Marketing Management Part-1 for BBA D-II

What is marketing?

Marketing is all about identifying and meeting human and social needs. To define marketing in just three words, it means meeting needs profitably.

Formal Definition of Marketing given by the American Marketing Association is Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organi­zation and its stakeholders.

Marketing management is both an art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicat­ing superior customer value.

Sometimes marketing is considered as the art of selling products, but actually selling is not the most important part of marketing! Selling is only the tip of the marketing iceberg. Peter Drucker, a leading management theorist, puts it this way: There will always, one can assume, be need for some selling. But the aim of market­ing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available.

Thus, marketing is the process by which companies determine what all products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It is an integrated process through which companies build strong customer relationships and create value for their customers and for themselves.

Marketing is customer oriented and evolved from production concepts where there is a shift of focus from production to the perceived needs and wants of their customers as the means of staying profitable. The term marketing concept holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired customer value. It proposes that in order to satisfy its organizational objectives, an organization should anticipate the needs and wants of consumers, develop their products and services and satisfy these more effectively than competitors.

What is Marketed

Marketing managers are involved in marketing of entities which can be classified into 10 categories: goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.

Goods: Physical goods and products constitute the bulk of marketing effort. Each year, many companies alone market food products, elctronics, automobiles, etc. There are lot of goods people consume and use in their life.

Services: As economies advance, a growing proportion of their activities is focused on the production of services. For example, The US economy consists of a 70-30 ratio of services-to-goods mix. Services include the transportation, hotels, car rental firms, barbers, restaurants, maintenance and repair of products, consultancy services by professional working in companies such as accountants, bankers, lawyers, engineers, doctors, software programmers, and management consultants. Many market offerings consist of a variable mix of goods and services. For example, at a restaurant, the customer consumes both a product and a service. Similarly, at medical service, customer consumes both service from doctors and products in the form of medicines.

Events: Marketers promote time based events, such as trade shows, sports events, art performances, anniversaries, ect. For example, Global sporting events such as the Olympics or World Cup are promoted  aggressively to both companies and fans.

Experiences: By orchestrating several services and goods, a firm can create, stage, and market experiences. Walt Disney World's Magic Kingdom represents experiential marketing: Customers visit a fairy kingdom, a pirate ship, or a haunted house. So does the Hard Rock Cafe, where customers can enjoy a meal or see a band  in a live concert. There is also a market for customized experiences, such as spending a week at a baseball camp playing with some  retired baseball  greats, paying to conduct the Chicago Symphony Orchestra for five minutes, or climbing Mount Everest.

Persons: Celebrity marketing is a major business. Today, every major film star has an agent, a personal  manager, and ties to a public relations agency. Artists, sports-persons, musicians, CEOs, physicians, high-profile lawyers and financiers, and other professionals are also getting help from celebrity marketers.

Places: Cities, states, regions, and whole nations compete actively to attract tourists, factories, company  headquarters, and new residents. Place marketers include economic development specialists, real estate agents, commercial banks, local business associations, and advertising and public relations agencies.

Properties:  Properties are intangible rights of ownership of either real  property (real estate) or financial  property (stocks and  bonds). Properties are bought and sold, and this requires marketing. Real estate agents work for property owners or sellers or buy residential or commercial real estate. Investment companies and banks are involved in marketing securities to both institutional and individual investors.

Organizations: Organizations actively work to build a strong, favorable, and a unique image in the minds of their target customers. Companies spend money on corporate identity advertisements. Universities, museums, performing  arts organizations, and non-profits all use marketing to boost their public images and to compete for audiences and  funds.

Information: Information can be produced and marketed as a product. This is essentially what schools and universities produce and distribute at a price to parents, students, and  communities. Encyclopedias  and  most nonfiction books market information.

Ideas: Every market offering includes a basic idea. Products and services are platforms for delivering some idea or benefit. Social marketers are busy promoting such ideas as Friends Don't Let Friends Drive Drunk and A Mind Is a Terrible Thing to Waste.

Types of Demand

For any company, demand is a basic necessity for marketing of products and services. Different types of demands indicate differet status of market conditions with respect to demand.

1. Negative Demand: The market is in a state of negative demand if a major part of the market dislikes the product and may even pay a price to avoid it. For eaxmple, people have a negative demand for Vaccination, Dental work, Vasectomies, Gall bladder operation, etc.
2. No Demand: Target consumers may not be nterested in the product or service. For example, farmers may not be interested in new farming methods, college students may not be interested in a foreign language course.
3. Latent Demand: Many consumers may share a strong need that cannot be satisfied by any existing products. For example, latent demand for harmless cigarettes, safer neighborhood, more fuel efficient cars.
4. Declining Demand: A substantial drop in the demand for products. For example, declining demand of automobiles, medicines.
5. Irregular Demand: Organizations face demand that varies on a seasonal, daily or even hourly basis, causing problems of idle capacity or overcrowded capacity.
6. Full Demand: Organizations face full demand when they are pleased with there volume of business.
7. Overfull Demands: Some organizations face a demand level that is higher then they can or want to handle.
8. Unwholesome Demand: Unwholesome products will attract organized effort to discourage their consumption.

Types of Customer Markets

A market is a place where buyers and sellers interact with each other to buy and sell goods and services. The place can be physical or online. Economists describe a market as a collection of buyers and sellers who transact over a particular product or a class of product (for example, real estate market or food market). Modern economies abound in such markets. Manufacturers go to resource market (raw material markets, labor markets and money markets) to buy resources and turn them into goods and services, and then sell finished products to intermediaries, who then sell them to consumers. Consumers sell their labor and receive money for their service with which they pay for goods and other services. The government collects tax revenues to buy goods from resources, manufacturer, and intermediary markets and uses these goods and services to provide public services. Each national economy and the global economy consist of complex interacting sets of markets linked through exchange processes.

On the other hand, marketers often use the term market to cover various grouping of customers. They view the sellers as constituting the industry and the buyers as constituting the market. They talk about need markets, product markets, demographic markets and geographic markets or they extend the concept to cover other markets, such as voter marketers, labor markets and donor markets. Sellers and buyers are connected by four flows. The sellers send goods, services and communication (advertisements, information about products) to the market and in return they receive money and information (attitudes, sales data).

Key Customer Markets

There are four types of customer markets:

1. Consumer Markets
2. Business Markets
3. Global Markets
4. Non-profit Markets

Consumer Markets

Companies selling mass consumer goods and services such as soft drinks, cosmetics, air travel and athletic shoes and equipment spend a great deal of time to establish a superior brand image. Much of a brand strength depends on developing a superior product and packaging, ensuring its availability and backing it with engaging communication and reliable service.

Business Markets

Companies selling business goods and services often face well-trained and well-informed professional buyers who are skilled in evaluating competitive offerings. Business buyers buy goods in order to make or resell a product to others for a profit. Business marketers must demonstrate how their products will help these buyers achieve higher revenue or lower costs. Advertising can play a role, but a stronger role may be played by the sales force, price, and the company's reputation for reliability and quality.

Global Markets

Companies selling goods and services in the global marketplace face additional decisions and challenges. They must decide which countries to enter, how to enter each country as an exporter, licenser, joint venture, contract manufacturer or as a sole manufacturer and how to adapt their product and service features to each country. The pricing of their products in different countries and adapting their communications to fit different cultures is a prime criterion.

Nonprofit and Governmental Markets

Companies selling their goods to nonprofit organizations such as churches, universities, charitable organizations or government agencies need to price their products and services carefully because these organizations have limited purchasing power. Lower prices affect the features and quality that the seller can build into the offering. Most of the Government purchasing call for bids, with the lowest bid being favored.

Consumer Analysis

All marketing plans should begin with a look at the all-important consumers and their needs. People do not have the same needs or desires. The objective of consumer analysis is to identify segments or groups within a population with similar needs so that marketing efforts can be directly targeted to them. Several important questions must be asked to find the market that will unlock untold marketing riches.

What is the need category?

What is the need or use that the product addresses? The question may seem unnecessary, but while answering, it may uncover a potential market for the product that was previously overlooked.

Who is buying and who is using the product?

Buyers many times are different from users. For example, women make the majority of purchases of men’s underwear and socks. If an advertising campaign wanted to target the buyer of men’s socks, it probably would be inappropriate to buy space in  Sports Illustrated. Determining the buyer as well as the user provides the essential initial insights to create a marketing plan.

What is the buying process?

Once the need is established, and who is making the purchases, then try to form a hypothesis on how the product is bought. Marketing research is a prime source of information. Understanding the  buying process is critical because it will lead to the possible routes to reach buyers. The buying process includes all the steps
that a person takes leading to a purchase.

Is what I’m selling a high or low involvement product?

As the discussion of buyer behavior indicates, different products elicit dif-ferent purchase behaviors because of their inherent importance to the buyer and user. If the consumer feels a high level of risk in buying a product, then it is considered a high-involvement product. With  low-involvement products the decision is simpler. For example, if a candy bar isn’t tasty, you can always pitch it and buy another one.

How can I segment the market?

If the product does not satisfies the masses, then choose a segment or segments of the market to target. Segments are homogeneous groups of similar consumers with similar needs and desires. For instance, Coca-Cola uses a mass-market approach to get everyone drinking. Orangina, a specialty soda, appeals to a more narrowly defined market segment. It’s priced higher and its bottle is shaped differently.

Buying Process

For any particular product, the buying process can include one or all of the following steps:

1. Awareness
2. Information Search
3. Evaluate Alternatives
4. Purchase
5. Evaluate

Awareness (Interest, Problem Recognition)

At some point a person will realize a need, like the need to use soap. Advertising may trigger that need. Prestige products such as designer clothes and fragrances trigger desire. They meet emotional needs such as love and group acceptance. Head & Shoulders preys on the fear of a loss of love and group acceptance. Ask the question - How do consumers become aware of my product?; Where are my targets likely to be exposed to my message?

Information Search

People involved in purchase decisions are confronted with information from a variety of sources:  Consumer Reports, sales-people, specialty magazines, family, friends and local experts. The target market should get as much favorable information as possible about the product when and where buyers make their buying decisions. For example, store displays play that role at the point of purchase (POP).

Evaluate the Alternatives

Which one is best for me? This includes not only products within a category, but substitutes as well. When confronted with the high prices of automobiles, a college student may end up buying a motorcycle, a moped, or a bicycle. Depending on the importance of the product, consumers may seek additional information and advice. Car purchases often include a trip to the local mechanic or the neighborhood car buff. Placing positive information where your buyers are likely to look is one key to marketing success.

The Purchase Decision

This is the big sale. Even though the decision to buy could be yes, in certain instances the first purchase is only a trial. Adoption of new and improved Bounty paper towels as your regular brand occurs only after a successful test with those tough spills. With many big-ticket items, such as ocean cruises and appliances, a trial is not possible. In those instances the decision process is more time-consuming and difficult to make because there is more risk involved. It is very important for the marketer to understand risk. Through the use of a number of marketing tools, such as advertising, knowledgeable salespeople, warranties, and printed materials, purchase risk can be reduced by offering the buyer information explaining what level of performance one can expect, as well as providing a basis of comparison with competing products.

Evaluate (Postpurchase Behavior)

Did I make a mistake? This conclusion can be reached either on a physical level by testing the product’s efficacy or on a psychological level by checking for peer approval. Buyer’s remorse and postpurchase dissonance are terms to describe the period of confusion that often follows a purchase. Automobile advertising, for example, is not only targeted at potential buyers, but also at recent buyers to reassure them that they didn’t screw up when they bought a Dodge Caravan minivan instead of a Honda Odyssey.

Company Orientation towards Marketplace

As the marketing environment changes, the way the company deals with the marketplace also changes. The company orientation towards marketplace deals with the concepts which a company may apply while targeting a market segment. There are five different orientations which a company may take towards the marketplace.

1. Production Concept
2. Selling Concept
3. Product Concept
4. Marketing Concept
5. Societal Marketing Concept

Production Concept

In this concept the company mainly tries to increase production irrespective of demand of the customer and market. The production concept is almost extinct now with companies becoming customer oriented.

Selling Concept

The selling concept believes that customers will not buy products unless persuaded to do so. This is true even today in case of certain types of products (such as insurance). Although the customer should use it, they rarely do.

Product Concept

According to the product concept, the customers will always buy products which are better in terms of quality performance and features. This concept is especially applicable in terms of electronic items and other technical gadgets.

Marketing Concept

Just like selling is a necessity, similarly branding and marketing are a necessity in some products. The marketing concept proposes that the success of a firm depends on the marketing efforts of the company in delivering a value proposition.

Societal Marketing Concept

The societal marketing concept leads to a company orientation which believes in giving back to the society what it had received from the society. This concept believes that the company is making profits because of the society and hence it should also take measures to make sure the society also benefits from the company.

Creating Value for the Customer

What is the key to a consistent proactive marketing strategy? First and foremost it is a philosophy that dedicates resources of the firm to ensuring that the wants, needs, and demands of the customer are the firm’s focus. This customer-focused mentality is the foundation of the strategy that makes up the entire marketing process.

Second, it is a plan, supported by the firm’s philosophy. Once the philosophy is in place, a plan can give direction, guidance, and a structure for proactive strategies that will increase sales and improve business relationships. Often firms find themselves dedicating resources to marketing activities - from trade shows to flyers - and spending money on marketing that is not targeted to the right audience at the right time. This is reactive marketing with a shotgun, rather than a rifle. Conversely, a proactive, focused marketing plan can provide guidance for targeting the right audience at the right place and at the right time, which in turn maximizes the return on investment and increases revenues.

Third, marketing is a process of creating value for the customer. It is a set of activities to educate, communicate with, and motivate the targeted consumer about the firm’s services or the company’s product and services.

Traditionally, this set of activities, the marketing mix, is represented by four parts, known as 4 P’s of Marketing: price, product, placement, and promotion. But to create a marketing strategy and plan that touch on all areas necessary to position a product in the market to maximize sales revenues, there are multiple areas to be tackled.

An effective marketing strategy/plan is an ongoing value-creating process composed of several elements:

• Marketing segmentation
• Marketing strategy
• Market research
• Pricing
• Placement
• Value chain

Market Segmentation

Market segmentation means division of market into different homogenous groups of consumers. A market segment is a subset of a market made up of people or organizations with one or more characteristics that cause them to demand similar products or services based on qualities of those products such as price or function.

A true market segment meets all of the following criteria:

• It is distinct from other segments as different segments have different needs
• Iit is homogeneous within the segment and exhibits common needs
• It responds similarly to a market stimulus
• It can be reached by a market intervention

Based on consumer market, market can be segmented in one or more ways: 

1. Geographic segmentation is based on regional variables such as region, climate, population density, and population growth rate
2. Demographic segmentation is based on variables such as age, gender, ethnicity, education, occupation, income, and family status
3. Psychographic segmentation is based on variables such as values, attitudes, and lifestyle
4. Behavioral segmentation is based on variables such as usage rate and patterns, price sensitivity, brand loyalty, and benefits sought

The Marketing Mix

4 P's of Marketing

Elements of the marketing mix are referred to as the Four P's.

The major marketing management decisions can be classified in one of the following four categories:

• Product
• Price
• Place (Distribution Channel)
• Promotion

These are the four variables that marketing managers can control in order to best satisfy their customers in the target market.

Product

The product is the physical object or service offered to the consumers. In the case of physical products, it also refers to any services or conveniences that are part of the offering. Product decisions include aspects such as function, appearance, packaging, service, warranty, etc.

Price

The price is the amount a customer pays for the product. Pricing decisions should take into account profit margins and the probable pricing response of competitors. Pricing includes not only the list price, but also discounts, financing, and other options such as leasing.

Place

Place refers to location where the product can be purchased. Place (or placement) decisions are those associated with channels of distribution that serve as the means for getting the product to the target customers. The distribution system performs transactional, logistical, and facilitating functions. Distribution decisions include market coverage, channel member selection, logistics, and levels of service.

Promotion

represents all of the communications that a marketer may use in the marketplace. Promotion has four distinct elements: advertising, public relations, personal selling and sales promotion. Promotion decisions are related to communicating and selling to potential consumers. Since these costs can be large in proportion to the product price, a break-even analysis should be performed when making promotion decisions. It is useful to know the value of a customer in order to determine whether additional customers are worth the cost of acquiring them. Promotion decisions involve advertising, public relations, media types, etc.

Extended Markrting Mix

Three more Ps are added to the marketing mix (People, Process and Physical Evidence) known as Extended Marketing Mix.

People

All people involved with consumption of a service are important. For example workers, management and consumers. It also defines the market segmentation, mainly demographic segmentation. It addresses particular class of people for whom the product or service is made available.

Process

Procedure, mechanism and flow of activities by which services are used. It also refers to the procedure how the product will reach the end user.

Physical Evidence

The marketing strategy should include effectively communicating their satisfaction to potential customers.

Marketing Strategy

To build a strong and durable house, it is necessary to create blueprints. Likewise, to build a strong and profitable business, it is necessary to develop a strategy. Essentially, marketing strategy is a plan that allows a business owner to direct activities that are consistent with the goals of the business owner and organization and spend money wisely in order to create the greatest amount of return on investment

Marketing Strategy Process

The marketing process is a circular function. Marketing plans undergo many changes until all the parts are internally consistent and mutually supportive of the objectives. All aspects of a proposal need to work together to make sense. It is very easy to get one part right, but an internally consistent and mutually supportive marketing plan is a great accomplishment. It’s a seven part process.

1. Consumer Analysis
2. Market Analysis
3. Review of the Competition and Self
4. Review of the Distribution Channels
5. Development of a Preliminary Marketing Mix
6. Evaluation of the Economics
7. Revision and Extension of Steps 1-6 until a consistent plan emerges

Market Research

To thoroughly understand what is happening in the industry, it is invaluable to know what the trends in the industry are as well as what the firm’s competitors are doing to make money, to improve their businesses, and to improve their own market shares. Market research is necessary to make better firmwide decisions. With marketing being a philosophy where the resources and activities of the firm or company are focused on satisfying the wants and needs of the customer, marketing research is the way a firm with a marketing philosophy determines what those wants and needs may be, and further, how to communicate the associated benefits most effectively and efficiently. Additionally, market research is used to monitor and modify, if needed, the elements of the marketing strategy.

Market research includes:

• Defining the problem and research objectives
• Developing a research plan
• Presenting the plan
• Implementing the plan (collecting and analyzing data)
• Interpreting and reporting the findings

Product Life Cycle (PLC)

Markets can be characterized by the stage that they are at in their product life cycles (PLC). Instead of being merely a factor of time, the PLC describes how a product’s sales grow as new segments become aware and begin buying it. Cellular phone service began in the early 1970s with fewer than ten thousand users. But it wasn’t until the 1990s, when the prices dropped and many could afford a unit for their cars, that a multisegment market of over six million users emerged. The PLC concept is important because the process of diffusion or adoption by the population has major implications for how a product is marketed. Each product develops its own unique PLC as it matures.

The four generic stages of the PLC and their implications for action are:

Stage 1: Introduction

Awareness and education are needed. If possible a trial is important. High advertising costs may be incurred to get the word out. Some vendors opt for an exclusive distribution of their products in a few select outlets at first. Initially companies make frequent product changes as customers’ needs become known. The first buyers are called the innovators, followed by the early adopters. They freely take purchase risks because their personalities or pocketbooks allow them to do so. When companies introduce new products, managers must make difficult pricing decisions because there is frequently no basis for comparison. The level of initial prices and profits has great implications regarding the outcome of future battles with competitors as well as your ability to perform additional research and development (as with products like high-definition TV and DVD).

Stage 2: Growth

Education is still important, but at this stage competition is intensified. The early majority becomes interested. As more consumers become familiar with a product they examine the new models to decide which to buy, not whether they should buy. When buyers get to the store they start comparing features. To make the product more accessible, marketers often choose a  selective distribution to gain a greater number and variety of outlets. At this stage it is important to boost the sales volume ahead of the competition in order to reduce costs through production and advertising efficiencies. This helps a company gain the competitive advantage in the next stage of the PLC (e.g., palm organizer).

Stage 3: Maturity

At this stage the late majority of the mass market buys. Because people are accustomed to buying the product and the differences are few, brand loyalty plays a dominant role. Price competition often becomes heated in stable markets because additional market share comes directly from your competitors. The product’s features that were so important in the growth stage have become standardized. Because there is less differentiation on product attributes, advertising is used as a vehicle to differentiate products. Marketing managers try to segment their target market as much as possible to meet specific unmet consumer needs. In mature markets competitors are ferreting out all possible segments. All possible channels of distribution are also considered using a mass market distribution strategy (e.g., CD players, VCRs).

Stage 4: Decline

As a product ages in its PLC, it is likely that its competitors offer similar products. Even the most timid consumers, the laggards, find it safe to buy the product at this late stage. (If it does cause cancer, the FDA usually has found out by now.) Consumers turn a deaf ear to advertising because they know that all competing products are the same. At this stage many companies focus their efforts on reducing price if com-petition remains, or slowly increasing prices if the competitive field thins. Trade relations are key to staying on the retail shelf at this point, because without the excitement of novelty, distributors and retailers would rather allocate space to newer and potentially more profitable products. The effort to sell the trade is popularly called relationship marketing (e.g., black-and-white TVs, phonographs, and cassettes).

Pricing

To sell a product for a particular price, value must be created. Value is the consumer’s estimate of the product’s overall capacity to satisfy his/her needs. When the value placed on a product or service is high, then satisfaction is achieved. Consumers are savvy and will choose based on the level of satisfaction that corresponds with the price. If a bottle of Coca-Cola were priced at $5 while a liter of Pepsi-Cola was priced at $1, it is likely that the sales of Coke would decrease. If these were the only two options at the supermarket, the likelihood of Pepsi sales increasing is high. Pricing is what customers are willing to trade in return for a product - that is, the value they place on a product or service. Generally, a price/quality relationship exists, where the higher the price, the higher the quality; especially in the case of personal services, consumers will expect a higher level of service if the fee associated with that service is higher relative to other providers of similar services.

Marketers may elect to skim the market with a relatively high price at first, and then, as demand wanes at this relatively high price, gradually lower the price. New, innovative products often use this pricing strategy because their newness and uniqueness may enable ahigher price at first. As copycats and competitors enter the market, prices will fall to meet the market price.

Some marketers, though, may use a penetration strategy, where the product or service is offered at a very low price, in order to quickly grab market share and be considered the low price provider. Wal-Mart is an example of a company using a penetration pricing strategy.

Pricing is a powerful tool in developing a marketing strategy with a strong connection to the financial condition of the organization. Pricing too low may result in economic consequences if costs are not covered, and pricing too high may stunt demand and sales of the product or service, also resulting in adverse economic consequences.

Branding

On the shelves of every grocery store are brand-name products from Oreo cookies to Tide detergent. Strong brands are a great asset to a company and can generate streams of incremental revenue due to the fact that people are willing to pay a premium for brand-name products and over time they reduce marketing costs because a brand’s customers present lower or no purchase barriers.

A brand is a name, symbol, term, sign, design, or combination of each of these things, the purpose of which is to identify goods and services of one seller or of a group of sellers and differentiate them from competitors. A brand is also the sum of all characteristics that make a product offering unique. A company can copy a product, but it cannot replicate the brand. In a sense, the brand is the personality of the product, what the product means to the customer and the set of emotions evoked when the brand is encountered or used by the customer.

Brand Identity

A brand’s identity is the company’s vision of the brand and the brand’s promise to consumers. It is also the outward visible identity of the cor-porate brand or family of brands. McDonald’s, for example, has the golden arches as part of its brand identity, but it also represents convenient and reliable products. When you order a McDonald’s cheese-burger, it should taste the same whether you are ordering it in Los Angeles, Hartford, Shanghai, or Moscow and it should be prepared quickly, because it is fast food.

Brand Image

The brand image is the consumer’s actual view of the brand. Companies will try to bridge the gap between brand identity and brand image. Consistency is the key element when promoting a brand or product, and a clear and consistent promotional campaign will help ensure that the brand’s image and the brand identity are very similar.

Brand Loyalty

People who buy only a particular brand of product or service are considered by marketers to be brand loyal. There are various levels of brand loyalty, from extremely loyal to brand negative and everything in between. Think about the products you buy; are you willing to purchase just any brand of detergent or coffee creamer? Some people will use only Clorox bleach or Coffee-mate coffee creamer, while others will be satisfied using private-label bleach or a generic creamer and may not notice a difference beyond price. 

Advertising

Advertising is paid communication brought to audiences through different forms of media such as television, radio, newspapers, magazines, and billboards. A company uses advertising to inform, persuade, or remind its target market of its products or services.

Comparative advertising is used to differentiate a company’s products in the marketplace from other similar products. For example, McDonald’s and Burger King used to run comparative advertising, comparing their cooking methods for hamburgers. The Pepsi Challenge campaign was another form of comparative advertising in which consumers were asked to take blind taste tests to see if they could tell the difference between the products.

Advertising is used once a product has matured in the marketplace, that is, once a product has been around for a while. Institutional advertising promotes the company, organization, government agency, or a concept or philosophy, but not a specific product.

Advertising Mediums

There are advantages and disadvantages to each media type, and when selecting the advertising mediums to use, companies must understand who their target audience is and which is the most effective method for reaching them. Marketers must be able to divide their budgets among the various media resources in order to stretch them the farthest to reach the most customers.

• Television
• Print Ads
• Radio
• Internet
• Direct Mail
• Telemarketing

Sales Promotion

Sales promotion consists of many activities used to sell products. They are activities that give consumers a short-term incentive to make a purchase. Sales promotions are also activities that change the price and value relationship of a product as perceived by the target audience with the possible effect of generating immediate sales. It is possible that a sales promotion can also alter the long-term value of the brand by making what might be a premium product more affordable.

Sales promotions are generally time-bound programs that require participation on the part of the consumer through either immediate purchase or some other action. The fundamental goals of sales promotion are tactical, strategic, and ultimate. The tactical goals are to combat a competitor’s increase in market share, to com-bat other competitors’ promotional efforts, and to move brands that are either declining, overstocked, damaged, or not selling fast enough. The strategic goals are to motivate consumers to switch from a rival brand, to increase product consumption, to reinforce the marketing communications efforts for the brand, and to motivate brand loyalty. The ultimate goal of a sales promotion is to increase sales, profits, and market share.

There are different channels for sales promotions, which include consumer promotions and trade promotions.

Consumer Promotions

Consumer promotions are geared toward getting consumers to try a company’s products. Some examples of consumer promotion activities include coupons, rebates, sampling, sweepstakes, point-of-purchase displays, giveaways and special packs.

Trade Promotions

Trade promotions are geared toward marketing intermediaries as opposed to consumers. A snack food manufacturer, for example, may offer a discounted price to a retailer who buys a large quantity of a product.
These types of promotions are most successful when they offer financial incentives and serve to effectively reduce the cost of the product. Another form of trade promotion is paying for shelf space. On the shelf at the grocery store, product placement is very important. Items placed at eye level on higher shelves have proven to sell much better than products placed on lower shelves. Knowing this, manufacturers often pay a slotting fee in order to have their products prominently dis-played on the desired shelf or in a preferred position within a retail store.

Personal Selling

Personal selling uses a personal sales presentation to influence customers to buy a product. Personal selling tactics are most often used when there are a few geographically concentrated customers; the product is highly technical in nature; the product is very expensive; or when the product moves through direct distribution channels. It is a tactic often used by businesses looking to sell to other businesses, as opposed to businesses selling to consumers.

The sales process involves a personal seller identifying the target customer by determining who is likely to buy his or her product. Once the target customers have been identified, the salesperson will contact them. Upon meeting with a potential customer, the salesperson will make a sales presentation, explaining how the customer needs the prod-uct or service that is being sold. The salesperson should be prepared to answer the customer’s questions. After the presentation, the goal of the salesperson is to close the sale while the presentation is still fresh in the mind of the customer. Following up with the purchaser after the sale is made is a very effective strategy for developing long-term relationships.

Relationship Strategies

Developing an effective relationship strategy can be the key to forming long-term relationships with customers and in turn creating loyalty. Good customer service and treating customers fairly become the critical first step for ensuring a healthy relationship. Fair treatment includes responding to customer complaints and finding workable solutions to resolving mistakes that have been made. Although the customer may not always be right, the customer should always be treated graciously. Providing customers with truthful information and creating personable contact with them are critical.

Loyalty Programs

Many companies develop loyalty or frequency-marketing programs in order to further engage the consumers with their products and increase customer loyalty. These programs are very effective for targeting the company’s most valuable customers. Most airlines develop frequent-flier programs, which allow customers to earn points toward their next flight. Other businesses, such as coffee shops, also offer frequency cards, that entitle the customer to a free beverage, for example, after purchasing a certain number of beverages.

Loyalty programs have been very effective in generating repeat business. They offer an added value to the consumer, whereby the purchaser is not simply enjoying the value of the current purchase, but is being rewarded. It is important, however, that the loyalty program be relative to the product and service offering of the organization and that the award be attainable. Customers may experience frustration if, with an airline ticket as an example, they are unable to redeem their ticket when they want to travel, or if the restrictions on the reward are so high that it is not worth the hassle of redemption.

Public Relations and Publicity

An organization’s public relations and publicity activities are the means to foster its relationships with its various audiences and to communicate with them. Public relations efforts are undertaken in order to form a favorable view in the public eye. Favorable publicity can enhance an organization’s image and increase demand for its products. A positive article or review about a product or service adds credibility, believability, and legitimacy in a much more effective manner than paid advertising. Negative publicity, on the other hand, can tarnish an organization’s reputation. Most public relations strategies include press releases, special events, and press conferences.

Press releases are articles or brief news releases that are submitted to publications by the firm. They often provide information about company happenings: new hires, new products or services, or changes in management. They can be an effective way of gaining attention and creating or maintaining awareness.

Many organizations sponsor special events such as product launches. A fashion company may sponsor a fashion show to display its new line of clothing. A musician may hold a record release party for his or her new album. The firm will often invite top clientele, industry insiders, and media to these events.

A news conference is an in-person announcement of recent organizational events to the media. It is an effective method of informing the public of recent happenings without causing rumors to be spread, because the information will come straight from the source.