In some cases, a standard and stable offering of products, without improvement, is unlikely to stay relevant to changing customer needs over time. In this case, it becomes necessary to consider the needs of the new marketplace and improve the product accordingly. This will generally mean enhancing existing or adding new product features and benefits.

Provide Variety

By improving the product over time, a firm is essentially adding variety to its product mix. In some markets, such as entertainment, food, hospitality, travel, and so on variety is a sought after benefit.

Energize the brand

By regularly improving offerings and existing products, the brand and relevant may be perceived as quite innovative. For example, 3M works hard to create the market perception among consumers and retailers that they are innovative and exciting. One way they can achieve this is via frequent product enhancements.

Input into Marketing Communications

A new and improved product provides a good story (Message) for the marketplace. Therefore, a product improvement can form part of the marketing communications campaign for the firm. This gives the company something new and exciting to communicate and may also add to the above benefit of energizing the brand.

Increased Retailer interest

It is possible that the existing product, in its prior form, may not have appeal to certain retailers for certain reasons. Alternatively, a retailer might be more interested in a company that is seen to be willing to reinvest and improve and its existing product line. For this combination of reasons, frequent product improvements may deliver greater access to retailers for a manufacturer.

Arrest Declining Sales

Probably one of the main triggers for a product improvement is the declining sales of an established product. This is typically a signal that the product is no longer as relevant or as competitive as it once was in the market. In many cases, an appropriate product improvement should be able to reverse this situation if it is executed correctly.

Product Management is the business process of planning, developing, launching, and managing a product or service. It includes the entire lifecycle of a product, from ideation to development to go to market. Product managers are responsible for ensuring that a product meets the needs of its target market and contributes to the business strategy, while managing a product or products at all stages of the product lifecycle. Software product management adapts the fundamentals of product management for digital products.

Role of Product Managers

Product managers are responsible for managing a company’s product line on a day-to-day basis. As a result, product managers are critical in both driving a company’s growth, margins, and revenue. They are responsible for the business case, conceptualizing, planning, product development, product marketing, and delivering products to their target market. Depending on the company size, industry, and history, product management has a variety of functions and roles. Frequently there is Profit and Loss (P&L) responsibility as a key metric for evaluating product manager performance.

Tasks

Product managers analyze information including customer research, competitive intelligence, industry analysis, trends, economic signals, and competitive activity, as well as documenting requirements, setting product strategy, and creating the roadmap. Product managers align across departments within their company including product design and development, marketing, sales, customer support, and legal.

Product management was born during the Great Depression when a 27-year-old marketer proposed the idea of a “Brand man” an employee to manage a specific product rather than a traditional business role. Since the 1930s, the continued success of this function has led to the growth of product organizations across industries and geographies.

1931: Neil H. McElroy, a marketing manager at Proctor & Gamble, writes a 300-page memo on the need for “brand men,” who manage specific products.

Late 1930s: McElroy is an advisor at Stanford University, where he influences two young visionaries: Bill Hewlett and David Packard.

1943-1993: Hewlett-Packard sustains 50 years of 20% Y/Y growth by implementing the “brand man” philosophy in their new company.

Late 1940s: Toyota develops JIT manufacturing principles, later adopted by Hewlett-Packard.

1953: Toyota develops the kanban method.

1970s: Tech companies in the U.S. start developing lightweight processes, in opposition to cumbersome processes that emerged from manufacturing industries.

1980s: Developing agile processes, combined with greater acceptance of “Brand management” roles, takes hold in many technology and software companies.

2001: The Agile Manifesto is written, which, in large part, broke down department silos and outdated processes, to make room for a unified product management role.

Good visuals in a business presentation can range from complex videos to a simple poster. For those presenters who are not skilled in the video arts, there are several ways to present information with visuals that will help your audience remember key points long after your presentation has ended. Three effective methods include PowerPoint presentations, flip charts and posters.

PowerPoint Presentations

PowerPoint offers hundreds of font, audio and image options for its users. The first thing presenters should understand is that just because there are 350 font options does not mean you should use them. Always use either light font over a dark background or dark font over a light background. Avoid red font and green backgrounds or fonts and backgrounds that are close on the color wheel as they will be difficult to read. Follow the rule of 8. The rule of 8 states that you should be able to read your presentation while standing 8 feet away from the standard computer screen. If the font is too small to read from this distance, it will be too small to read in your presentation. Include a maximum of five points per page.

Effective Flip Charts

Flip Charts are not only inexpensive but they can also be used for ideas and brainstorming within the context of the meeting. Use dark markers to write on a flip chart and make sure you have plenty of paper on the flip chart pad. Some flip charts now have adhesive on the back of each page so the presenter when finished, can stick the page to a corresponding wall that the audience can see. This feature prevents having to flip back and forth from page to page wasting valuable time and allows for writing a free flow of ideas with ease.

Effective Posters

Posters are prepared much in advance of a presentation. The simplest posters can be made from poster board with graphics and text added with glue or tape. More advanced posters can be made using PowerPoint and then printed and laminated for a more professional look. Change the size of your PowerPoint slide to a good poster size, such as 2-by-3 feet , and decrease the view percentage on your computer screen to around 25 percent, or the smallest view that still allows you to see each element clearly. PowerPoint hints also apply to poster design. Avoid designing posters that are too busy or have too much text. A poster should have an eye-catching visual that tells the story without viewers having to read paragraphs of accompanying text.

Simplicity is key in conveying information visually. The more complex the visual, the more likely you are to lose the message you are trying to convey. Visuals can help your audience retain information up to six times longer. Beware, however, of staying on one visual for too long. According to The Eggleston Group, studies show that audience members become bored with a visual after 7 to 10 seconds. Always rehearse with your visuals. Don’t forget to inspect the room where you will be presenting to make sure the elements required for your presentation, such as projectors, screens and outlets, are available.