ABE Marketing Policy, Planning & Communication (Revision Kit) · ABE Marketing Policy, Planning &...

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ABE Marketing Policy, Planning & Communication

(Revision Kit) Ibrahim Sameer

2012

For the ABE MPPC Exam December 2012

ABE Marketing Policy, Planning & Communication (Revision Kit) 2012

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Contents Preference ..................................................................................................................................................... 3

Question 1 ..................................................................................................................................................... 4

Question 2 ................................................................................................................................................... 10

Question 3 ................................................................................................................................................... 14

Question 4 ................................................................................................................................................... 19

Question 5 ................................................................................................................................................... 23

Question 6 ................................................................................................................................................... 26

Question 7 ................................................................................................................................................... 29

Question 8 ................................................................................................................................................... 33

Question 9 ................................................................................................................................................... 37

Question 10 ................................................................................................................................................. 42

Question 11 ................................................................................................................................................. 45

Question 12 ................................................................................................................................................. 47

Question 13 ................................................................................................................................................. 54

Question 14 ................................................................................................................................................. 57

Question 15 ................................................................................................................................................. 64

Question 16 ................................................................................................................................................. 69

Question 17 ................................................................................................................................................. 74

Question 18 ................................................................................................................................................. 78

Contingency Q & A ...................................................................................................................................... 80

Question 1 ................................................................................................................................................... 80

Question 2 ................................................................................................................................................... 84

Question 3 ................................................................................................................................................... 87

Question 4 ................................................................................................................................................... 89

Question 5 ................................................................................................................................................... 92

Question 6 ................................................................................................................................................... 97


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Preference The first 18 questions of this kit are the most probable questions which can ask this December

2012 exam, the other 6 questions are also imperative. The only purpose of this ABE Exam Kit is

to give you suggestions for topics & questions to concentrate more on in your last few days of

preparation. Do not exclude any other topics from your overall preparation for the ABE exam.

Please note that, this ABE Exam Kit questions should not be relied on 100%, they are only just

intelligent guesses of mine.

Good Luck for your Exam

Ibrahim Sameer


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Question 1 Discuss the statement that, if business logistics is to play its full part in helping to achieve

marketing orientation within the firm then logistics must be an integral part of the strategic

marketing plan. (25 marks) OR

“Logistics is the area in which purchasing and marketing overlap.” (Jim Blythe, 2005)

Discuss the above statement in the context of a totally integrated business logistics system and

explain the contribution that logistics can make to the marketing performance of a firm. (25

marks) OR

(a) Explain the nature of business logistics and its contribution to the performance of the

marketing firm. (10 marks)

(b) Briefly give the rationale for the need of business logistics systems to be „fully integrated‟. (4

marks)

(c) List and briefly explain the component parts of such an integrated system. (4 marks)

(d) Discuss the importance of logistics to the achievement of marketing operational, tactical and

strategic goals. (7 marks) OR

(a) Explain the term „total business logistics‟ and outline the activities that take place within

each of the main elements of such a distribution system. (10 marks)

(b) Discuss the contribution of „total business logistics‟ to the achievement of marketing goals at

the operational, tactical and strategic levels. Use examples to illustrate the key points. (15

marks) OR

Evaluate the proposition that logistics management must be part of the strategic marketing plan if

logistics is to play its full part in achieving marketing orientation within the firm. (25 marks)

OR

Discuss the statement that, if business logistics is to play its full part in helping to achieve

marketing orientation within the firm then logistics must be an integral part of the strategic

marketing plan. (25 marks) OR

(a) Define the term „logistics management‟. (5 marks)

(b) “Logistics management must be part of the strategic marketing plan if logistics is to play its

full part in achieving marketing orientation within the firm.” Discuss this viewpoint in detail. (20

marks) (Total 25 marks)

Answer


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Marketing logistics is a term that has developed from the military use of the term „logistics‟.

From a military point of view logistics was a range of activities that made sure supplies were in

the right place at the right time in the right condition and delivered to the right people. In a

marketing context the term has a very similar meaning except we are now using it in a

commercial context rather than a military one. From a marketing standpoint the subject of

distribution management is divided into two separate, but interrelated parts, these are channels of

distribution and physical distribution management (logistics).

Nature of logistics management

Marketing has many definitions, one, which relates to the process of getting the right goods to

the right place at the right time. This is a simplistic definition, but it does encapsulate the

importance of time and place. It has been said earlier that it is the mission of the marketing

orientated firm to produce goods and/or services that satisfy the needs and wants of specifically

defined target markets more efficiently and effectively than competitors. Products can be

perceived as a „bundle of attributes‟, many of which are implied attributes created by branding,

packaging and advertising.

Time and place utility

What the right place and the right time are will depend on the character of the product or service.

The importance of time and place will also depend on the character of the product or service and

the situation or occasion in which they are used. For example, if you walk into a pub or a café for

a drink, you expect it to be available more or less immediately. A Christmas present really only

has maximum value on Christmas day, it‟s not quite the same if someone gives you a delayed

Christmas present say a week or so later. Christmas day is particularly important to children, as

all parents will know. For any gift to children to have the desired „magical‟ effect it must be

there on the right day. If you order flowers by telephone to send to someone on Valentine‟s Day

they are of little use if they are delivered the day after.

The integrated nature of logistics

In order to be truly effectual all of the functions within the logistics function must be fully

integrated, which is what is at the heart of „Total Business Logistics‟. Because the functions

making up logistics management are often complex and highly specialised, they need to be

managed by professional people. To illustrate this, the use of forklift trucks, cranes, gantries and


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lifts can be a very dangerous business. Such equipment forms the tools of materials handling.

The incorrect operation of such machinery can result in serious injury and damage or even death.

Evolution of the „total‟ logistics concept

With the growing finesse of marketing analysis has come an increased mindfulness of the costs

of logistics. Firms must aim to provide customer satisfaction in order to make money, and to

achieve this, goods must be in the right place at the right time. There is an equilibrium that must

be achieved between the costs of logistics and customer satisfaction. Greater levels of service

usually mean higher costs and the balance is the task of logistics management.

Definitions

Modern management theory and practice takes a holistic approach to logistics management and

today this managerial function is often referred to as „total business logistics‟ with the emphasis

on the word „total‟. It is intended to be a complete physical distribution system, which employs a

total cost approach. The five main elements of total business logistics are:

1. Service levels

2. Warehousing

3. Order processing

4. Transportation

5. Stock levels/inventory

Business logistics management integrates these functions, making sure each element is used to

best effect towards a single, well-defined goal. This is known as the systems approach to

logistics management.

A good grasp of the two main premises is important.

1. The achievement of an effectual system is the outcome of hard work and dedication to purpose

by all concerned. The overall service aim can be achieved, even though it may appear as if some

individual elements of the system are not working to maximum efficiency. It is the total final

output of the system that is important and the criterion by which the effectiveness of the system

as a whole should be evaluated.

2. The best service cannot be provided at the lowest cost, since costs increase with the level of

service offered. When the level of service that should be offered to customers has been decided,


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the company must then search ways of keeping costs to a minimum without putting at risk the

agreed service targets.

Order processing

This is the first stage of the logistical process, and an effective order-processing department has a

direct influence on lead times. Orders come from the sales team via the sales department,

arriving only rarely on an ad hoc basis, most companies preferring to build up regular supply

routes with an efficient supplier, which remain stable over a period of time. Contracts are

frequently set up and regular repeat orders are made throughout the duration of the contract.

Order processing has been made much more efficient by the use of computerised systems, which

allow automatic updating of stock levels and delivery schedules, thus accurately illustrating the

sales position. Such accuracy is essential in the order-processing department, but this must be

combined with speed of processing.

Inventory

This is a critical area of PDM, since customer satisfaction depends on the company not running

out of stock and being able to deliver orders. An optimum stock level must be operated, whereby

stock-out situations do not happen. However, stock levels should not be too high as this is costly

to maintain. Techniques for ascertaining optimum stock levels are examined later.

Stocks mean cost - the opportunity cost, which exists through constant competition for the

company‟s resources. If a high stock level has to be maintained, then the profit contribution must

be larger than the costs associated with carrying extra stock. Some companies may have to carry

high stock levels to meet short lead times in a particular market, and these companies must look

to reduce costs in other areas of the PDM mix.

Warehousing

Many firms dispatch goods direct to the customer from their own on-site warehouse. However, if

a firm sells goods which are taken off regularly, but in small quantities, strategically located

warehouses around the country may be used. Large retail chains use this type of system, in which

goods are transported in bulk from manufacturer to retail warehouse, where stocks are stored

before being distributed to individual stores belonging to the retail chain. Levels of service and

costs will increase with the number of warehouses used and again, an optimum strategy should

be laid down which enables operation at a desired level of service. What must be taken into

consideration is location of customers, size of orders, frequency of deliveries and lead times.


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Transportation

This is usually the greatest cost in distribution, and is calculated according to numbers of units or

weight. However, it must not be thought that management of the transportation function is easy,

since costs must be carefully controlled and type of transport chosen, which must be kept under

review. Many companies have dedicated transport managers, illustrating the importance of the

PDM function.

Road transport, with its advantages of speed and door-to-door delivery, has become the most

popular method of transportation. Rail transport is often used when lead-time is not of such

paramount importance, or when attempting to bring down transport costs. Air transport is not

widely used for distribution within the UK, although overseas long-distance routes can justify the

cost. It is used for transporting goods, which are highly perishable or valuable in relation to their

weight.

Business logistics - a systems approach

It has already been emphasised that various marketing activities need to be combined to form a

single marketing effort. Managers are now becoming more conscious of the potential of PDM

and that logistical systems should be designed with the „total‟ function in mind. A disconnected

approach to PDM will result in a firm failing to provide satisfactory service and involve it in

excessive costs. It should also be noted that within the PDM structure there would be possible

conflict between individual managers aiming to achieve their personal goals to the detriment of

the overall PDM objectives.

Monitoring and control of the logistics function

Getting the right goods to the right place at the right time for least cost is the objective of PDM.

The basis of monitoring and control is to provide definite measures of operational effectiveness,

giving management objectives, which point to criteria, which allow useful assessment of

performance.

The output of a physical distribution system

The level of customer service is the key output from any system of physical distribution and this

is a competitive benefit that can be offered to customers to keep existing business or to attract

new business. The level of service offered should be at least comparable to that of major

competitors. The level of service is often perceived as the time it takes to deliver a customer‟s

order, or how many orders can be met from stock. Technical assistance, training and after-sales


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service is also involved. The two most fundamental areas are reliability and frequency of

delivery and the ability to meet orders quickly from stock.

Elasticity of service

The cost of providing service is measured in time and money, especially in industrial markets

where service can often take precedence over price when potential customers are deciding on a

supplier. Companies operating JIT manufacturing are particularly conscious of this fact.

Marketing firms wishing to raise their service levels can face diminishing returns. For a company

to offer 100 per cent service provision, every eventuality would have to be covered, which is

costly. Maximum customer satisfaction and minimum distribution costs are not compatible and

there has to be some compromise in other areas. This depends on the degree of service sensitivity

or service elasticity in the particular market.

Inventory management (stockholding)

Inventory gives cover against what may happen tomorrow. Inventory is kept to increase

profitability with the support of manufacturing and marketing. Manufacturing support comes

through two types of inventory that of the materials for production, and that of spare and repair

parts for maintaining production equipment. Marketing support is provided through an inventory

of the finished products, and of spare and repair parts which support the products.

Stocks are accumulated because supply and demand cannot be perfectly co-ordinated, and

because of the uncertainty of future demand and reliability of service. They ensure that raw

materials, spare parts and finished goods are available when needed.

The logistics function plays a crucial role in delivering utility and satisfaction to customers. It is

a long-term strategic tool, which can be used to gain a competitive advantage. It delivers a level

of service and time and place utility to customers. Because of this, it must ultimately come under

the influence of senior marketing staff.


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Question 2 (a) Explain why service industry experts consider the application of relationship marketing

concepts to be particularly important for firms involved with services marketing. (13 marks)

(b) Explain how marketing firms can use the “GAPS model” of service quality (Zeithaml,

Parasuraman and Berry, 1990) to evaluate and measure their firm‟s success in delivering service

quality to their customers. (12 marks) (Total 25 marks)

OR

(a) Explain why many experts such as Christian Gonroos (1994) suggest that the application of

the „relationship marketing concept‟ is particularly important to firms operating in service

industries. (13 marks)

(b) Discuss how the quality of a fi rm‟s service offering can be appraised. (12 marks) (Total 25

marks)

OR

(a) Examine the importance of applying the relationship marketing concept to marketing

activities within service industries. Give examples to justify your answer. (13 marks)

(b) Giving examples, explain how marketing firms can monitor and measure the quality of the

service that they offer to customers. (12 marks) (Total 25 marks)

OR

(a) Examine the importance of applying the relationship marketing concept to marketing

activities within service industries. Give examples to justify your answer. (13 marks)

(b) Giving examples, explain how marketing firms can monitor and measure the quality of the

service that they offer to customers. (12 marks) (Total 25 marks)

Answer

(a) The concept of relationship marketing is particularly important in the area of services. Much

of the UK‟s economy is service based in terms of gross domestic product (GDP) output. Service

offerings are largely intangible. Most service offerings have some actual tangible product

component and most products have some service component. For example, a financial service

such as a bank account or an investment scheme is largely intangible. Because services are

largely intangible it is more difficult for the marketing firm to tell whether they are providing

what the customer wants. Service satisfaction depends on the experience and the perception of


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the customer. It is a largely subjective thing. Hence, it is vitally important for the marketing firm

to monitor their service offering to the customer and to ensure that they are at least matching and

possibly even exceeding the customer‟s service expectations.

Because of the nature of services the traditional marketing mix is extended from the 4P paradigm

to the 7P model. We retain the existing so called 4Ps of Place, Price, Promotion and Place and

add to these Processes, People and Physical evidence. Processes are concerned with the

efficiency of the process used in the delivery of the service, for example, how well a travel firm

booked and organised your holiday.

Research has shown that it is five times more expensive to win a new customer, than it is to keep

an established customer. Hence it is very important for firms to retain existing customers,

especially potentially profitable key accounts. Therefore, it is essential that marketing firms

spend time and energy to find out what customers really want. In certain service marketing

situations when a firm loses a customer they are often „lost for good‟. This can also be the case

for products but more so for services. For example, a man in his 50s might have been with one of

the high street banks since his university days. He may still hold his account in his old university

branch. Such a person is likely to be inundated with direct mail and other personalised direct

marketing messages e.g. on the internet to try and persuade him to „switch‟ his account to

another bank. If such a person ever did switch his account then he would be very unlikely ever to

return to his original bank and from the bank‟s point of view the customer would be „lost for

good‟. On the other hand if the same person switched his loyalty from say Sainsbury‟s

supermarket to Asda (Sainsbury‟s and Asda are popular UK supermarkets) because he thought

Asda offered better sales promotions, it might be possible to get him back. Such a person is

unlikely never to visit Sainsbury‟s again in his life. In such a situation such a customer would be

classified by Sainsbury‟s as „always a share‟. The concepts of „Lost for good‟ and „Always a

share‟ type customer situations are listed below:

● Always a share - low transaction and switching costs, if you lose a customer can always get

them back.

● Lost for good - if transaction and switching costs high then when you lose a customer you are

unlikely to get them back

Relationship Marketing is particularly important in „Lost for Good‟ situations because once the

firm has lost the customer it is highly unlikely that they will ever manage to get them back.


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These are service marketing concepts and as can be seen from the discussion above the concept

of relationship marketing is particularly important in a service marketing context.

(b) Research has shown that the quality of the service provided by a company or institution can

be measured by determining the discrepancy or „gap‟ between what the customer wants

(customer expectations) and how the customer experience the service (customer perceptions).

Customer perceptions are formed by the customer experiencing socalled moment of truths.

„Moment of truth‟ is the basic concept of service marketing and is used to describe each episode

in which a customer comes into contact with any aspect of your organisation. Parasuraman,

Zeithaml and Berry (1990) developed the so-called SERVQUAL instrument which can be used

to measure the quality of service.

They developed the so-called „gaps model‟ of service quality. The most important gap, referred

to as Gap 5, is the gap between customer expectations and customer perceptions. This gap is

caused by the four other gaps as detailed in the following figure:

These gaps are defined as follows:


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Gap 1: represents the discrepancy between what the customer wants (customer expectations) and

what management think they want (management perceptions).

Gap 2: represents the discrepancy between management‟s perception of client expectations and

service quality specifications.

Gap 3: represents the discrepancy between the service delivered and the service quality

specifications.

Gap 4: represents the discrepancy between the promised service (external communication to

customers) and the service provided.

Parasuraman, Zeithaml and Berry developed a methodology which is now widely used in the

measurement of service delivery and customer satisfaction. The methodology is based on a series

of standard questionnaires in order to determine whether the above gaps exist in an organisation.

The general idea is to be able to close the gaps, especially Gap 5 which is the most important and

really cased by the other gaps in the model. These questionnaires are applied to customers (Gap

5), management (Gaps 1 & 2) and service contact personnel (Gaps 3 & 4). The above Servqual

instrument and the Gaps framework are good examples of how firms can measure the

effectiveness of their service offering in relation to customers perceptions. There are other

methods such as standard qualitative interviews but these tend to be less sophisticated than the

now well accepted Servqual/Gaps framework.


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Question 3 By means of a flow diagram, show the sequential stages in the New Product Development (NPD)

process. Examine the management decisions that have to be made at each stage. (25 marks)

OR

Describe and explain one appropriate process of new product development (NPD) that marketing

management should follow to reduce the possibility of product failure at the commercialisation

stage of the NPD programme. (25 marks)

OR

(a) List the stages in the new product development process (NPDP) and analyse the marketing

activities that management is likely to undertake at each stage. (13 marks)

(b) Using examples of your choice, explain how new products can be categorised. (5 marks)

(c) Briefly discuss the alternatives available to marketing management in organising staff and

resources for the development of new products within the fi rm. (7 marks) (Total 25 marks)

OR

Describe the New Product Development (NPD) process from the start of the product idea to the

post-launch evaluation, and discuss the activities that take place at each stage of the process. (25

marks)

Answer

New products are key to a company‟s continued survival, but their development is a risk laden

undertaking. Large sums of money can be lost, but product failure can also damage a company‟s

image and allow other companies to gain competitive advantage. Naturally, the objective of new

product strategy is to launch a successful product, but it is essential that any such strategy be

designed to reduce risk throughout individual stages of development. The development of a new

car, for example, is a multi-million pound investment, although success or failure is of little

consequence to the consumer. For many companies, new products represent „make or break‟

decisions.

The process of new product development goes through a logical series of steps from the

inception of the idea to the actual launch of the product. These steps are now explained:


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● Idea generation can come from a variety of sources. In innovative companies, such ideas tend

to be research driven. The notion of marketing orientation tells us that we should look to our

customers first (through marketing research) before embarking upon new product development.

However, in the case of companies producing „breakthrough‟ products this might be difficult as

customers will not necessarily be able to envisage what they require.

Marketing research does come into the equation, but more through procedures like product

testing come later in the process. A culture should exist within the organization that encourages

new product ideas amongst more than simply the Research and Development function. The sales

force should be a regular source of new product ideas, and such data can be gathered from the

company‟s marketing information system.

Brainstorming is a good method of producing new product ideas as long as it is chaired

competently, but regular meetings of planning committees should have this at the head of their

agenda. Venture teams can then be set up to progress likely ideas.

● Screening is the first stage of sifting viable ideas from less viable ones and obvious issues are

addressed at this stage in terms of potential demand, the company‟s capability in terms of

development and production and the profit potential. This is an important stage at which „Go‟ or

„Drop‟ decisions are made.

● Business analysis is where the new product idea‟s financial viability is appraised. By this

phase only „serious‟ contenders will remain and here a critical stage has been reached. Such

analysis needs to take into consideration total costs rather than simply development and

production costs.

● Product development is the point at which the company has committed itself and indeed this is

when costs start to increase sharply. Where appropriate, prototypes will be developed. These can

be assessed by marketing research through product appraisal tests. It is also here that product

refinement and modification will be possible through feedback from marketing research.

● Test marketing is the penultimate stage. This might be appropriate where the product is a fast

moving consumer good when it can be tested in „test towns‟ or a television test areas before

going „national‟, but this is not always appropriate for more durable products. Here, product

placement tests with members of the general public are probably more appropriate.


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● Commercialisation is where the product is to be launched on the market. All of the various

filters have taken place, but even at this stage success is not guaranteed. However, there is a far

greater likelihood of success if the procedure just described has been undertaken.

An American firm of consultants, Booz, Allen and Hamilton first put forward the notion of the

decay curve of new product ideas, which is illustrated below:

In their original research Booz, Allen and Hamilton found that it took 58 new product ideas to

produce one potentially successful product. However, even during the „commercialisation‟ stage

there was still a 50/50 chance that the product would not be successful. The results of later

research suggested that it took considerably fewer new product ideas to produce a successful

product.

Factors for successful innovation

McKinsey & Co conducted research in 1980 which investigated a number of large multinational

organisations. The research examined factors that were deemed to be essential in their successful

operation and eight factors were highlighted:

● A bias towards action

● Simple line and team staff organization

● Continued contact with customers

● Productivity improvement via people

● Operational autonomy and the encouragement of entrepreneurship

● Simultaneous loose and tight controls


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● Stress on one key business value

● An emphasis on sticking to what it knows best

This research has stood the test of time and it is still cited today as being the critical success

formula for successful international enterprise.

New product categorisation

The product or service is the principal component of marketing as it provides revenue without

which commercial activity could not take place. Before describing a formal organisational

structure for the development routine suggested for new products it is helpful to list the types of

new product categorisation used in marketing as this might influence the subsequent organisation

of the product development process:

● Innovative products are completely new to the marketplace;

● Replacement products might include well-known items, but with a new design and functions;

● Imitative products are common once an innovative product has become successfully

established. They are colloquially termed „me too‟ products;

● Relaunched products occur when an original product has gone into decline, but the company

anticipates sufficient potential sale if the image of the product or its position is altered through

manipulating the marketing mix.

Organisation for new product development

How new product development is managed is critical in terms of potential success or failure.

There are a number of different organisational alternatives:

● New product managers are given the sole task of developing new products. Sometimes this

task is part of the duty of a product or brand manager.

● New product committees receive new product ideas from marketing or research and

development or from other source within the organisation and assess their viability in terms of

potential success.

● New product departments exist in large innovative companies and their work cuts across a

number of departments. When a new product idea looks to be viable a „product (or project)

champion‟ is appointed to see development through from its design and development to final

launch.

● New product venture teams comprise people from different parts of the organisation who are

brought together on an ad hoc basis so different views can be incorporated in new product


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decision-making. Their task is to develop products within predetermined budgets and time

constraints.


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Question 4 (a) Describe and contrast the following three types of business orientation:

(i) Production orientation

(ii) Sales orientation

(iii) Marketing orientation

Use specific examples to illustrate the points made. (13 marks)

(b) Discuss the importance of recent marketing developments which focus on environmental,

ecological and related issues. (12 marks) (Total 25 marks)

OR

(a) Using examples to illustrate your answer, describe and contrast the following three types of

business orientation:

(i) Production orientation

(ii) Sales orientation

(iii) Marketing orientation (13 marks)

(b) Discuss the recent developments which have become known collectively as „green

marketing‟ (i.e. sympathetic to environmental, ecological and related issues) and the likely effect

of such issues on marketing firms over the next 10 years. (12 marks) (Total 25 marks)

OR

Assess whether marketing firms really care about ethical and moral issues or whether their

actions are simply a cynical exploitation of consumers‟ concerns. Use examples to support your

answer. (25 marks)

OR

Discuss the recent developments which collectively have become known as „green marketing‟

(i.e. marketing sympathetic to environmental, ecological and related issues) and explain the

likely importance of such issues to organisations involved in marketing over the next decade. (25

marks)

Answer

(a) Different types of business orientation

It can be said that generally speaking, there are three basic types of business orientation:


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Production orientation

In the nineteenth and early twentieth centuries, the primary purpose of all business and industrial

activity was thought to be production. Manufacturers were in a “supplier‟s market” and were

faced with a virtually insatiable demand for anything that could be produced. Henry Ford made a

famous statement when he produced his first production line Model “T” Ford: “You can have

any colour you like, as long as it is black.”

This was certainly a production orientated statement and during this period firm concentrated on

improving production efficiency in an attempt to bring down costs. In America, in the economic

recession of the 1920s and 1930s, to simply produce was no longer good enough and firms had

to begin to focus their attention on the changing needs of the market place. This ultimately led to

the idea of marketing orientation and it was America in the 1930s that saw the origin of this

common-sense philosophy.

Sales orientation

Gradually business people began to appreciate that in a highly competitive environment it was

simply not enough to produce goods as efficiently as possible. The sales department was thought

to hold the key to the firm‟s prosperity and survival, and sales volume became the success

criterion. In a sales-orientated firm, selling is a major management function, and is often given

status equal with that of production and finance. Here the emphasis is on “pushing” a company‟s

products or services to sometimes unwilling customers.

Marketing orientation

Under the marketing concept it is the customer who becomes the centre of business attention.

Firms no longer see production or sales as the key to prosperity, growth and survival, but the

identification and satisfaction of customers‟ needs and wants. In a marketing-orientated

organisation, the whole firm appreciates the central importance of the customer and realises that

without satisfied customers there will be no business.

The Chartered Institute of Marketing sums up what marketing is in its formal definition of the

subject:

“Marketing is the management process responsible for identifying, anticipating and satisfying

customer requirements profitably.”

An alternative definition is put forward by the American Marketing Association:


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“Marketing is the process of planning and executing the conception, pricing, promotion and

distribution of ideas, goods and services to create exchanges that satisfy individual and

organisational objectives.”

The Chartered Institute of Marketing definition, perhaps more succinctly sums up the overall aim

of marketing, but it is felt that the American Marketing Association‟s definition is more precise

as it identifies the tools with which marketing realises its objectives. These tools are collectively

known as the “marketing mix” - a term coined by Neil Borden and essentially this means

manipulating the “four Ps” (a term coined by E Jerome McCarthy and which embraces price,

product, place and promotion) in their most effective way. It is really only since the end of the

Second World War that marketing has developed in the United Kingdom as a formalised

business concept with a codified philosophy and a set of techniques. It has also been

demonstrated that marketing is now central to planning in businesses that operate in a

competitive environment. The marketing-orientated firm achieves its business objectives by

identifying and anticipating the changing needs and wants of specifically defined target markets.

Business planning, therefore, starts with customers, and it is the responsibility of marketing to

marshal these requirements through the marketing plan into the corporate business plan. As a

consequence, it is from customers‟ needs and subsequent marketing planning to meet these

needs, that other functions in a business operation take their respective leads.

(b) We hear the term “green” being applied in a number of situations these days. There are

“green” political parties both in the UK and elsewhere in the world for example Germany.

Recycling of otherwise waste materials is another manifestation of what has come to be referred

to as “green” consciousnesses. Firms too have become more “green” in their business methods,

particularly production and other operational methods. They have also become more “green” in

terms of the packaging used on their products, and of course in terms of the products and

services themselves. A firm that perhaps epitomises the “green” marketing firm is the “Body

Shop” which offers a range of environmentally friendly, not tested on animals, ethically, non

exploitatively produced cosmetic and related products. A marketing firm that is a good example

of a “green” firm in the service sector is the Co-operative Bank, which prides itself on only

investing and lending to ethically run enterprises. For example, it will not lend to any firm that

exploits cheap labour overseas or pollutes the environment or tests products on animals.

Green marketing as a pro-active policy


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If you look at the labelling of many everyday packaged grocery products the next time you are in

the supermarket you will see some form of “green” message on most of them. Many firms are

now adopting a “proactive” rather than reactive “green” marketing strategy in an attempt to gain

a competitive business environment. Marketing is all about the enterprise meeting the needs and

delivering the want of specifically defined target markets more effectively and efficiently than

the competition. If the market wants, and is prepared to pay for, “green” products and services

then marketing-orientated firms are duty bound to find ways of offering such goods and services

to their customers. They simply would not be doing their job if they did not, and if they do not

satisfy customers it will only be a matter of time before those customers find another marketing-

orientated firm that does. So-called “green” issues are no longer simply side issues and only

practised by a few firms, such as “Body Shop”. Today “green” issues often have a key position

in the long-term corporate policy of many firms. Firms are seeking advice from a whole raft of

“environmental consultants” who claim to offer such firms professional advice on all areas of

environmental and “green” issues. In fact offering advice on “green” issues is today one of the

growth areas of the business consultancy world. Most marketing courses taught at colleges and

universities today usually have a “green” marketing component to them. At the postgraduate

level at the major business schools, “green” issues are given full module status and they are so

important, that they are often woven into all aspect of marketing and business teaching.


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Question 5 (a) Discuss the view that the choice of channel of distribution must be based on the long term

cost-benefit outcomes. (12 marks)

(b) For each of the following distribution strategies, explain the circumstances under which a

marketing firm might decide to use it and outline the main principles involved in each strategy.

Give examples to illustrate your answer.

1. Intensive distribution

2. Exclusive distribution

3. Selective distribution (13 marks) (Total 25 marks)

OR

(a) “Distribution is not simply an adjunct [add-on] to marketing; it has a full place in the

marketing mix and can be an essential component of marketing strategy.” (Lancaster and

Reynolds, 2006) Discuss the validity of this statement. (13 marks)

Answer

(a) The nature of distribution

Distribution arrangements tend to be long-term in nature. Because of this time horizon, channel

decisions are usually classed as strategic, rather than tactical or operational ones. There are two

reasons for treating channel decisions in this way:

● Channel decisions have a direct effect on the rest of the firm‟s marketing activities. For

example, the selection of target markets is affected by and in turn affects, channel design and

choice. Similarly, decisions about individual marketing mix elements (e.g. pricing) must reflect a

company‟s channel choice.

● once established, a company‟s channel system may be difficult to change, at least in the short-

term. Although distribution channels are not impervious to change and new channels emerge as

old established channels fade, few companies are able to change their channel structure with the

same ease of frequency as they can change other marketing mix variables like price or

advertising strategies. Because channel arrangements are likely to change slowly over time,

manufacturers need to continually monitor the distributive environment and reassess their

existing channel structure in an attempt to exploit and capitalise on any change. However, they

should be aware of developments that are taking place, so as not to be caught off guard. Nowhere


24 Ibrahim Sameer

is this truer than in the case of the speed of development of the Internet as a direct retailing

medium, that has caught many traditional distributors off balance.

(b) Strategic elements of channel choice

An important consideration for marketing management in formulating channel policy and the

number of marketing intermediaries used is the degree of market exposure sought by the

company for its products. Three distribution strategies, resulting in varying degrees of market

exposure, can be distinguished.

Intensive distribution

Products, when viewed by consumers in their totality, are seen as a bundle of attributes or

satisfactions including possession utilities and time and place utilities.

Producers of convenience goods and certain raw materials aim to stock their products in as many

outlets as possible (i.e. an intensive distribution strategy). The dominant factor in the marketing

of such products is their place utility. Producers of convenience goods such as pens,

confectionery and cigarettes try to enlist every possible retail outlet, ranging from multiples to

independent corner shops, to create maximum brand exposure and maximum convenience to

customers. With such products, every exposure to the customer is an opportunity to buy, and the

image of the outlet used is of less significant factor in the customer‟s mind than the impression

of the product.

Exclusive distribution

For some products, producers deliberately limit the number of intermediaries handling their

products. They may wish to develop a high quality brand image. Exclusive distribution to

recognised official distributors can enhance the prestige of the product. Exclusive distribution is

a policy of granting dealers exclusive rights to distribute in a certain geographical area. It is often

used in conjunction with a policy of exclusive dealing, where the manufacturer requires the

dealer not to carry competing lines.

Car manufacturers have such arrangements with their dealers. With the arrangement goes a

stipulation by the manufacturer that the distributor is able to uphold appropriate repair, service

and warranty handling facilities. By granting exclusive distribution, the manufacturer gains more

control over intermediaries regarding price, credit and promotional policies, greater loyalty and

more determined selling of the company‟s products.

Selective distribution


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This policy lies somewhere between the extremes just described. The manufacturing firm may

not have the resources to adequately service or influence the policies of all the intermediaries

who are willing to carry a particular product. Instead of spreading its marketing effort over the

whole range of possible outlets, it concentrates on the most promising of outlets.

Channel members should have certain facilities in order to store and market products effectively,

for example, frozen food products require that intermediaries have adequate deep freeze display

facilities. Specialised resources may be necessary, for example, certain ethical pharmaceutical

products require that intermediaries are capable of offering advice as to the use and limitations of

the product, so such products might be restricted to pharmacies. The product may have a

carefully cultivated brand image that could be damaged by being stocked in limited line discount

outlets where products are displayed in a functional way to reduce overheads and the final price.

Selective distribution is used where the facilities, resources or image of the outlet can have a

direct impact on customers‟ impressions of the product. An example here is „up market‟ brands

of perfume.


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Question 6 Identify and explain the main factors that the marketing management of a firm would need to

take into account when deciding to set a price for a product or service. Use examples to show

how such factors impact on pricing decisions. (25 marks)

OR

Identify and discuss the main factors that management will have to take into account when

setting the price for a product or service. Use examples to support your answer. (25 marks)

Answer

To ensure profitability, prices must ultimately exceed costs. It seems logical, therefore, to

consider cost as the first stage in price planning. In fact, the problem should be approached from

the opposite direction. In line with marketing orientation in general, pricing strategy should

begin with the consumer and work „backwards‟ to the company. Costs cannot be ignored, but

pricing must be consumer- or customer-orientated, the customer being the person who finally

decides whether or not the product is purchased. The following steps should be followed:

Identify the potential consumer or market

This step may appear to be too obvious to be worth mentioning, but its purpose is to focus the

planner‟s mind on the market from the outset. It also prevents price from being viewed as

separate from the other marketing mix elements.

Demand estimation

The likely volume of sales will directly affect the manufacturer‟s costs and thus the price

necessary for profit maximisation. Ideally, demand analysis should provide the company with a

schedule of predicted demand levels at differing prices. This establishes the position and slope of

the demand curve.

Anticipate competitors‟ prices and potential competitor reaction

The complexity and nature of a competitor‟s pricing structure are usually difficult to ascertain.

Of course consumers (i.e. other manufacturers and final consumers) can easily compare selling

prices, but this does not give any real insight into a competitive manufacturing pricing structure,

as it relates to the various members of the marketing channel. Buyers often compound this

difficulty by inventing „special prices‟ and „non-existent discounts‟, not really offered by


27 Ibrahim Sameer

competitors, but stated as being real during the negotiation process in order to help when

bargaining for a lower price.

Market share analysis

If the company is seeking a large market share, the price for the product will need to be

competitive. Management should ensure that production capacity is sufficient to meet the

demand that this anticipated market share might create. If production capacity is limited, there is

little point in setting low prices that might attract orders that cannot be fulfilled. Market

considerations should be the major determinant of price, so it would not make sense to develop a

product whose price did not fall approximately in line with competitive prices. The level of

potential demand at given price levels is, therefore, an important consideration.

Cost analysis

In the break-even figure below, demand analysis indicates that a price of £1.80 per unit would be

attractive to the market, and the desired market share would require a production level of

100,000 units per annum. Fixed costs for production of the product are £100,000. Variable costs

rise as production increases; at a production level of 100,000 units, total costs are £150,000. The

company knows, therefore, that it must charge at least £1.50 per unit in order to break even at

this volume. However, this is a break-even figure based solely on cost. The break-even point can

be modified by changing the price: at a higher price, fewer units are required to break even.


28 Ibrahim Sameer

In this example, the company has already estimated that £1.80 is a desirable price in market

terms. If this price is used with information from the figure above, the following equation can be

used to calculate the number of units required to break even at this price.

Fixed costs = £100,000

Variable costs = £0.50 per unit

Selling price = £1.80

Number of units required to break even at a given selling price = n

Total costs will be equal total revenue when: 100,000 + 0.5n = 1.8n

Therefore, n = 77,000 (approx.) and total costs = £138,500 (approx.)

The company had planned to produce and sell 100,000 units. When the price is set at £1.80 per

unit, break-even will be approximately 77,000 units. This price provides for profitable

production at all points above 77,000 units.

Profit calculation

Taking the example in the break-even figure above, the company could use £1.80 at 100,000

units as its basis for setting a price if the objective was other than to break even. Once equipped

with cost and demand data, various price levels that might be appropriate to a chosen marketing

strategy can be considered. Several break-even points can then be plotted along the line of total

cost. As long as the output level is to the right of any given break-even point, the company will

generate profits. Thus the break-even point is a function of price which is, in turn, a function of

the chosen marketing strategy.


29 Ibrahim Sameer

Question 7 (a) Explain how Customer Relationship Management (CRM) has evolved from Relationship

Marketing. (12 marks)

(b) Explain the relationship between good internal marketing and successful CRM outcomes. (13


OR

(a) Explain the principles involved in integrated customer relationship management (CRM) and

the usefulness of the integrated CRM to marketing organisations. (12 marks)

(b) Describe the relationship between internal marketing policies and practices, and good

external CRM outcomes. Use examples to illustrate your answer. (13 marks) (Total 25 marks)

OR

(a) Define Customer Relationship Management (CRM). (5 marks)

(b) Explain how the use of Internet based technologies by fi rms has resulted in the increased

adoption of the CRM concept. Use examples to support your answer. (20 marks)

(Total 25 marks)

Answer

(a) Customer Relationship Management (CRM) is not just about keeping your customers

satisfied; it allows firms to attract customers with speed, accuracy, availability, creativity and

flexibility. In today‟s ever-changing business and technology environment, CRM is more crucial

than ever - ultimately a firms ability to compete, survive and profit may depend on it. The

subject of marketing is dynamic and evolving. Every year there seems to be a new conceptual,

strategic or operational innovation within the field. The nature and direction of modern

marketing has changed over the last 20 years.

The basic definition of marketing as a business process concerned with satisfying customers

needs and wants more effectively and efficiently than the competition remands the same and

probably always will do. The basic marketing concept is as valid today as it has always been.

Businesses still need to put the customer at the very centre of their operations. In fact in today‟s

global and increasingly complex and competitive world it is probably even more relevant to

today‟s commercial enterprises. However the processes used by firms to achieve marketing goals


30 Ibrahim Sameer

this have altered dramatically. If one was to examine a standard marketing textbook from the

1970‟s or even from the 1980‟s and one from today and compare them, you would see a number

of topics in the more recent version, which were not even mentioned in earlier versions. Topics

such as „Internal Marketing‟, „Relationship Marketing‟, „e-marketing‟, „Green Marketing‟ and

„Customer Relationship Management (CRM)‟, are all fairly recent additions to the marketing

literature. In particular there has been what can only be described as a complete „paradigm shift‟

in the way the management of marketing firms view their customers, look after them, nurture

them and establish relationships with them over the long-term. Basically the focus of marketing

has shifted from the shorter-term view of customers as the next „transaction‟ to seeing customers

as a long-term income stream over many years, a so called „relationship‟ marketing approach.

CRM is a business strategy that integrates people, process and technology to maximise

relationships with a firm‟s day-to-day customers, distribution channel members, internal

customers and suppliers. CRM is a comprehensive approach that provides seamless coordination

between sales, marketing, customer service, field support and other customer-facing functions.

Relationship marketing is a business concept, which has developed from a growing body of

literature expressing lack of satisfaction with conventional „transactional‟ marketing. This

dissatisfaction applies to all areas of marketing but especially business to business and services

marketing where the shortcomings of the more conventional marketing approach was first

recognised. In 1954 Peter Drucker said “there is only one valid definition of business: to create

customers. It is the customer who determines what the business is”. Hence customers are central

to business and the underlying theme behind relationship marketing is the acquisition,

satisfaction and retention of customers. Retention is the key word here and is the basic premise

behind the CRM approach to business and the main rationale for employing a long-term CRM

strategy. In a sense, it is the basic marketing concept in principle but developed into a format in

which it can be applied in an operational setting, rather than merely being an idealized concept

that management merely aspires to.

(b) Internal marketing

Internal marketing is the process of engaging the support and commitment of employees and

other organisational members for the goals and objectives of the company. Successful businesses

recognise the importance of internal communications.


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An effective system of cross company communications is vital for keeping staff informed of

what is happening throughout the company and for providing a feedback mechanism. Internal

marketing takes place at the interface between marketing and human resource management and

involves both of these management disciplines. The application of internal public relations has a

salient role to play in the overall process of achieving an internal marketing „culture‟ because it

too embraces both of these areas of management.

In a very real sense the internal marketing is actually an intrinsic part of the relationship

marketing process, it would be difficult to have the latter before first achieving the former.

Internal marketing is an important „implementation‟ tool. It aids communication and helps

organisations to overcome any resistance to change. It informs and involves all staff in new

initiatives and strategies. It is simple to construct, especially if you are familiar with traditional

principles of marketing. If not, it would be valuable to spend some time considering marketing

plans. Internal marketing obeys the same rules as, and has a similar structure to, external

marketing. The main differences are that a firm‟s customers are staff and colleagues from your

own organisation. In a sense they are „internal customers‟. If staffs are not aware and in support

of your marketing campaign, they may be unable or unwilling to provide the support that will

ensure your project or campaign is a success. Someone asked, “What is meant by this business of

internal marketing?” If it‟s good for your customers, it‟s good for your staff. Besides, it‟s

important for everyone on the team to know the same information.

What do you do if a staff member gets a call from the local newspaper and hasn‟t been told about

your planned event? Get staff members involved in your planning. Ask their opinion about

marketing materials and procedures. Treat them as another focus group. Finally, spend time

selling your staff on the marketing concept. Make sure they understand and agree.

The staff represents the „coal-face‟ of the corporate brand. They meet, greet and serve customers

in a variety of different ways, face-to-face, online, via telephone and so on. Customer

relationships depend on their attitude and their loyalty. In turn they build loyalty longer-term for

the company. The longevity of customer relationships is a continuing issue for many companies

as it often costs more to recruit a new customer than to serve a customer of longer standing. To

motivate staff, it is necessary for communication to flow horizontally and vertically to all staff

levels. This process of communication should include the brand mission, philosophy and core

values. Many organisations are unable to harmonise these communications flows to reach all


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staff levels; some do not achieve even one of these flows. For this reason, a new view may have

to be taken of the classic human resources function in many organisations. In the future, the

process of Internal Marketing will require an empowered Human Resource capability.

Potentially, Internal Marketing could have a wide variety of applications, yet too few companies

would be able to benchmark themselves against the holistic range of these three concepts. By

ensuring that all members of staff are aware of the corporate vision, it becomes clearer what the

organisational goals and priorities are, thus helping to avoid conflict within the organisation. A

focus on development can help them to develop the skills and the knowledge that they need.

Finally, rewarding them financially through salary packages as well as recognition for their

individual and collective contribution towards the corporate strategy means that all three factors

can work as a cohesive whole.


33 Ibrahim Sameer

Question 8 (a) Compare „market penetration‟ pricing with „market skimming‟ pricing. (12 marks)

(b) Under what market conditions might each of the above pricing approaches be appropriately

used? Use examples to illustrate key points. (13 marks) (Total 25 marks)

OR

Compare and contrast the pricing strategy of „market penetration‟ with that of „market

skimming‟ and explain the marketing conditions in which each method might be used. Support

your answer with practical examples. (25 marks)

OR

Compare the pricing strategy of „market penetration‟ with that of „market skimming‟ and explain

under what conditions each method might be used by marketing management. Give examples to

support your answer. (25 marks)

OR

Answer

(a) The strategies considered here are called „market penetration‟ and „market skimming‟ and

they relate to new products that are being introduced to the market place. A market penetration

strategy relies on the economies of large scale production to allow the product to be introduced

to the market at a price low enough to attract a large number of buyers as quickly as possible.

This will tend to constrain possible competitors by creating a low price barrier to market entry. If

product design and manufacture is costly to set up and operate and is also conducted on a large

scale, then this too will deter competitors. The aim is to attain a high or even total, initial market

share and keep this share high during the later stages of the product‟s life cycle. The figure below

explains this idea, and it can be seen that the product is introduced at an attractively low

„penetration‟ price at the beginning of its life cycle. As a result, demand for the product is high at

the early stages.


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An example of a type or class of product where a penetration pricing strategy tends to be used is

new mass produced models of motor cars.

A market skimming policy infers that a company will initially charge the highest price that the

market will bear, and promotional effort is directed at a small percentage of the potential market.

These customers are likely to be the innovators who will purchase during the introduction stage

of the product‟s life cycle, followed closely by the early adopters who are also more receptive to

new concepts and products. Their income levels and generally higher social status make them

less sensitive to high initial prices. To be able to reach a wider group of customers once the

innovators and early adopters have purchased, the company reduces its prices progressively thus

skimming the most advantageous prices from each successive adopter group. Price reductions

are successively brought in as sales slow at each phase, until the product has reached all of the

target market.

The figure below illustrates market skimming and here it can be seen that individual „skims‟

have been taken at certain times. The explanation that follows is for illustration purposes, for the

timing of skims does not necessarily relate to social class; for the „innovator‟ categories, a home

computing system is an example of a product that will be aimed at „technically minded people‟,

whereas the „innovator‟ category for an expensive new brand of perfume might well be the „A‟

and „B‟ social grades.


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In the above figure, the new product is introduced at time T0 at a high initial price P1. The

product is meant to appeal to the AB social grades at this stage. They make their initial purchases

and the market then begins to tail off, so prices are reduced to P2 which brings in the C1 social

classes at time T1. The same thing happens again at time T2 when the C2 social classes are

brought in by bringing down the price to P3. The final skim is brought in as price P4 at time T3

which brings in the DE social grades and this is when the product has reached its

maturity/saturation phase.

(b) A product example where firms have used market skimming as a pricing policy is personal

computers. However, products like microwave ovens and pocket calculators have gone through

this same process. A modification on the model described is to initially introduce a refined

„deluxe‟ version of a new product, with simpler versions appearing later at appropriately reduced

prices. In order to be successful, a skimming strategy must relate to a product or service that is

distinctive enough to exclude competitors who might be encouraged to enter the market in the

early stages through the high prices being attained. Other elements of the marketing mix must

assist this skimming strategy by advancing a good quality, distinctive image.

A skimming strategy is particularly relevant for new products because at the earlier phases of the

product‟s life cycle competition is minimal and the uniqueness of the new product can create

opportunities for non-price competition. In addition, as we have seen from the example, the

market can be effectively segmented or „cherry picked‟ on the basis of innovator characteristics

who will be willing to purchase regardless of the initial costs. At a more practical level, high

initial prices can lead to quicker recovery of research and development plus production set-up


36 Ibrahim Sameer

costs, and it can keep demand within the capacity of production whilst production levels are

building up.

A market penetration strategy relies on economies of large-scale production to allow the product

to be introduced to the market at a price low enough to attract a large number of buyers as

quickly as possible. This will tend to constrain possible competitors by creating a low price as a

barrier to market entry. If product design and manufacture is costly to set up and operate and is

also conducted on a large scale, then this too will deter competitors. The aim here is to attain a

high or even total, initial market share and keep this share high during the later stages of the

product‟s life cycle.

This would be referred to as „rapid‟ penetration, where the strategy is to gain maximum market

share from the outset. The Boston Consulting Group has indicated that high market share can

give the firm competitive advantage in terms of economies of scale and learning economies.

High market share products can become major income stream providers (cash cows) when the

market stabilises and matures. Firms often use „strategic pricing‟ to buy market share. That is

they price as if they enjoy the economies of a high market share, even if this means selling at or

below cost in the short run, and then the low price brings the demand, reduces costs and enables

the firm to sell profitably at that price. The other use of penetration pricing alluded to above is

for the firm to use market skimming in order to recoup investment, exploit the existence of

„innovators‟ and „early adopters‟, and then lower the price to create price segments after the

skimming has run its course. This use of pricing is often referred to as „slow‟ penetration pricing.


37 Ibrahim Sameer

Question 9 (a) Explain the conceptual principles behind the design of three advertising models and

demonstrate their practical use with examples. (13 marks)

(b) Discuss the importance of the management‟s ability to measure both the communications and

sales effects of advertising. (12 marks) (Total 25 marks)

Answer

Advertising models

Advertising has attracted much academic research over the years resulting in the postulating of

many conceptual and theoretical models. These have been drawn from several sources,

particularly psychology, and from advertising practitioners in order to attempt to explain how

advertising works.

The stimulus/response formula

This was an early attempt to model the effects of advertising and how advertising worked. Later

models began taking into consideration the environment in which the decision to buy is made.

Daniel Starch said in 1925 “for an advertisement to be successful it must be seen, must be read,

must be believed, must be remembered and must be acted upon”. This model assumed that the

advertisement is the main influence on the state of mind of the consumer in respect of the

product or service, and makes no allowance for combined or multiple effects of advertisements.

The DAGMAR philosophy

Colley‟s DAGMAR model in 1961 (Defining Advertising Goals for Measured Advertising

Results) allows for the cumulative impact of advertisements and also maps out the states of mind

consumers pass through:

1. From unawareness to awareness;

2. to comprehension;

3. to conviction;

4. to action.

This is described as the marketing communications spectrum. Advertising, along with

promotion, personal selling, publicity, price, packaging and distribution, move the consumer

through the various levels of the spectrum as follows:

Unawareness / awareness. The advertisement tries to make potential customers aware of the

product‟s existence.


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Comprehension. The customer recognises the brand name and trademark and also knows what

the product is and what it does; knowledge gained from the advertisement or from an

information search prompted by it.

Conviction. The customer has a firm attitude, preferring a particular brand over all others.

Preferences may have an emotional rather than rational basis.

Action. Some move is made towards purchase, thus the advertisement has been acted upon.

This illustrates the concept that the purpose of advertising is to cause a change of mind leading

toward purchase, but it is rare for a single advertisement to have the power to move a prospect

from complete unawareness to action. Effectiveness is judged by how far an advertisement

moves people along the spectrum.

The Lavidge and Steiner model

This consists of a hierarchical sequence of events on six levels:

1. Awareness

2. Knowledge

3. Liking

4. Preference

5. Conviction

6. Purchase

These steps divide behaviour into three dimensions: cognitive (the first two), affective (the

second two) and motivational (the third two). Although this differs from the „DAGMAR‟ model

in the number and nature of stages, there is agreement that purchase is the result of the

persuasion elements, making the assumption between changes in knowledge and attitude towards

a product and changes in buying behaviour there is a predictable outcome.

Cognitive dissonance theory

Dissonance theory (Leon Festinger, 1957) illustrates a two-way relationship, with behaviour

influencing attitudes as well as attitudes influencing behaviour. After making a decision to

purchase, the prospect will be involved in cognitive dissonance and will actively seek

information to reinforce the decision, focusing on attractive features and „filtering out‟

unfavourable data. The major implication of this is that advertising for existing brands in the

repeat purchase market should be aimed at existing users to reassure them in the continuation of

the buying habit at the expense of the competition.


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It must be remembered that an advertisement is the channel through which the sponsor

communicates their message. The encoded message reaches recipients, through advertising or

salespeople, who then decode and absorb it either fully or partly.

The quality of the transmission can be distorted by „noise‟ occurring because the receiver does

not interpret the message in the way the source intended (due perhaps to differences in cultural

backgrounds of the two parties) or because of cognitive dissonance which occurs when peoples‟

receipt of the message does not agree with what they previously believed.

Dissonance may cause a number of different reactions by the receiver:

1. Rejecting the message

2. Ignoring the message

3. Altering the previous opinion

4. Searching for justifications

The first two reactions are of course negative, and from this feedback the source may change the

message or stop communicating altogether with a particular receiver who is not receptive to the

source‟s ideas. It can, therefore, be seen that advertising does not always convert people into

users of a particular product. It can, however, have a positive effect in preventing loss of users,

and increasing their loyalty.

(b) Advertising can rarely create sales by itself. Whether or not the customer buys depends on

the actual product, price, packaging, personal selling, after-sales service, financing and other

aspects of the marketing process. Advertising is just one element of the communications mix.

Advertising performs certain parts of the communicating task with greater economy, speed and

volume than can be achieved through other means. For most advertising the main effect is a

communication effect. However when advertising is used as the main tool in a direct marketing

campaign then sales may be the most important effect as the advertising communication may be

designed to create a direct sales response rather than merely inform or build awareness.

The amount of the communication task performed by advertising varies, depending on the nature

of the product, frequency of purchase and price. Where the product is sold through mail-order

catalogue or direct mail almost the whole communication task is achieved by advertising. In

contrast, in industrial markets, the salesperson normally closes a sale, but the task of selling the

company‟s product is helped by the potential client‟s awareness of the product achieved in part


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through company advertising. Here, advertising‟s purpose is to enhance potential clients‟

responses to the firm and its products.

Advertising has two separate but interrelated effects, a sales effect and a communication effect. It

is important for management to understand what their advertising is intended to achieve in order

for them to be able to measure the appropriate effect. Advertising messages will contain both

sales and communications effects. However one or the other is likely to be dominant. Most

advertising has a communication agenda and does not attempt to bring about a sale directly

although it is intended to push the recipient of the message in the direction of a sale; hence it has

some sales effect.

Even direct response advertising which is more likely to attempt to achieve an actual sale,

especially television direct advertising, has some communications effect i.e. it informs as well as

tries to bring about a sale.

Hence management needs to be able to set suitable sales and communications objectives in order

to be able to appraise the correct effects. A number of models have been developed to answer the

question „how does advertising work?‟ These models have been drawn from varying disciplines,

particularly psychology as well as from advertising practitioners. Early models relied on the

stimulus/response formula, while later ones took into account the environment in which

purchasing decisions are made.

The idea that advertisements „nudge‟ consumers along a spectrum that extends from complete

ignorance to attempting to purchase, rather than individually achieving or failing to achieve

results that owe nothing to previous exposures, leads to the concept that the purpose of

advertising is to bring about a change in state of mind towards the purchase of a product. A

single advertisement is rarely powerful enough to move a prospect from complete unawareness

to action although direct marketing campaigns do use advertising to bring about a sale.

Advertising effectiveness should be measured in terms of the extent to which it moves people

along the spectrum. Adoption of the DAGMAR (Defi ning Advertising Goals for Measured

Advertising Results) model can lead to a clearer statement of advertising objectives and to valid

measurements of success in obtaining these objectives. If the aim of the advertising is to actually

bring about a sale as in a direct marketing campaign for example then obviously sales should be

the criteria on which the success of the advertising is judged. If the advertising is designed to


41 Ibrahim Sameer

achieve a more intermediate communication objective such as awareness or desire then the

communication effectiveness would be the most appropriate measure.


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Question 10 (a) Define the term „marketing orientation‟. (5 marks)

(b) Discuss the view that achieving marketing orientation within the firm necessitates thinking of

marketing as an overall business philosophy. (20 marks) (Total 25 marks)

OR

“All staff working in an organisation should think of themselves as „part-time marketers‟ and, to

be truly effective, marketing must be thought of as an overall organisational business philosophy

rather than just another functional area of management.” Discuss this statement. (25 marks)

Answer

(a) In order for a profit-making enterprise to prosper, or even to survive, its management must

work hard to retain its existing markets against competition and must continually strive to

counter technical obsolescence and changes in consumer tastes by attempting to secure new and

profitable customers. Not-for-profit organisations must continually justify their existence in

terms of their usefulness to society. They have to answer to interested parties who may well

withdraw their financial support if the goods or services they offer to the community do not

match the requirements of the community. The marketing concept, which puts the emphasis on

customers and the identification and satisfaction of customer requirements, results in the

customer or consumer becoming the central focus of an organisation‟s activities.

The generally accepted European definition of marketing is that given by the Chartered Institute

of Marketing (CIM).

“Marketing is the management process responsible for identifying, anticipating and satisfying

customer requirements profitably”.

A more technical definition is given for marketing by the American Marketing Association:

“Marketing is the process of planning and executing the conception, pricing, promotion and

distribution of ideas, goods and services to create exchanges that satisfy individual and

organisational objectives”.

When an organisation adopts the marketing concept they can be said to be „marketing

orientated‟. It is the company‟s whole approach to the business situation that is the key issue.

This means an adoption of a business philosophy that puts customer satisfaction at the centre of


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management thinking throughout the organisation, and this is what distinguishes a marketing

orientated firm from a production or sales orientated organisation.

(b) Marketing as an organisational philosophy and activity is applicable to almost all types of

organisation, whether profit-making or not-for-profit. When properly understood, it will be

appreciated that marketing is not necessarily narrowly confined to a particular office or

department, and indeed one of the most frequent problems that companies have is in the belief of

other departments (and sometimes even the marketing department itself) that somebody „does‟

marketing in the process sense. In its widest sense, marketing is really an attitude of mind or an

approach to business problems that should be adopted by the whole organisation. It is only when

the discipline is understood in this wider context that the student and practitioner alike can

properly appreciate the role of marketing and its value to an organisation. At higher levels,

examination questions tend to be more about marketing philosophy, whereas at lower levels the

functional elements of marketing tend to attract more questions.

The importance of the consumer:

As far back as 1776, during the Industrial Revolution, Adam Smith, widely regarded to be the

founding father of modern economics, wrote the following in his classic work The Wealth of

Nations: “Consumption is the sole end and purpose of all production and the interests of the

producer ought to be attended to only so far as it may be necessary for promoting that of the

consumer.”

In essence, it does not matter how good a firm may think its product to be, or how well organised

it is in processing its orders, unless it has customers there is no business to conduct. In the

statement above, Adam Smith has given the essence of the central guiding theme of the subject

of marketing. The key word is consumer, as it is the identification and satisfaction of consumer

requirements that forms the basis of the modern concept of marketing.

Interestingly, Smith went on to say:

“The maxim is so perfectly self-evident that it would be absurd to attempt to prove it. But in the

mercantile system, the interest of the consumer is almost constantly sacrificed to that of

producers who seem to consider production, and not consumption, as the ultimate end and object

of all industry and commerce.”

Some people view the subject of marketing as a branch of applied economics. Other writers and

practitioners have worked for a number of years in a specialised field of marketing such as


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advertising, brand management or marketing research. It is understandable that such people often

regard their particular speciality as the most important facet of marketing. Some people take a

rather myopic view of the subject and see marketing merely as a collection of well-developed

management techniques, which, when combined, constitute a functional area of the

organisation‟s management operation. More enlightened practitioners and theorists view the

subject as an overriding business philosophy which guides the organisation in everything it does.

Marketing is often viewed as:

● A social process: At a macro level, marketing is viewed as a social process by which

individuals and groups obtain what they need and want by creating and exchanging things of

value.

● A distributive system: Marketing is viewed as a process whereby in a democratic society,

operating within a free market or mixed economy there evolves a system of distribution that

facilitates transactions resulting in exchange and consumption.

● A targeting or allocative system: Marketing is perceived as the way any organisation or

individual matches its own capabilities to the needs and wants of its customers. From an

organisational point of view, marketing is seen as the primary management function that

organises and targets the activities of the entire organisation in order to convert consumer

purchasing power into effective demand. Its objective is to move the product or service to the

final consumer or user in order to achieve company profit (or optimum cost efficiency).

● A functional area of management: Marketing is seen as a functional area of management,

usually based in a particular location within the organisation, which uses a collection of

techniques, e.g. advertising, public relations, sales promotion and packaging, to achieve specific

objectives.

● An overall business philosophy: Many successful firms see marketing as the keystone of

their business. Marketing in such firms is viewed not as a separate function, but rather as a

profit-orientated approach to business that permeates not just the marketing department but the

entire business. The central mission of the entire organisation is seen as the satisfaction of

customer requirements at a profit (or, in not-for-profit sectors, at a maximum level of efficiency

or minimum level of cost). This is achieved by focusing the attention of the entire organization

on the importance of the customer and the needs of the market place.


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Question 11 (a) Describe the role and assess the importance of sales forecasting to a marketing firm. (15

marks)

(b) Discuss the advantages and disadvantages for a marketing firm of using qualitative methods

to produce sales forecasts. Give examples to support your answer. (10 marks) (Total 25 marks)

Answer

(a) The role of sales forecasting is to provide management with the information they need to

make future decisions. These will include marketing decisions but the sales forecast has a wider

use and will also feed into other decisions e.g. materials. The very nature of marketing decision-

making involves forecasting future conditions, particularly sales conditions and hence the

importance of sales forecasting to management.

Although forecasting is important in most functional areas of a firm, the forecasting of sales is

particularly important. The sales forecast is the foundation on which company plans are

constructed, not just marketing plans. For this to be sound, the forecast must be built on firm

foundations.

The sales forecast provides the „bedrock‟ from which all other forecasts are derived. They are

passed down from marketing to management in other functional areas. The forecasts derived

from the initial sales forecast are then used to set budgets and other schedules.

Sales forecasting information is required for all future plans and decision making including

strategic, tactical and operational decision making and can be long term, medium term and short

term in nature. The role of the sales forecast is to provide management with the starting point

from which other forecasts can be derived. The cornerstone of successful marketing planning

particularly is forecasting the demand for products and/or services in order to allow management

to make appropriate future marketing decisions and to allocate funds. The sales forecast then

forms the basis for other forecasts and plans within the organisation.

(b) Students are likely to start their answer by explaining the term „qualitative‟ forecasting and

the fact that they are largely based on subjective methods such as executive opinion, sales force

composite, customer use projections, opinion surveys, etc., rather than objective numerical

techniques.

Students should be able to give the general advantages and disadvantages of qualitative sales

forecasting methods. The specific advantages and disadvantages discussed may depend on the


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particular qualitative method being discussed. Some students will use specific methods of

qualitative forecasting in their answers (see above). Others will give a more general assessment

of the advantages and disadvantages of taking a qualitative approach. Both are acceptable. Apply

positive marketing principles. Marks are awarded for the discussion on advantages and

disadvantages. Some of the advantages may include:

They are based on experience.

They do not need statistics.

Greater credibility amongst users.

Because of the status of individuals contributing to the forecast, the figures are perceived to have

a high level of source credibility by people who make use of the forecasting information. Some

of the disadvantages may include:

They are time consuming.

You cannot always do them using a computer, etc.

There may be a difference between what respondents say they are going to

purchase and their actual purchases (surveys).

Sample surveys, particularly if they involve face-to-face contact with

customers and potential customers, can be time-consuming and expensive.

If forecasts are required regularly, then subjective methods are likely to be expensive,

particularly if forecasts are required in a disaggregated form (e.g. product line by product

line over time).

Students are encouraged to use examples.


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Question 12 Explain the term “integrated marketing communications mix” and demonstrate, by the use of

examples, how the constituent elements of a well planned communications mix can interact and

integrate. (25 marks)

OR

(a) Define the term „marketing communication mix‟ and examine the way the communication

elements within the mix might be integrated. (15 marks)

(b) Using an example, assess how the lack of integration might damage the marketing

communications. (10 marks) (Total 25 marks)

Answer

The marketing communications mix consists of personal selling, a range of conventional

advertising media and a range of non-media communication tools. The conventional media tools,

which involve „renting‟ space on television, newspapers, posters, radio etc. are referred to as

„above the line‟ promotional or communications techniques. Other marketing communications

techniques which do not necessitate the renting of time or space in the media, such as sales

promotion, sponsorship and exhibitions are put into a separate category known as „below the

line‟ activities. All media that does not involve the commissioning of space or airtime in or on

conventional media are referred to as „below the line‟ techniques. Marketing effectiveness relies

crucially on communications effectiveness.

The market is activated through information flows. The manner in which a potential buyer views

the seller‟s market offering is significantly influenced by the amount and type of data he or she

has about the product or service on offer from the marketing firm, and the reaction of the

potential consumer to that information. Marketing, therefore, relies upon information flows

between the seller and the prospective buyer as a way of achieving the desired buyer–seller

interaction.

Types of communication

Some marketing communication activities are striving to bring about an actual sale. The majority

of marketing communications often have a more indirect role, such as communicating certain

product attributes to the consumer. They will of course be contributing to the final sale, but on

their own they are merely making an intermediate contribution rather than having the objective


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of actually resulting in a sale. In this sense all forms of commercial marketing communications

are a form of promotion, from the livery painted onto articulated lorries delivering products to

retail stores, the labels on tins of grocery products to business cards held by sales people working

in the field; they all communicate something and combined they are referred to as the marketing

communication mix.

The marketing communications mix

Advertising is a non-personal form of mass communication, paid for by an identified sponsor.

Personal selling involves a seller attempting to persuade a potential buyer to make a purchase

using personal contact; this method is very important in industrial and other business-to-business

markets. Sales promotion encompasses short-term activities such as giving coupons, free

samples, extra product, price reductions, competitions etc. which is supposed to encourage quick

action by buyers, often acting on impulse to take advantage of the promotion. The company has

control over these variables, but has less control over the communication variable,

publicity/public relations. Put together, these promotional activities make up the promotional or

communications mix with a different importance attached to each element in relation to the type

of product or service, structure of the market, stage of the product life cycle, rate of market

growth, degree of competition, characteristics of consumers and company resources.

The marketing communications process

Effective communication is a prerequisite for effective marketing. If the marketing

communications part of the overall marketing mix does not work, it does not really matter how

well each of the other mix elements perform, the overall marketing effect is likely to be mediocre

at best and at worst an outright failure. An effective marketing communications system also

allows feedback from the consumer to the seller via the use of conventional marketing research

techniques concentrating on communications research.


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You can see from the figure above that the marketing communications process can be easily

modelled using a simple schematic diagram. Starting from the left-hand side of the figure we

have the sender of the message followed by the message, the media used and the receiver of the

message. The message might be compromised by „noise‟ or interference in the system. Finally

there is a feedback loop, basically some form of communications research that ascertains

whether the message has been received by the intended audience in the manner intended.

AND

(a) The marketing communications mix consists of personal selling, a range of conventional

advertising media and a range of non-media communication tools. The conventional media tools,

which involve „renting‟ space on television, newspapers, posters, radio etc. are referred to as

„above the line‟ promotional or communications techniques. Other marketing communications

techniques which do not necessitate the renting of time or space in the media, such as sales

promotion, sponsorship and exhibitions are put into a separate category. Media that do not

involve the commissioning of space or airtime in or on conventional media are referred to as

„below the line‟ techniques.

To the majority of lay people marketing communications, such as television advertising,

sponsorship, telephone marketing, sales promotion, direct mail and poster advertising, is

marketing. This is because marketing communications is certainly the most highly visible aspect

of marketing activity and it impacts on everyday on life. Every person comes into direct contact

with some form of marketing communications every day; it is an intrinsic part of our everyday

lives. Marketing communications, whether above or below the line activity, are collectively just

one of the „4Ps‟ of the marketing mix. However, it is a very important part; some would say the

most important part. No matter how fantastic a firm‟s product or service offering is the value and

benefits to the consumer have to be communicated to prospective customers and communicated

effectively in order to produce the desired results. Marketing communications, in the form of

above and below the line promotion, lies at the very heart of any marketing plan.

The word „promotion‟ refers to everything to do with the promotion of an organisation, its

products and or services. In a sense all marketing communication activity is a type of promotion

that is trying to promote the brand, product and/or firm. What characterises „above the line‟

activity from „below the line activity‟ is somewhat arbitrary. There is no universally accepted


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definition of either. Below the line activity is usually classed as non-media advertising. Basically

if an advertisement is submitted to a publication and a commission is paid to the advertising

agency to feature the piece then this is deemed to be „above the line‟ communication. If no

commission has been paid to an agency for organising the work, for example in the case of a

public relations press release, a trade exhibition or a sponsored sports event, this is referred to as

„below the line‟ activity.

Promotion

Some marketing communication activities are striving to bring about an actual sale. For example,

an advertisement for a certain record company showing a particular „pop music‟ album that

cannot be purchased in the shops, and inviting you to use their „free phone‟ number at the end of

the advertisement to buy the product using your credit card, is a form of direct marketing and is

attempting to make a sale from those watching the advertisement. The majority of marketing

communications however, are not of this direct marketing type. The majority of marketing

communications often have a more indirect role, such as communicating certain product

attributes to the consumer. At the end of the day they will, of course, be contributing the final

sale, but on their own they are merely making an intermediate contribution rather than having the

objective of actually ending in a sale. They are not really attempting to score a sale directly but

are making a contribution to the communication process, at the end of which a sale may take

place. Whether the communication „tool‟ being used is trade journal advertising, public relations,

direct mail, telephone marketing, sponsorship or corporate advertising, all of these forms of

communication, whether they are direct or not, are promoting either the product, service or firm.

In this sense, all types of commercial marketing communications are forms of promotion, from

the livery painted onto articulated lorries delivering products to retail stores, to the labels on tins

of grocery products, to business cards held by sales people working in the field; they all

communicate something, and combined they are referred to as the marketing communication

mix.

Product and service attributes

The job of marketing communications is, as the name suggests, to communicate the benefits of

the product, service or firm to potential consumers and other interested parties such as

shareholders. The same process is undertaken in „not-for-profit situations‟ such as charitable

organisations and political parties: The last „New Labour‟ election campaign in the UK is a good


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example. The benefits marketing communicators attempt to get across can be „real‟, in the sense

of the tangible attributes of the product such as the speed of a car, or the performance of a stereo

system, although many of the attributes are implied through association or suggestion, that is

they are „created‟, and not tangible in the true meaning of the word. Products and services have

been described as a „total bundle of attributes‟ which the consumer perceives in its entirety.

In other words, consumers see the product or service offering as a unified whole, rather than a set

of individual component parts such as its price, packaging, colour and so forth. A large number

of products, especially in the fast moving consumer goods (FMCG) category, are very similar to

other products in their class. For example, brands of packaged sugars are basically similar no

matter what brand is selected and the same goes for many FMCG products, particularly

packaged grocery products. In times of shortage, such as during the war years, goods were

treated as homogenous commodities; basically, soap was soap! In less developed countries the

same is true today - many basic products are viewed as commodities and there is much less

emphasis on packaging and branding.

The marketing communications mix

Promotion refers to the communications activities of advertising, personal selling, sales

promotion and publicity/public relations. Advertising is a non-personal form of mass

communication, paid for by an identified sponsor. Personal selling involves a seller attempting to

persuade a potential buyer to make a purchase using personal contact; this method is very

important in industrial and other business to business markets. Sales promotion encompasses

short-term activities such as giving coupons, free samples, extra product, price reductions,

competitions etc., which are supposed to encourage quick action by buyers, often acting on

impulse to take advantage of the promotion. The company has control over these variables, but

has less control over the communication variable: publicity/public relations. This is another non-

personal communication method, which reaches a large number of people, but it is not paid for

by the company, and is usually in the form of news or editorial comment regarding a company‟s

product or service. Put together, these promotional activities make up the promotional or

communications mix with a different importance attached to each element in relation to the type

of product or service, structure of the market, stage of the product life cycle, rate of market

growth, degree of competition, characteristics of consumers and company resources. Company

size, competitive strengths and weaknesses and style of management all influence the choice and


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composition of communications mix. Other important factors with which promotion must be

coordinated are: the product itself, price, and distribution channels used. Product communication,

including brand name, design of packaging and trade-mark are all product cues which

communicate a specific message about the total product or service offering. Price can

communicate different things under varying circumstances, for instance conveying „prestige

appeal‟ for those buyers who perceive that a high price is equal to quality, and prestige through

the price quality relationship. Price is also a very important promotional tool in the form of price

reductions, especially within the packaged grocery market. The place in which the products are

distributed also has an important communications aspect. Retail stores have „personalities‟ or

store images which consumers often associate with the quality or fashionability of the products

they stock.

(b) Marketing effectiveness relies crucially on communications effectiveness. All elements of the

mix must be fully integrated and the overall message reaching the target audience must be

consistent. If this does not happen the receiver of the message will be confused. For example, the

market is activated through information flows. The manner in which potential buyer views the

seller‟s market offering is significantly influenced by the amount and type of data he or she has

about the product or service on offer from the marketing firm, and the reaction of the potential

consumer to that information. Marketing, therefore, relies upon information flows between the

seller and the prospective buyer as a way of achieving the desired buyer-seller interaction.

Effective, integrated communication is a pre requisite for effective marketing. If the marketing

communications part of the overall marketing mix does not work, it does not really matter how

well each of the other mix elements perform, the overall marketing effect is likely to be mediocre

at best and at worst an out right failure. Many products or services fail, not because there is

anything wrong with the product or service itself, or because of anything problematic with its

distribution or price, but because of unimaginative and lacklustre marketing communications.

Buyers‟ perceptions of market offerings are affected by the quantity and sort of information that

travels to them and their reaction to that information.

There must be a good, integrated flow of information between seller and buyer to allow for

effective and informed decision-making which precedes an actual purchase. The message

received by the target audience at all „brand touching‟ points within the overall communication

process must be consistent and integrated. An effective marketing communications system also


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allows feedback from the consumer to the seller via the use of conventional marketing research

techniques concentrating on communications research.


54 Ibrahim Sameer

Question 13 (a) Discuss the relationship between market segmentation and the success of marketing

programmes. (13 marks)

(b) What are the main criteria you would use to rate the practical usefulness of a segmentation

base or variable? (12 marks) (Total 25 marks)

OR

(a) Examine the role of market segmentation in effective marketing. (13 marks)

(b) Identify and briefl y describe the criteria that you would use to help establish whether a

variable might be useful as a segmentation base. (12 marks) (Total 25 marks)

OR

(a) Discuss the importance of effective market segmentation to the success of marketing

programmes. (13 marks)

(b) Identify and explain the main criteria that you would use to evaluate the effectiveness of a

segmentation base or variable. (12 marks) (Total 25 marks)

OR

Identify and explain the criteria used to evaluate the effectiveness of marketing segmentation

variables. (12 marks)

OR

Identify, and explain the role and importance of, five main criteria that can be used by

management to evaluate the effectiveness of marketing segmentation variables. (15 marks)

OR

(a) Explain why segmentation is necessary in marketing. (2 marks)

(b) Identify and explain four criteria that you could use to determine the effectiveness of a

particular segmentation variable. (12 marks) (Total 14 marks)

Answer

(a) Importance of segmentation

The essence of the marketing concept is the idea of placing customer needs at the centre of the

organisation‟s decision-making. The need to adopt this approach stems from a number of factors,


55 Ibrahim Sameer

including increased competition, better-informed and educated customers and, perhaps most

importantly, changing patterns of demand. Primarily it is the change in patterns of demand that

has given rise to the need to segment markets. Market segmentation is one of the central pillars

of modern marketing and is found at the very core of the marketing process. Some writers

suggest that segmentation is the most important activity within modern marketing.

This claim is debatable but what is true is that the general principles and processes of market

segmentation are absolutely vital to effective marketing strategies for the vast majority of firms

operating in today‟s highly competitive economy. This change in patterns of demand stems from

the fact that higher standards of living and a trend towards individualism has meant that

consumers are now more able to exercise their choice in the market place. Market segmentation

can be defined as the process of breaking down the total market for a product or service into

distinct sub-groups or segments where each segment may conceivably represent a separate target

market to be reached with a distinctive marketing mix. Segmentation and the subsequent

strategies of targeting and positioning start by recognising that increasingly, within the total

demand/market for a product, specific tastes, needs and demand may differ. It breaks down the

total market for a product or service into individual clusters of customers, or segments. Here,

customers who share similar demand preferences are grouped together within each segment.

Effective segmentation is achieved when customers sharing similar patterns of demand are

grouped together and where each group or segment differs in the pattern of demand from other

segments in the market. In most markets, be they for consumer or industrial products, some kind

of segmentation can be accomplished on this basis.

(b) Criteria for effective segmentation variables/bases.

Theoretically, the base(s) used for segmentation should lead to segments that are:

1. Measurable/identifiable. Here, the base(s) used should preferably lead to ease of

identification in terms of who is in each segment. It should also be capable of measurement in

terms of the potential customers in each segment.

2. Accessible. Here, the base(s) used should ideally lead to the company being able to reach

selected market targets with their individual marketing efforts.

3. Meaningful. The base(s) used must lead to segments, which have different preferences or

needs and show clear variations in market behaviour, and response to individually designed

marketing mixes.


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4. Substantial. The base(s) used should lead to segments, which are sufficiently large to be

economically and practically worthwhile serving as discrete market targets with a distinctive

marketing mix.

The third criterion is particularly important for effective segmentation, as it is an essential

prerequisite when attempting to identify and select market targets.


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Question 14 (a) Evaluate the concept of the product life cycle (PLC) as a strategic management tool. (13

marks)

(b) Use examples to show how the components of the marketing mix alter and change in relative

importance within each stage of the PLC. (12 marks) (Total 25 marks)

OR

Explain the concept of the product life cycle (PLC) and evaluate its usefulness as a strategic

marketing tool. Give examples to support your answer. (25 marks)

OR

(a) Explain the concept of the product life cycle (PLC) and evaluate its practical usefulness as a

strategic marketing tool. (13 marks)

(b) Show, using specific examples, how the importance of the components of the marketing mix

changes within each stage of the PLC. (12 marks) (Total 25 marks)

OR

(a) Identify and briefly discuss the four stages of the product life cycle (PLC) model. (8 marks)

(b) Explain three ways in which the PLC model may be useful to marketers. Use examples to

support your answer. (7 marks) (Total 15 marks)

Answers

Product life cycle

Marketing people have found it to be a useful planning tool. The principal problem with this

theory is that it is so neat as to be totally “believable” and some product managers tend to expect

that every product will fit this neat curve. Marketing academics have therefore criticised the

concept on the basis that when a product is launched it is often killed off prematurely because

sales suggest that it has gone into a quick decline, whereas the reality is probably only a slight

hiccup in the growth curve of the product.

On the diagram below is superimposed the revenue curve which shows the product recovering its

costs of development and launch and then moving into profitability. Naturally, all products will

behave differently, but as a tool of planning this theory has much to commend it.


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The product life cycle can thus be applied to the industry as a whole (which will include a

summation of all manufacturers‟ sales that are marketing that particular product) or it can apply

only to the sales of a specific product for an individual company. This is one of the positive

benefits of the PLC as a strategic analytical tool; it can be applied at various levels of

disaggregation. For example, for a product in the world economy as a whole, by individual

country, by industry, by product type, product form or even by individual brand.

The time span of the product life cycle can range from say a fashion season to many years. In

this latter case the maturity and saturation stages will be considerably lengthened. It is now

acknowledged that different categories of life cycle exist.

● Product category life cycles describe a generic product like soap or shoes. Life cycles here

tend to be long or infinite.

● Product form life cycles describe the type of product like perfumed soap or plastic shoes. Here

the life cycle is shorter.

● Brand life cycles describe the various manufacturers‟ brands of perfumed soap or plastic

shoes. This might, in the case of plastic shoes, be linked to a single fashion season with a new

brand coming out shortly afterwards, so this kind of life cycle is the shortest of all.

Generally the product life cycle is an interesting and potentially useful concept to the strategic

marketing planner. It is obvious to all that, with the exception of very few products that seem to

be impervious to life cycle pressures, most products do indeed go through some form of sales


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and profitability change over time which you could say is analogous to a form of “life cycle”.

However the PLC concept should be used with great caution as a planning tool. Evidence from

many research studies indicates that the PLC is insufficiently robust in terms of its time

dependency to be used as a predictive or forecasting tool. The work of Polli and Cook and many

others have alerted users of the PLC to the danger of bringing about a self-fulfilling prophecy in

terms of declining products. The PLC is an interesting general concept but should be used with

caution when used as a strategic marketing tool.

(b) Strategies suggested by each life cycle stage

If you are looking at a PLC curve plotted on graph paper you could be said to be trying to

identify the “point of inflection” or change in the direction of the curve. If this information can

be obtained and successfully introduced into the PLC model then the product life cycle can be

used strategically and impart an anticipated course of product development for which strategies

can be planned in advance.

Marketing actions are now suggested which are normally appropriate to each of these separate

stages.

● Development is of course the prelaunch phase and it is during this period that confidentiality

will usually have to be maintained in terms of keeping information away from competitors. It is

no secret that in many larger organisations the research and development function is housed

entirely separately from the main production unit. In fact, in a lot of cases research and

development is on an entirely different site. As the research and development process progresses

from experimentation to the tangible product, so, in a marketing orientated organisation, the

involvement of marketing research will tend to increase.

● Introduction is the launch period and the product is slowly gaining acceptance. There are few

(indeed sometimes zero) competitors at this stage, but this are where a number of new products

fail. The product is seen to be innovative at this stage and potential buyers must be informed as

to what it will do, so advertising tends to be of an informative nature. Buyers tend to be what are

known as “innovators” and “early adopters”. The product is new and can normally sustain a high

initial price (skimming), as there are few or no competitors. Indeed, the product will probably

have been expensive to produce and the costs of creating awareness prior to and during, its

launch might have been high, so this is an opportunity to recoup as many of those costs as the


60 Ibrahim Sameer

market will sustain. Distribution is not widespread at this stage and is often exclusive within a

particular geographical location.

● Growth is the period during which competitors will start to appear with similar offerings.

Indeed, they might well have been conducting parallel research and development, but have been

slower in launching their innovative products. Even now, the product is still exposed to failure,

perhaps through competitive activity, as competitors have been able to learn from your mistakes

during your launch. They will know your price and might undercut and they will know the

perceived weaknesses of your product, so they can emphasise the strength of theirs.

Although it might seem that being in the market first is a good policy, it is also a high risk policy,

and unless the company is large enough to sustain a costly failure at this stage, or has other

products to fall back upon, then such a policy is very high risk indeed.

● Maturity and saturation are dealt with together, because the “maturity” phase is the phase

where the product‟s sales level off to a gradual peak over a longer period (often even years or

decades) and the “saturation” phase is from its peak, gradually downwards to the phase where

sales start to decelerate towards the “decline” phase. In fact, many marketing authors miss out

the “saturation” phase altogether and class all of this phase as “maturity”. During this phase sales

slowdown and repeat purchases are prevalent. There are attempts to “differentiate” products

through the addition of “features”. Price competition is at its maximum as other manufacturers

enter the market. Promotion to the trade is also important, as manufacturers will wish to retain

their distribution outlets. Joint manufacturer/trade promotions are developed with costs being

shared on an equitable basis. There is generally a move away from a “pull” strategy of promotion

towards a “push” strategy.

● Decline is signalled by steadily and sustained falling sales after the “saturation” phase.

Marketing research should have told the company that this was due to happen in order that they

could concentrate upon developing new product lines. However, company management quite

often refuses to accept that its products are about to enter the decline phase and stay with it in the

hope that the inevitable might not happen. Such a decline might be a function of a change in

customer preferences, but more likely it is a function of a new product or process supplanting the

existing one. The phase is characterised by competitive intensity and price-cutting and sales

falling continuously. Many producers decide to abandon the marketplace, or are forced to

abandon because of financial difficulties. Thus, the decision to abandon the marketplace is a


61 Ibrahim Sameer

critical one and should theoretically come when the product moves from a positive to a negative

revenue situation.

Additional things you may include:

Some writers such as Professor Ted Levitt consider the product life cycle (PLC) to be at the very

centre of marketing strategy and hold the view that future marketing strategy should be based

around the inevitable PLC curve. Others feel the PLC is at best weak as a predictor of a

product‟s behaviour at whatever level of aggregation, e.g. brand, product type, and question

using the PLC as a strategic management tool. Writers in this particular school of thought

include Polli and Cook. They state it is not clear whether the PLC concept is sufficiently robust

in terms of time prediction to be used as a predictive strategic tool and that many good products

are dropped because of careless use of the PLC. Some say the PLC results in a self-fulfilling

prophecy.

The notion of the product life cycle is almost as old as the subject of marketing. Various stages

are proposed which show that a product passes through a number of stages in its life from the

time it is conceived (the development phase) to the time it is deleted during the decline stage.

Marketing people have found it to be a useful planning tool.

The principal problem with this theory is that it is so neat as to be totally „believable‟ and some

product managers tend to expect that every product will fi t this neat curve. Marketing academics

have therefore criticised the concept on the basis that when a product is launched it is often killed

off prematurely because sales suggest that it has gone into a quick decline, whereas the reality is

that what they are is probably only a slight hiccup in the growth curve of the product. On the

diagram below is superimposed the revenue curve which shows the product recovering its costs

of development and launch and then moving into profitability. Naturally, all products will

behave differently, but as a tool of planning this theory has much to commend it.

N.B. Diagrams can be used to illustrate these points.

The product life cycle

The shape of the curve can alter and this is useful in illustrating the effect of different marketing

conditions. Different patterns are suggested in the figures below, with explanations, but more

combinations are possible.


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The first figure represents a „fad‟ product which comes quickly into the marketplace and is never

seen again. The second figure represents a „fashion‟ product whose sales might go in cycles. The

third figure represents a product, which passes through a number of phases, but where the

product manager does not allow the product to become „stale‟ after it has entered maturity. This

is done by introducing a modification, which builds upon the success of the original product.

The product life cycle is influenced by the nature of the actual product, changes in the

competitive environment, changes on the part of consumers who might display different

preferences as the product moves through its life cycle. The shape of the curve, from an

individual manufacturer‟s viewpoint, can also be altered as a result of competitive actions.

The product life cycle can thus be applied to the industry as a whole (which will include a

summation of all manufacturers‟ sales that are marketing that particular product) or it can apply

only to the sales of a specific product for an individual company. This is one of the positive

benefits of the PLC as a strategic analytical tool; it can be applied at various levels of

disaggregation. For example, for a product in the world economy as a whole, by individual

country, by industry, by product type, product form or even by individual brand.

The time span of the product life cycle can range from say a fashion season to many years. In

this latter case the maturity and saturation stages will be considerably lengthened. It is now

acknowledged that different categories of life cycle exist.

● Product category life cycles describe a generic product like soap or shoes. Life cycles here

tend to be long or infinite.

● Product form life cycles describe the type of product like perfumed soap or plastic shoes.

Here the life cycle is shorter.


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● Brand life cycles describe the various manufacturers‟ brands of perfumed soap or plastic

shoes. This might, in the case of plastic shoes, be linked to a single fashion season with a new

brand coming out shortly afterwards, so this kind of life cycle is the shortest of all.

Generally the product life cycle is an interesting and potentially useful concept to the strategic

marketing planner. It is obvious to all that, with the exception of very few products that seem to

be impervious to life cycle pressures, most products do indeed go through some form of sales

and profitability change over time, which you could say is analogous to a form of „life cycle‟.

However the PLC concept should be used with great caution as a planning tool. Evidence from

many research studies indicates that the PLC is insufficiently robust in terms of its time

dependency to be used as a predictive or forecasting tool. As mentioned above, the work of Polli

and Cook and many others have alerted users of the PLC to the danger of bringing about a self-

fulfilling prophecy in terms of declining products. The PLC is an interesting general concept but

should be used with caution when used as a strategic marketing tool.


64 Ibrahim Sameer

Question 15 (a) Explain the value of a fully integrated marketing information system (MkIS) to marketing

management. (15 marks)

(b) Identify and discuss the four component parts of such an integrated marketing information

system. (10 marks) (Total 25 marks)

OR

Examine the concept and role of a fully integrated Marketing Information System (MkIS) within

the modern marketing fi rm. (25 marks)

OR

(a) Analyse the concept of a fully integrated Marketing Information System (MKIS) and assess

the importance of such a system to the management of a marketing organisation. (15 marks)

(b) Identify and explain the elements that constitute an integrated MKIS. (10 marks) (Total 25

marks)

OR

(a) Describe the purpose of a fully integrated Marketing Information System (MkIS). (3 marks)

(b) Outline the component parts of an MkIS. (4 marks)

(c) Explain the importance of an MkIS to a company. Give examples to support your answer. (7


Answer

(a) It is sometimes said that information is the very lifeblood of successful marketing. It is of

tremendous strategic value to marketers, as well as having importance in tactical and more

routine operational decision making. An appreciation of what sort of information to amass and

how to make best use of it once you have it, is the key competence of strategic marketing. How

can a firm expect to achieve a competitive advantage over its rivals if it knows little or nothing

about what they are doing in the present and what they might be planning for the future?

Knowledge is power and marketing is concerned with creating superior competitive power

through the superior use of information.

The need to manage information


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All aspect of information including its collection, storage, processing, retrieval and use must be

managed. The marketing oriented firm needs some form of process to carry out this activity.

What is needed is some form of system devoted to the management of the entire information

needs of the organisation. Such a system is called a Marketing Information System (MkIS).

Marketing research is a component part of an integrated MkIS.

Many markets are dynamic rather than static. The only thing really certain about the future is that

it will be different from today. Marketing management needs to anticipate and stay ahead of

these changes. Much marketing decision making at the strategic level requires some form of

prediction or forecast of likely future conditions across a wide variety of areas. Marketing

information systems can be used to provide information for use in a wide range of decision areas.

Marketing Information Systems

Philip Kotler defines a MkIS as:

„…. consisting of people, equipment and procedures to gather, sort, analyse, evaluate and

distribute needed, timely and accurate information to marketing decision makers.‟

A formal MkIS can be of great benefit to any organisation whether profit making or nonprofit

making, no matter what its size or the level of managerial finesse. It is true today that in many

organisations an MkIS is integrated as part of a computerised system. To manage a business well

is to manage its future and this means the management of information, in the form of a

companywide “Management Information System” (MIS), of which the MkIS is an integral part,

is an indispensable resource to be carefully managed just like any other resource that the

organisation may have e.g. human resources, productive resources, transport resources and

financial resources.

Marketing information is vital to the marketing effort and is far too important to be left to

chance. Unfortunately in many organisations, particularly in small and medium sized enterprises

(SMEs) information is not managed as well as it should be and many firms do not attach the

same importance to the management of information as they do to the management of other areas

of the firm, such as finance.

(b) The information requirements of the modern firm goes way beyond the type of information

that can be gained by the application of formal marketing research. The up to date enterprise is

required to gather information from whatever sources it can and needs to make competent use of

this information in storing it, disseminating it, processing it and in its utilisation. The MkIS is


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systems that will assist marketing management conduct all of their necessary information duties

in a systematic and planned way. The concept of an integrated marketing information system is

shown below with a brief explanation given after. Three of these four component parts or

“subsystems” collect and produce information. The fourth subsystem takes the information

provided from the other three parts and processes it, models it and carries out other procedures

on the data that adds value to it and enhances its value to marketing decision makers.

Internal Accounting System

All organisations produce information as part of the general process of conducting their business.

Business forms and documentation are fairly standard within a particular country, and even

between different parts of the world they are reasonably similar. In the United Kingdom you can

purchase readymade business forms and other commercial documentation from any business

stationers. For a small charge they will print your company‟s name, address, telephone, fax, e-

mail and VAT registration number on the forms to “customise” them for you. The generation,

recording, storage and retrieval of such data is referred to as the “internal accounting system of

the firm”.

The term tends to create ideas of financial and cost accounting information. This should not be

the case; it is far more general than that. Actually the term refers to all information received and

generated by the firm and not just financial information. Maybe a more accurate name for this

system would be the “internal documentary system” as it reflects where the information is

generated much more accurately.

The Marketing Intelligence System


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As we have seen from the previous section, firms produce a treasure of information internally

through the very action of managing and administering their business. Apart from the official

purpose for which such information was produced e.g. sending out invoices, auditing, etc., it

often remains a neglected marketing resource. There are other data sources that are often under-

utilised by marketing management. The type of information we are talking about here is not

rigorously collected marketing research information, but that which is less formally collected,

often in a very ad hoc fashion as and when it presents itself. The system that attempts to collect,

collate and manage this source of “loosely” collected information is referred to as the “Marketing

Intelligence System”. Professor Philip Kotler, an expert in the field, defines the Marketing

Intelligence System in the following way:

“A Marketing Intelligence System is a set of procedures and sources used by managers to

obtain their everyday information about pertinent developments in the marketing

environment.”

In the process of carrying out their management or general business functions for the firm,

members of staff may come across potentially useful and commercially interesting information.

Most of the time staff does nothing with it because there is no process within the firm for

handling it. Some firms have “suggestion boxes” but that is about as far as it gets. The type of

information we are referring to here has not been generated or collected in any special way. On

the contrary it is the sort of information that many employees generate or come across every day

as part of their regular job. In many firms such information is thought to be of little or no

consequence and hence no one bothers to report it and it simply becomes a wasted resource.

The Marketing Research System

This is the final input to the Marketing Information System. The Marketing Research System

makes use of both secondary data (data that are already in existence) and primary data (data

collected for a specific piece of research for the first time). Marketing research is the “scientific”

method modern marketing firms use in order to build value in the minds of the firms‟ target

market. The primary objective of marketing research is to find, in a systematic way, reliable,

unbiased answers to questions about the market for goods or services and to look at ideas and

meaning on many issues.

Marketing research is often concerned with the action of collecting, analysing and interpreting

the material to try and establish what it is that people actually want and why they actually want


68 Ibrahim Sameer

it. The people themselves may not always be aware of their motives for desiring or purchasing

particular goods and or services. Many of the motivations for purchase are subconscious and take

the skill of the trained consumer behaviourist working with the marketing researcher to establish.

Marketing is the business process used by firms in order to create “bundles of values or

satisfactions” in the form of products and services, which their customers will purchase.

The Analytical Marketing System

This subsystem of the overall MkIS does not, and is not intended to, produce any new data.

Rather, it takes the data from the other three component parts of the system in the form of input

data and enhances its value. Users of the system are able to do this by applying what might be

termed “management science” techniques to the data thereby transforming it in to a form that

makes it more easily understood and more valuable to the marketing decision maker. The

techniques applied to the data by the marketing management scientist are usually statistical in

nature and many computer packages, such as the Statistical Package for the Social Sciences

(SPSS) are commercially available that can conduct very sophisticated analysis.

For example, information collected from formal marketing research, marketing intelligence and

the gathering of internally generated information can be used as input data in a wide range of

sales forecasting models. Data collected over a period of time can be extrapolated in to the future

by the use of time series techniques.


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Question 16 Discuss the key retailing developments that have occurred over the last 30 years. You may use

the retailing environment in any country of choice to illustrate the points discussed. (25 marks)

OR

Using a country of your choice as an example, discuss the major changes in the retail

environment over the last 10 years. (25 marks)

Answer

Elements in the external environment, whether political, social, legal, demographic,

technological or economic factors all have an effect on the company‟s future marketing activities

and policies. These outside environmental factors are driven by manifold interconnected forces,

which result in sometimes, quite dramatic change. Often the consequent change is speedy and

sensational, for example, the reunification of Germany after the fall of the Iron Curtain. More

often change takes place at a gradual rate, in fact so slow that it is insensible and can only be

realised in retrospect. Nothing represents this principle more than the transformations that have

taken place within the retail industry over the last thirty years.

Internet marketing

The World Wide Web (WWW) on the Internet is a marketing tool that actively persuades

customers to search for the seller rather than the prospective seller contact them. It is almost a

complete role reversal. Researchers in this area often use the term “virtual value chain” in

relation to the use of the WWW and the “market space” rather than the conventional term market

place. The WWW is still in its babyhood as a marketing tool, but it is increasing in importance,

especially in the area of marketing communications where it is emerging as a new major

medium. It will be interesting to see how this medium develops over the next decade; it is

certainly a “hot” topic in the journal literature at the moment.

Television shopping channels

Television shopping via online computer is still at an early stage, but it should become more

accepted if companies invest enough in the innovation and evolution of appropriate software and

hardware to make the search and ordering systems work more efficiently and user friendly. This

direct form of retailing is economical as orders are often placed straight with manufacturers

cutting out the need for expensive “middlemen” eating away at the profits. This shopping format


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is very popular in the USA. As with the WWW the developmental possibilities of this form of

“non shop shopping” are literally enormous and it will be very interesting to see how this form of

retailing develops over the next ten years or so.

Vending technology

Automatic vending has grown a lot since the 1960s and is now used for beverages, cigarettes,

chocolate, and many other goods. When you go to the swimming baths you can buy swimming

goggles, ear plugs, combs, soap, shampoo and a range of other related products all out of a

vending machine. Vending machines are placed in favourable locations like bus stations,

colleges, public houses and factories, or as with the previous example, in the changing rooms at

swimming baths. They have been used since the 1950s to provide entertainment through

jukeboxes and more recently arcade games. Cash-dispenser machines, another form of vending

technology, only this time vending money, are comparatively new and in addition to dispensing

cash they can answer balance inquiries, take requests for statements and cheque books and

accept deposits. The HSBC bank in particular seems almost “human free” when you go in.

Everything you need to do, such as make a deposit, pay your mortgage or loan repayment, etc.,

can be done using one of its automatic teller machines.

Personal direct marketing

Door-to-door direct selling is relatively costly, but wholesaler and retailer margins are removed.

As long as the salesperson can achieve a regular list of customers for relatively frequently

purchased items then it can be successful. Avon Cosmetics and Kleeneze Ltd are two examples

of companies who are thriving in this regard. Door-to-door selling faces the disadvantage of a

bad image for a number of reasons. First there are many firms who try and solicit business by

sending callers around to people‟s houses to screen out those who will not be interested and to

try and identify serious prospects. Double glazing, other home improvement type products and

services, such as security systems and insurance products, are all represented in the door-to-door

selling repertoire. At time people get fed up with unsolicited calls, especially in the evening after

they have had a hard day at work. Another related problem is the potential security risk. Some

people simply will not open their doors to unsolicited callers no matter what.

Party plan

Party Plan is liked for goods, such as cosmetics, kitchenware, jewellery and linen. A meeting or

“party” is arranged, usually in the home of a hostess who invites friends, and then receives a


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“consideration” in the form of cash or goods based upon what the people at the party buy. Party

Plan schemes are a mixture of the commercial and social. People come to the party, not only to

see the merchandise but also for an evening with friends. Guests at the “party” feel obliged to

purchase something even if it is only something small as a kind of token gesture.

Mail order

Mail order marketing can be through catalogue or non-catalogue methods. The first relies on

catalogues to obtain sales, sometimes using agents to deal with order collection and

administration in return for a commission. Products can be purchased interest-free and extended

credit terms are sometimes offered. There are some specialist mail order houses that deal with a

limited range of lines that are difficult to access in ordinary retail outlets (e.g. clothes for very

large people). Non-catalogue mail order depends on press and magazine advertising and is often

used to sell a range of products. This range, which historically has always been quite limited,

seems to be expanding all the time. In the Sunday papers you will find mail order advertisements

or “inserts”, i.e. loose pieces of card with advertising messages on them which are inserted into

the newspaper or magazine, for shirts, porcelain items, insurance, garden equipment and a

plethora of other things.

Direct mail

Other direct marketing techniques include using direct mail, where a letter and instructions on

ordering are sent through the post. Such methods are used by book and record clubs particularly.

Television can also be used to convey the direct marketing commercial message, with orders

often being placed by a telephone call to a free number with the requisition for the quotation of

credit card details to an answering machine. Often the process of ordering is done entirely by

machine with the use of a recorded message and the “star” button on a “touch type” telephone.

Telephone ordering is often linked with press advertising, especially in colour supplements.

Scrambled merchandising

The demand for food products in an advanced industrialised economy is relatively income

inelastic, in that customers do not necessarily buy more food when their incomes increase,

although they may “trade up” to more elaborate and sophisticated types of food. The demand for

food in such advanced nations is related to population growth, and population growth within the

UK is either zero in some years or relatively small in others. Because of this the large UK food

multiples can only grow either at the expenses of each other‟s “food spend” market share, or by


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diversifying into non food products on which people on increasing incomes are likely to spend

their money. In the UK, multiples have diversified into non-food items to advance their turnover

and profits. Many now sell clothing, electrical goods, plants and flowers and have spread out of

their conventional range of food products. However, a number have recently returned to their

core business of food retailing because of a lack of focus in their image that resulted in the minds

of the general public from too much diversification.

“One stop” shopping

Access to a motor vehicle is one of the main reasons that people tend to shop less frequently than

they used to say, 20 years ago, with a week or longer between shopping trips becoming quite

normal. Many people do their main shop once a month in the hypermarket and then “top” up

throughout the month with things like bread, eggs and milk, often bought locally or delivered to

their door. Shopping is also developing into more of a family affair, particularly amongst the

middle classes. This has accounted, at least in part, for the growth of “out of town” shopping

centres, such as “Meadowhall” near Sheffield, where most of a family‟s needs may be purchased

within the same shopping mall. It is not unusual to see that the national multiples are set up in

certain centres with a number of satellite shops supplying goods they do not sell. For example

ASDA in Wakefield has a shoe shop, a travel agency, opticians and a building society situated

within its concourse and trading as separate businesses under a concession from ASDA. Such

stores tend to be hypermarkets or mega stores and the main reason why this trend might slow

down is because of planning regulations and a recognition by planners that such out of town

centres lead to the demise of traditional town shopping centres.

As well as increased mobility most people own freezers which enables customers to transport

and store large quantities of frozen food. Increased microwave cooker ownership has also

increased sales of “instant” meals, many of which are cooked from frozen. A final point

connected to the growth of “one stop shopping” is the change in population from urban to

suburban centres. Congestion in towns demoralises car drivers who elect to shop in big “out-of-

town” complexes where parking is plentiful and usually at no charge.

Business format franchising

The business format franchise was evolved in America, but it has increased in importance within

the UK since the early 1960s. It is basically a contract between a franchiser (the person or firm

with proven business idea) and each separately owned company of the franchisee (the person or


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group of people who want to make use of the proven business idea in exchange for an ongoing

commission). The franchiser‟s brand and standing is used for marketing a product or service and

the support received by the franchisee from the franchiser will depend on the contract. The

contract is usually written so as to minimise the risks in opening a business, which is why many

entrepreneurs thinking of going into business for themselves chose this method of doing so.

What attracts new franchisees is that others have successfully followed the “blueprint” so why

not them? The larger franchiser supplies the franchisee with a “business package” or “format”, a

trade name and specific products or services for sale. A complete set of operating manuals and a

business plan, which the franchisee must adhere to, are also included.

Expansion of multiple chains

Multiples have been capable of eliminating wholesalers from commercial transactions through

the use of central buying direct from the manufacturers, in effect acting as their own wholesalers.

Bulk purchases have meant beneficial prices from producers, whilst independent shops have still

to purchase through wholesalers, so there are tremendous difficulties for small retailers in terms

of price competitiveness. Some groups of wholesalers endeavoured to equalise this growing

competition from multiples by setting up their own chains called “voluntary groups”. Retailers

were requested to associate and display the group‟s logo and embrace the “rules” of the group.

Notably, “Spar” is still a flourishing voluntary group operator today, but many groups have now

ceased to trade in the light of rivalry from the larger and more powerful multiple chains.

The retail “life cycle”

This concept is similar to the “product life cycle” concept and basically refers to evolutionary

changes in retailing. So as not to be confused with the product life cycle concept it is sometimes

referred to as the “wheel of retailing”. The “wheel” seems to be turning with ever increasing

speed with each retailing idea taking less time to achieve maturity than the previous one. It took

around 50 years for department stores to reach maturity; supermarkets took around 25 years and

hypermarkets, and now mega stores, only ten years. This concept can be contrasted to Charles

Darwin‟s theory of evolution, which states that a changing environment leads to adaptation and

hence evolution, in this sense retail evolution.


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Question 17 Using examples to illustrate your points describe the nature and discuss the specific role of the

following categories of marketing research within the overall marketing research process:

1. Exploratory research

2. Descriptive research

3. Predictive research

4. Conclusive research (25 marks)

Answer

Types of marketing research

Marketing research activities can be classified by their purpose or general objective. Some

marketing research exercises are intended to produce results that are purely exploratory in nature.

Such research is usually carried out at the beginning of the overall research project. Other

research may produce data that are descriptive, predictive or conclusive in nature. These general

classifications are now examined in more detail.

Exploratory research

This is usually undertaken at the initial stages of the overall research process. Unless a researcher

has experience of a particular industry or research area within a particular industry, then they will

have to familiarise themselves with the general dynamics of that industry or research area in

order for them to make an effective job of carrying out the main body of the research.

Exploratory research is basically a „having a look‟ type of activity. It is not designed to enable

the researcher to draw firm conclusions about the research situation, rather to enable him or her

to establish the general parameters of the research situation. The use of secondary data, i.e. those

data that are already in existence usually in printed for or on some kind of computerised data

retrieval system, is an important part of the exploratory process. In terms of primary data

collection, i.e. those data that are collected for the first time specifically for a particular research

exercise, then qualitative research methods are more often employed than quantitative methods.

Depth interviews and group discussions allow the researcher to explore respondents‟ opinions

and attitudes on key issues. Both of these interviewing techniques employ relatively small

samples and hence by their very nature can only hope to provide general exploratory

information. Nonetheless, information gained from qualitative exploratory research enables the


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market researcher to plan a more effective research programme than would be the case if the

exploratory stage were missing. Exploratory research lays down the foundations enabling the rest

of the research exercise to be built soundly.

Descriptive research

This is intended to describe certain factors that marketing management is likely to be interested

in, such as market conditions, customer‟s feelings or opinions toward a particular company,

purchasing behaviour and so forth. Such research is not intended to allow the researcher to

establish causal relationships between marketing variables and sales or consumer behaviour, or

to enable the researcher to predict likely future conditions. Descriptive research merely examines

„what is‟. Such research, just like exploratory research, usually forms part of an on-going

research programme. Once the researcher has established the present situation in terms of market

size, main segments, main competitors, etc., they may then proceed to types of research of a

more predictive and/or conclusive nature. Descriptive research usually makes use of descriptive

statistics to help the user understand the structure of the data and any significant patterns that

may be found in the data. All measures of central tendency such as the mean, median and mode

are often used along with measures of dispersion such as the variance and standard deviation.

Descriptive research results are often presented using pictorial methods such as graphs, „pie

charts‟, histograms, etc.

Predictive research

The objective of predictive research is to enable the marketing researcher to predict something

about future market conditions such as market growth or decline, increased competition, greater

import penetration in a particular market, future price levels or changes in consumer taste, to

name but a few examples. Many marketing research techniques can be used to generate

information that might prove useful to the researcher in predicting such conditions. When using

qualitative research such as depth interviews or group discussions, the researcher can interview

individual salespeople or „experts‟ in the industry. Group interviews can be held in order to

arrive at a consensus as to what might happen within a certain market in the future. Opinions can

be elicited from respondents for various time periods, for example the next few months, next

year, next five years. Similarly, questionnaire surveys can be used to elicit responses. For

example, the sales force could be surveyed and asked for their opinion concerning future sales or

market conditions. A survey of buyer‟s intentions is a popular method of obtaining sales


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forecasting information. Formal statistical and mathematical techniques specifically developed

for forecasting exercises can also be used. Secondary data obtained from existing sources as well

as survey results or information derived from qualitative interviews can provide the forecaster

with valuable input data for forecasting.

Conclusive research

When using conclusive research techniques the researcher is attempting to establish causal

relationships between marketing variables such as price, advertising or packaging to some other

variable such as sales or patterns of consumption. In order to achieve this kind of test it is

necessary to use a formal experimental design in order to be able to test a specific hypothesis.

For example, assuming the marketing communications manager wanted to establish which set of

merchandising materials, which price promotion and which shelf configuration would be most

effective in achieving sales within a multiple grocery store chain, and also assuming that there

were four different versions of each of the marketing variables, e.g. four merchandising „sets‟,

four price promotions that could be used in store and four different shelf configurations. The

researcher wants to know which permutation of these three marketing variables is most effective.

The researcher sets up an experiment where each permutation of experimental treatments are

randomly allocated to retail stores. Differences between stores will be accounted for in the

experiment. The experiment will be allowed to run until sufficient data has been generated. The

results are then analysed and used to see if the hypothesis that one set of experimental treatments

has been more effective in generating sales than the others were in fact true or false. Statistically

designed experimental methods such as Analysis of Variance (ANOVA) would be used in such a

situation. All experimental exercises which enable the researcher to establish causation in tests

have a number of factors in common. The researcher starts with the marketing variables which

are to be tested, these are known as the „independent variables‟. These variables are then applied

to a given situation and certain effects are monitored. These effects are usually sales, but might

be something else such as behavioural changes of some kind, e.g. store loyalty. These effects are

regarded as „dependent variables‟ because they are dependent on the marketing variables

discussed earlier. Experiments are set up with the purpose of trying to establish scientifically,

using statistical tests, whether the effects seen in the dependent variables are in fact attributable

to changes in the independent variables (i.e. the marketing variables) and if so what are the

nature and strength of these effects. The marketing researcher wants to know whether the


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experimental effects caused by the independent variables acting upon the dependent variables are

in any way commercially exploitable.


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Question 18 (a) Examine the role of marketing research within a firm‟s overall marketing mix. (10 marks)

(b) Outline the stages within the formal marketing research process and explain the activities that

are carried out at each stage. (15 marks) (Total 25 marks)

Answer

(a) Marketing research has been defined in many ways. Professor Philip Kotler (2007) defines it

as “systematic problem analysis, model-building and fact-finding for the purpose of improved

decision-making and control in the marketing of goods and services”.

The American Marketing Association (AMA, 1961) defines it as “the systematic gathering,

recording and analysing of data relating to the marketing of goods and services”.

Whatever definition you may choose to adopt, you can see that the emphasis is on the

improvement in marketing decision making. Marketing research is the „scientific‟ approach to

building value in the eyes of the firm‟s target market. The aim of research is to find, in a

systematic way, reliable, unbiased answers to questions about the market for goods or services

and to look at people‟s ideas and intentions on many issues. Marketing research is often

concerned with the process of collecting, analysing and interpreting the facts to establish what it

is that people want and why they want it.

Without the information that marketing research provides, management cannot apply the

marketing concept as an overriding business philosophy to their organisation. Marketing is the

business process whereby business firms strive to create „bundles of values‟ in the form of

products and services which their customers will willingly buy. In the value creation process

marketing firms attempt to at least meet, but preferably exceed, the customer‟s expectations. To

remain competitive, marketing firms have to create customer value more effectively and

efficiently than the competition. Firms that are market driven and customer focused in this way

are often said to be „marketing oriented‟ firms. However „value‟ is somewhat subjective and lies

in the minds of individuals and groups of people. Value changes all the time within people‟s

minds. For example what is regarded as fashionable in terms of clothing or popular music might

not be next year. What might be regarded as unimportant say ten years ago may become more

important a decade later.

(b) Marketing research is a planned formal approach to the collection of marketing information.


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1 Problem definition leading to a preliminary statement of research objectives to provide

information, making this stage an identification of information needs. The information needed

is:

● Motivations, values, beliefs, feelings, opinions

● Evaluations, attitudes, intentions

● Knowledge, facts, behaviour, actions

● Demographic, socio-economic etc. (on/from people, stores, companies, brands, products)

This information is required for:

● Exploration, description, prediction or evaluation It comes from:

● Secondary data sources, both internal and external to a company

● Primary data sources (i.e. from field work)

2 Review of secondary data sources

● Company records, reports, previous research

● Trade associations, government agencies, research organisations

● Advertising/market research agencies

● Books, periodicals, theses, statistics, conference proceedings, etc.

3 Select approach for collection of new/primary information

● Experimentation

● Observation

● Surveys – mail, telephone, personal

● Motivational research techniques – depth interviewing, group interviewing, projective

techniques

4 Determine details of research design – methods, sample design

5 Data collection – the actual „field work‟ which might take the form of surveys, interviews,

observational studies or market experiments such as test markets

6 Analysis and interpretation of data. This is usually done using a data analysis package such as

Excel or SPSS. There are also computer based analysis packages for qualitative data.

7 Evaluation of results and recommendations


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Contingency Q & A

Question 1 Discuss the marketing activity that takes place at each stage of the marketing planning process.

Use a flow chart to demonstrate the sequential stages. (25 marks)

OR

(a) Using a flow chart to illustrate your answer, explain the stages within the overall marketing

planning process. (10 marks)

(b) Discuss the marketing activity that takes place at each stage of the marketing planning

process for a product or service of your choice. (15 marks) (Total 25 marks)

OR

List the stages in the marketing planning process and outline what happens at each stage. (14

marks)

Answer

An overview of marketing planning

The figure below, which is a relatively comprehensive model, gives an overview of the strategic

and tactical marketing planning process. The early part of this model shows how it fits into the

corporate planning framework; from there, more detailed activities take place that results in a

practical marketing plan.

Situational analysis

The mission statement has already been explained, but the next stage that relates to an analysis of

the current situation is now explained for it has two inputs. The first input relates to the

organisation‟s macro environment and these are factors over which the company has little or no

control. They are listed under four separate headings: Political; Economic; Sociocultural and

Technological and are known by the acronym “PEST”. Added to these factors, some marketing

planners also add “Legal” (the acronym then being SLEPT) and some add “Competition” if these

are felt to be specific issues.


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Marketing audit

This looks at the individual capabilities of the company, SBU by SBU. These two actions are

called the corporate auditing process and they form the situational analysis. Marketing‟s part of

this total corporate auditing procedure is termed the “marketing audit” and it is included here as

part of marketing planning because it forms the beginning of the marketing planning process.

SWOT analysis


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The SWOT analysis (strengths, weaknesses, opportunities and threats) is an attempt to translate

company specific factors from the company audit into company strengths and weaknesses plus

external environmental factors (from the PEST analysis) into external opportunities and threats.

Marketing objectives

These are concerned with what is to be achieved, unlike strategies that are the means of

achieving objectives. These objectives are obtained from corporate level strategies and should be

very specific. An acronym used in this context is that marketing objectives should be “SMART”

– which stands for specific, measurable, achievable, realistic and timely.

Forecast market potential

A lot of marketing planning texts seem to miss this stage. Without a forecast of the market

potential, a company does not really know what plans to make. Forecasting is at the very base of

company planning, and it is for medium and long term planning horizons that medium and long-

term sales forecasts are needed.

Generate marketing strategies

Strategies are, of course, the means through which marketing objectives can be achieved. They

are meant to detail selected approaches that the company will use to achieve its objectives.

Determining strategies leads to a series of action statements that are clear sets of steps to be

followed to achieve the objectives.

Assumptions and contingency plans

These should be stated as a series of points that relate to, and which preface, the make-up of the

detailed marketing mix plans in the next stage. Assumptions should only be introduced if they

are needed. For each assumption, a contingency plan should be formulated, so in the case of an

assumption being wrong, the appropriate contingency plan can be brought in.

Detailed marketing mix programmes

This part of the plan enables the organisation to satisfy the needs of its target markets and to

achieve its marketing objectives. This comprises the bulk of an organisation‟s marketing efforts.

The first part of this programme is to determine the marketing mix, and detailed consideration

must be given to each of the areas of the “seven Ps” plus customer considerations in terms of

segmentation, targeting and positioning. All ingredients of the marketing mix must be combined

in an optimum way to achieve company objectives.

Budget resources and staffing


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Now that detailed decisions have been made in relation to the different elements of the marketing

mix, the next stage of the programme is to budget. Organisations have many demands on their

limited resources, and it is this final balancing act that is the responsibility of corporate planning.

Budgeting covers not only general marketing expenditure, but also salaries and expenses for

staffing.

Timescales

This normally takes the form of a Gantt chart, which places time along the top and activities

down the side as illustrated below:

Implement the plan

This is precisely what the heading says. The plan is now put into action within the predetermined

budget and resource parameters, and along the timescale that has been agreed. More importantly,

those who will carry out the plan should be informed of its details and know the part they must

play within its implementation to ensure its success.

Measure and control

A marketing plan cannot be operated without some means to monitor measure and control its

progress. A system of controls should be established whereby the plan is reviewed on a regular

and controlled basis and then updated as circumstance change. Such controls can address the

tactics in terms of sales analyses, which will commence with a comparison of budgeted sales

revenue against actual sales revenue.


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Question 2 Examine the key „macro environmental‟ factors that affect international marketing firms

operating in today‟s business environment. (25 marks)

OR

Explain what is meant by the term „macro environmental factors‟, and discuss the most

important international „macro environmental factors‟ that affect marketing firms operating in

today‟s international business environment. (25 marks)

OR

Identify and explain the „macro environmental‟ factors that affect the marketing environment.

Give examples to support your answer. (14 marks)

Answer

In order for organisations to be in a position to adapt successfully to changing conditions, their

management requires an appreciation of the many factors and forces influencing such changes.

Firms would like to be in the position of being able to adapt to changes as they occur. Ideally,

management would like to be able to adapt in advance of change by anticipating events. By

identifying environmental trends early enough, management should be able to anticipate the

likely outcome of such trends.

Unless firms are able to identify and react to changes quickly, they run the risk of being dictated

to by circumstances beyond their control; then firms are forced into being “market followers”,

rather than playing a part in the changes occurring, influencing events and “leading” the market.

There are many possible international “macro environmental” factors that could be discussed in

this answer. The following is merely indicative of some of the more current important factors.

This answer is not intended to be an exhaustive list of these factors.

Globalisation.

The main international “macro” issue affecting marketing firms in the present, and an issue that

is likely to have increasing effect in the future, is what is known as the “globalisation” of

markets. Obviously this affects some marketing firms more than others; in general smaller firms

operating within the service sector will be less affected, as it is difficult for more competitive

countries, such as those with very low labour costs, to export services to the UK on a small scale.


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Larger providers of services, especially in areas such as financial services are however feeling

the full competitive force of the global market place.

As the world economy becomes more and more interconnected, events thousands of miles away

can affect businesses in this country, even the smaller enterprise.

Trading blocks

The best example of an economic trading block, and the one that is closest to “home” so to

speak, is the European Union (EU). The earlier title of the EU was the European Economic

Community (EEC) with the emphasis on the word “economic” as it was basically a single,

unfettered free trade area. The name has now been changed to the European Union because the

economic dimension of the union of free states has become less important, what seems to be the

important issue driving the evolution of the union is full economic and political integration i.e. a

United States of Europe in all but name.

Some of the major regional trade associations are as follows:

NAFTA – North American Free Trade Agreement

Canada, Mexico, United States

AFTA – ASEAN Free Trade Area

Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam, Laos,

Myanmar, Cambodia

APEC – Asia Pacific Economic Co-operation

Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia,

Mexico, New Zealand, Papua New Guinea, Vietnam, Philippines, Singapore, South

Korea, Taiwan, Thailand, United States, Peru

CACM – Central American Common Market

Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua

EU – European Union

Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland,

France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta,

Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United

Kingdom


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The creation of major trading blocks is a major factor that marketing firms will have to factor

into their future marketing policies and strategies and will have a serious impact on every facet

of their international and domestic operations.

International political factors

International marketers must consider the influence of governments on their activities. In recent

years, some emerging economies in Africa have been politically unstable. Countries that have

emerged following the breakup of the Soviet Union have displayed volatility. Governments can

also frustrate the efforts of international marketing in developed economies.

International consumer movement

Arguments have been outlined for and against the marketing system in a socioeconomic context

at a “macro” level. The modern day consumer movement, which had its roots in the 1970s, is

mainly involved in specific issues. However, consumerism has macro dimensions and is

responsible for much of the social awareness displayed by many business organisations‟ today.

Such companies do not view consumerism as a threat, but as a movement that can be responded

to positively, so as to serve their customers and society more effectively.

Emerging markets

Emerging markets, such as India, China, Russia and Brazil are going to be very important to

international marketers in the future particularly marketing firms based in the west. Such

countries are growing at a substantial rate and the demand from these countries for goods and

services that firms in the west can provide is enormous. Such countries also offer the prospect of

“outsourcing” services and manufacturing functions to firms in more developed countries faced

with higher costs.


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Question 3 Draw a „perceptual map‟ or „brand map‟ and explain how marketing management can

graphically present a product positioning strategy for a market segment. (13 marks)

Answer

Students should discuss what a product positioning strategy is and explain how management can

use a graphical analysis of the market place in terms of the product attributes and brand

characteristics of competitor‟s products to bench mark their product and help them position it

effectively.

Students should draw a „perceptual map‟ which might take the form of brand map, multi

dimensional scale or positioning map to illustrate the points being made. Students should

demonstrate how such a perceptual map or „brand map‟ can aid marketing management in

formulating an appropriate product positioning strategy.

OR

Discuss how management‟s choice of targeting and positioning strategy might influence the way

in which they plan and manage the firm‟s marketing mix. (10 marks)

Answer

Students will be aware that the whole point of segmentation, targeting and positioning is to treat

the overall market as separate sub markets. If all potential customers were exactly the same in

every respect including the criteria they used for purchase e.g. price only, then there would be

little or no scope for targeting and positioning.

Students should know that firms either segment the market or then try to satisfy all segments,

although this approach is actually rare, or more commonly will concentrate on or „target‟ one or

more segments. They will then try to „fine tune‟ through positioning themselves in relation to

other competitors within the segments they have decided to enter.

Although segmentation is often based on some suitable base or variable such as age, socio

economic group, income or where a person lives (or a mixture of these e.g. ACORN), targeting

and positioning is achieved in practice by manipulation of the marketing mix.

Students should provide explicit examples of this to illustrate the points made. For example, the

firm might be involved in different age segments but the product and/ or service offering is likely

to differ in line with each segment‟s requirements, for example, holidays where you have Saga


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and ‟18-30 Club‟ holidays. Positioning within each of these age segments will then be achieved

through the use of other mix variables such as price and communication tools. Generally for this

part of the question, students should demonstrate the importance of the marketing mix in helping

firms to create differentiated product and service offerings in the mind of potential target

markets.

They should be aware that the marketing mix is the set of internal variables used by marketing

firms to achieve their targeting and positioning goals once the general decision on segmentation

in terms of the most appropriate bases to use has been made and the choice of segments to

service has been decided upon. If the management of a firm thinks they cannot successfully

service a particular segment with the type of marketing mix components at their disposal e.g.

product range or product quality then they will select instead segments they can exploit

commercially more successfully or if there are none then leave the market altogether.


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Question 4 Explain why it is necessary for marketing managers to keep up to date with relevant

technological developments. Illustrate your answer with examples. (13 marks)

Answer

Business in general and certainly marketing in particular has become more and more affected by,

and dependent upon, technology. Furthermore, technological progress itself is altering and

accelerating. Technology seems to be developing at an exponential rate that is at an ever-

increasing rate. The rate of development increases because scientists and technologists can learn

from what has happened in the past, in a sense they are „standing on the shoulders of giants‟. For

example, the digital computer was developed in a laboratory in Manchester University, England

and since then other people have developed the basic technology into what we can see today.

Suffice it to say at this stage, that advances in technology are now beginning to basically change

the nature of marketing and other business and commercial activities. So much so that many

consider that in as little as ten years the process of marketing will be changed beyond recognition

compared to today. Some experts go so far as to say that the traditional marketing model or

„paradigm‟ is no longer applicable in the world of the Internet and that a new model is called for.

Certainly, at the very least, the modern-day marketer needs to be familiar with the key advances

in technology, which are at this time impacting on the marketing process. A summary of the

reasons for this, which captures the importance of technological advances, are listed below:

● Advances in technology enable the marketing process to be carried out not only more

effectively but also more efficiently, computer aided questionnaire design for marketing research

is a case in point. The computerisation of measuring instruments for advertising research is

another good example. Advances in technology allow the marketing professional to do more

things and to do tasks better.

● New technology increasingly facilitates the ease with which information, so vital to effective

marketing planning and decision-making, can be collected, analysed and used. Marketing

Information Systems and the ability to „tap‟ into internal and external databases has

revolutionised the planning process in marketing in terms of detail and speed. Data mining and

data fusion are techniques, which allow marketing research professionals to „engineer‟

information from a wide variety of sources and even create „virtual‟ consumer models from such

information.


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● Competitive success is increasingly based on the application of advances in technology. If you

take mobile telephones for example, it is no longer enough to produce a product that is capable

of making a telephone call. Today people want telephones that can send text messages; answer e-

mails play computer games and a host of other functions.

● Developments in business related technology often contributes to the growth of the

international company and a move towards the global market and consumer. Smaller firm‟s in

particular benefit from Internet based business technologies as it reduces their size disadvantage.

Electronic commerce has no geographic boundaries; it is just as easy to interact with consumers

in New Zealand from the UK as it is to interact with consumers in the next town. Many firms, in

order to both differentiate their products and reduce their costs are increasingly using computer-

based technology. Just-in-time ordering and stock holding systems saves firms millions in

inventory and logistics costs compared with the more traditional way of doing things in the past.

Computers have facilitated the use of these new systems and processes.

● Some of the developments in business related computer technology allow the marketer to be

much more customer focused and marketing oriented with, for example, much faster and flexible

responses to customer needs. The use of database marketing and data mining has improved the

accuracy and efficiency of many marketing operations particularly marketing communications

such as direct mail.

The examples given above demonstrate that marketing management must not only be aware of,

but understand, the advances in technology which are taking place; otherwise they will not be

able to do their job. Some marketing firms may even contribute to these changes, for example,

Napster.com has pioneered the marketing of music on the Internet and many other e-marketing

firms are likely to follow its lead in one way or another. Amazon.com leads the way in the

marketing of books and compact discs (CD‟s) on the Internet and is one of the most high profile

names in the whole of e-marketing. Napster.com and Amazon.com are two examples of how the

marketing firms making use of the new technology are themselves contributing to the

development of the Internet as a main stream commercial medium. These companies are rather

like Proctor and Gamble Limited as they were back in the 1950‟s and 60‟s when they pioneered

many of the fast moving consumer goods marketing techniques used today, especially in the

field of branding and sales promotions.


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Moreover, the marketer must also be aware of, and be prepared for, future advances in

technology. Marketing is all about staying ahead of the competition. This in turn means that the

marketer must also have the required skills to use the new technologies of today and tomorrow to

help assist the marketing process. Similarly, those organizations whose management and

marketers are unaware of, or unable to, use advances in technology will become increasingly

uncompetitive. The marketing manager of the future will need an understanding of the use of

technology within the discipline. He or she may not need to be a technical expert, after all these

are available as staff, but he or she must be able to appreciate how they can factor in the use of

new technology into all aspects of their marketing plans and operations.


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Question 5 Examine the main principles and processes involved in organisational buying behaviour and

compare these with consumer purchasing processes and behaviour. Use examples to illustrate the

key points. (25 marks)

OR

(a) Compare and contrast the main features of a „consumer purchasing decision‟ with an

„organisational purchasing decision‟. (12 marks)

(b) Outline the concepts of the organisational decision-making unit (DMU) and „buying centre‟,

and discuss the categories of people likely to be involved in their composition. (13 marks)

OR

Compare and contrast the factors infl uencing the process of organisational buying behavior with

those infl uencing individual consumer buying behaviour. Use appropriate diagrams as well as

consumer behaviour and buyer behaviour theories or models to illustrate your points. (25 marks)

OR

A marketing manager is considering moving from a job in fast-moving consumer goods (FMCG)

to a business to business (B2B) position. Discuss the different or additional „buyer behaviour‟

factors that he/she would have to learn and take into account. Explain using diagrams and

examples. (13 marks)

OR

Identify and describe three major factors that influence consumer buying behaviour. Give an

example of each to support your answer. (15 marks)

OR

(a) Explain the function of the Decision Making Unit (DMU) in an organisation. (5 marks)

(b) Identify five roles of people within the DMU and explain the involvement of each in making

purchasing decisions. (10 marks) (Total 15 marks)

Answer

The term „organisational buying‟ reflects purchasing in three different buying situations as

shown below:


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The principal similarity between consumer and organisational purchasing is that they both

represent a need-satisfying process. This need reflects itself in buying behaviour, and this is why

it is important that marketers understand purchasing motives in order to effectively target their

marketing efforts in a way that satisfies these needs. It can be seen that organizational purchasers

have to work with more stringent purchasing constraints, because they have the commercial and

budgetary interests of their respective organisations to serve. They also have logistical factors

like delivery schedules to maintain. There is little opportunity for „impulse‟ purchasing in which

everyday consumers can indulge. As purchasing professionals they should have a great deal of

technical and commercial knowledge about their prospective purchases.

Models of organisational buying

Below is a model of the organisational purchasing decision process. It is, perhaps, more precise

in its application than the models suggested for consumer buying behaviour as items for purchase

require a more business-like description through a formal specification at the ‘need description’

and ‘product specification’ stages.


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Organisational and consumer purchasing compared

How do purchasers in organisational buying situations differ from consumer buyers in their

purchasing decision-making processes? The following list provides the main characteristics of an

organisational purchasing situation:

● Rationality of purchasing motives

● Derived demand especially in industrial buying situations, where demand is dependent upon

purchases further down the supply chain and creates demand further up the chain

● Small numbers of individual buyers

● Large number of influences on individual buyers

● Often multi-person purchasing decision-making unit

● Suppliers are sometimes in active competition with each other

● Industrial customers may have more power

● Many products are pre-specified by the buyer‟s organisation

● Unequal purchasing power of customers

● Distribution is more direct

● Higher value of purchases

● There is sometimes a geographical concentration of purchasers

● Company policies, for instance in relation to suppliers being „listed‟ for a particular quality

standard, may act as a constraint on the buyer

● Possible „reciprocal‟ purchasing arrangements, in that certain markets may be closed off

because of a mutual trading agreement

● A sale is often preceded by lengthy negotiation

● Relationships between buyers and sellers tend to be more long term, rather than depending on

a single commercial transaction

The Decision Making Unit (DMU)

The predominant difference between consumer and organisational buying is that organisational

buying often involves group decision-making. In 1972 Frederick E Webster (Jr) proposed that

there were distinct roles in the purchasing process, sometimes taken up by different individuals.

He termed this idea the notion of the „buying centre‟ or the decision making unit (DMU).


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Organisational buyers tend to work to obtain satisfaction in relation to the company‟s

commercial needs. Much consumer behaviour has a psychological foundation. Although

organisational purchasers have an explicit rationale for their actions, this does not imply that they

are inflexible to receiving psychological influences. Marketers should not overlook the

psychological factors that drive industrial customers. Nowhere is this more important than in a

market where products or services on offer are broadly similar. It is here that organizational

marketers must attempt to modify their marketing advances to serve specific idiosyncratic needs

and requirements.

Organisational buying situations

Three major types of organisational buying situation have been identified, together with the

problems surrounding each, as shown below:


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From the viewpoint of suppliers‟ marketing departments, each of these purchasing situations

suggests a different marketing mix. This is in order to fit the particular circumstances, depending

upon whether the company is an „in‟ supplier currently supplying, or an „out‟ supplier seeking to

become an „in‟ supplier.


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Question 6 (a) Explain the role of personal selling, and assess its importance within the integrated marketing

communications mix. (13 marks)

(b) Identify the market circumstances where the use of personal selling as a marketing

communications tool is likely to be particularly effective. Use examples to support your answer.

(12 marks) (Total 25 marks)

Part (a).

All of the standard texts, including the recommended text, have a section on marketing

communications. At least a part of this chapter will cover personal selling. At this introductory

level, students are not expected to be experts in this subject but should be able to discuss the role

and importance of the selling function and give examples of where personal selling is most likely

to be employed by marketing firms.

Students should discuss the role of personal selling. The salesperson is often the closest to the

point of sale in many situations, and the main function of selling is to close the sale.

Selling can be carried out by non-personal means - in supermarkets, promotions and point of sale

materials may „close the sale‟. However where personal contact is necessary then the role of the

selling function is to sell.

In certain circumstances, where complex negotiation takes place as part of the selling process for

example, then there is no „non personal‟ substitute for personal selling in terms of its

effectiveness.

Personal selling is important is consumer durable markets and for products and services where

advice and demonstration is needed. It is particularly important in industrial markets and

business to business markets.

In many of these „non consumer‟ type of markets, personal selling is the most important

marketing communications tool and the majority of the marketing budget is often spent on the

sales function.

Part (b).

Students are expected to give examples of circumstances and situations where they consider the

use of personal selling to be of paramount importance. The list given below is not intended to be


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exhaustive but merely indicative of the type of situations students are expected to examine when

answering this part of the question:

Situations where there is a high degree of perceived risk in the buying situation.

Where there are complex commercial negotiations.

Where products are technically complex and need explaining and demonstrating e.g. cars.

In industrial and business to business markets generally, although routine order taking is often

carried out by telephone.

Where goods of ostentation are sold, high fashions for example.

When products are new or expensive.

The above scheme is just an example. Students will probably give three or four such examples.

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