What is Marketing?

What exactly is marketing and why is it important to you as an entrepreneur?  Simply stated, marketing is everything you do to place your product or service in the hands of potential customers.

It includes diverse disciplines like sales, public relations, pricing, packaging, and distribution.  In order to distinguish marketing from other related professional services, S.H. Simmons, author and humorist, relates this anecdote.

"If a young man tells his date she's intelligent, looks lovely, and is a great conversationalist, he's saying the right things to the right person and that's marketing.  If the young man tells his date how handsome, smart and successful he is — that's advertising.  If someone else tells the young woman how handsome, smart and successful her date is — that's public relations."

You might think of marketing this way.  If business is all about people and money and the art of persuading one to part from the other, then marketing is all about finding the right people to persuade.

Marketing is your strategy for allocating resources (time and money) in order to achieve your objectives (a fair profit for supplying a good product or service).

Yet the most brilliant strategy won't help you earn a profit or achieve your wildest dreams if it isn't built around your potential customers.  A strategy that isn't based on customers is rather like a man who knows a thousand ways to make love to a woman, but doesn't know any women.  Great in theory but unrewarding in practice.

If you fit the classic definition of an entrepreneur (someone with a great idea who's under-capitalized), you may think marketing is something you do later — after the product is developed, manufactured, or ready to sell.

Though it may feel counter-intuitive, marketing doesn't begin with a great idea or a unique product.  It begins with customers — those people who want or need your product and will actually buy it.

Entrepreneurs are in love with their ideas, and they should be.  After all, why would anyone commit their energy, life savings, and no small part of their sanity to anything less than a consuming passion.  Because entrepreneurs are passionate about their idea, product, or service, they innocently assume other people will feel the same.  Here's the bad news — it just doesn't work that way!

People have their own unique perceptions of the world based on their belief system.  The most innovative ideas, the greatest products, or a superior service succeed only when you market within the context of people's perceptions.

Context can be many things, singly or simultaneously.  To name a few, you may market to your customers within the context of their wants, needs, problems solved, or situation improved.  Entrepreneurs need to be aware of many other contexts, such as social and economic trends or governmental regulations, which we'll discuss another time.

People don't just "buy" a product.  They "buy" the concept of what that product will do for them, or help them do for themselves.  People who are overweight don't join a franchise diet center to eat pre-packaged micro-meals.  They "buy" the concept of a new, thin, happy and successful self.

Before you become consumed with entrepreneurial zeal and invest your life savings in a new venture, become a smart marketer.  Take time at the beginning to discover who your potential customers are, and how to effectively reach them.

Without a plan, your entrepreneurial dream is really wishful thinking.  While a marketing plan can be a map for success, remember that the map is not the territory.  A strategy that ignores the customer isn't an accurate reflection of the landscape.

A good marketing plan can help you focus your energy and resources.  But a plan created in a vacuum, based solely on your perceptions, does not advance the agenda.  That's why market research, however simple or sophisticated, is important.

Just keep in mind that research attempts to predict the future by studying the past.  It reveals what people have done, and extrapolates what people might do — not what people will do.

Planning is imperative, research is important, but there's no substitute for entrepreneurial insight.  After all, as Mark Twain wrote, "You cannot depend on your eyes when your imagination is out of focus".

Customer satisfactionFrom Wikipedia, the free encyclopedia

Customer satisfaction is a term frequently used in marketing. It is a measure of how products and services supplied by a company meet or surpass customer expectation. Customer satisfaction is defined as "the number of customers, or percentage of total customers, whose reported experience with a firm, its products, or its services (ratings) exceeds specified satisfaction goals."[1] In a survey of nearly 200 senior marketing managers, 71 percent responded that they found a customer satisfaction metric very useful in managing and monitoring their businesses.[1]

It is seen as a key performance indicator within business and is often part of a Balanced Scorecard. In a competitive marketplace where businesses compete for customers, customer satisfaction is seen as a key differentiator and increasingly has become a key element of business strategy. [2]

"Within organizations, customer satisfaction ratings can have powerful effects. They focus employees on the importance of fulfilling customers’ expectations. Furthermore, when these ratings dip, they warn of problems that can affect sales and profitability. . . . These metrics quantify an important dynamic. When a brand has loyal customers, it gains positive word-of-mouth marketing, which is both free and highly effective."[1]

Therefore, it is essential for businesses to effectively manage customer satisfaction. To be able do this, firms need reliable and representative measures of satisfaction.

"In researching satisfaction, firms generally ask customers whether their product or service has met or exceeded expectations. Thus, expectations are a key factor behind satisfaction. When customers have high expectations and the reality falls short, they will be disappointed and will likely rate their experience as less than satisfying. For this reason, a luxury resort, for example, might receive a lower satisfaction rating than a budget motel—even though its facilities and service would be deemed superior in 'absolute' terms."[1]

The importance of customer satisfaction diminishes when a firm has increased bargaining power. For example, cell phone plan providers, such as AT&T and Verizon, participate in an industry that is an oligopoly, where only a few suppliers of a certain product or service exist. As such, many cell phone plan contracts have a lot of fine print with provisions that they would never get away if there were, say, a hundred cell phone plan providers, because customer satisfaction would be far too low, and customers would easily have the option of leaving for a better contract offer.

There is a substantial body of empirical literature that establishes the benefits of customer satisfaction for firms.

Contents  [hide] 

1 Purpose

2 Theoretical Ground

o 2.1 The Disconfirmation Model

3 Construction

4 Methodologies

5 See also

6 References

7 External links

Purpose[edit]

A business ideally is continually seeking feedback to improve customer satisfaction.

"Customer satisfaction provides a leading indicator of consumer purchase intentions and loyalty." [1] "Customer satisfaction data are among the most frequently collected indicators of market perceptions. Their principal use is twofold:" [1]

1. "Within organizations, the collection, analysis and dissemination of these data send a

message about the importance of tending to customers and ensuring that they have a

positive experience with the company’s goods and services."[1]

2. "Although sales or market share can indicate how well a firm is performing currently,

satisfaction is perhaps the best indicator of how likely it is that the firm’s customers will make

further purchases in the future. Much research has focused on the relationship between

customer satisfaction and retention. Studies indicate that the ramifications of satisfaction are

most strongly realized at the extremes." On a five-point scale, "individuals who rate their

satisfaction level as '5' are likely to become return customers and might even evangelize for

the firm. (A second important metric related to satisfaction is willingness to recommend. This

metric is defined as "The percentage of surveyed customers who indicate that they would

recommend a brand to friends." When a customer is satisfied with a product, he or she

might recommend it to friends, relatives and colleagues. This can be a powerful marketing

advantage.) "Individuals who rate their satisfaction level as '1,' by contrast, are unlikely to

return. Further, they can hurt the firm by making negative comments about it to prospective

customers. Willingness to recommend is a key metric relating to customer satisfaction."[1]

Theoretical Ground[edit]

"In literature antecedents of satisfaction are studied from different aspects. The considerations extend from psychological to physical and from normative to positive aspects. However, in most of the cases the consideration is focused on two basic constructs as customers expectations prior to purchase or use of a product and his relative perception of the performance of that product after using it. Expectations of a customer on a product tell us his anticipated performance for that product. As it is suggested in the literature consumers may have various "types" of expectations when forming opinions about a product's anticipated performance. For example, four types of expectations are identified by Miller (1977): ideal, expected, minimum tolerable, and desirable. While, Day (1977) indicated among expectations, the ones that are about the costs, the product nature, the efforts in obtaining benefits and lastly expectations of social values. Perceived product performance is considered as an important construct due to its ability to allow making comparisons with the expectations. It is considered that customers judge products on a limited set of norms and attributes. Olshavsky and Miller (1972) and Olson and Dover (1976) designed their researches as to manipulate actual product performance, and their aim was to find out how perceived performance ratings were influenced by expectations. These studies took out the discussions about explaining the differences between expectations and perceived performance." [3]

The Disconfirmation Model[edit]"The Disconfirmation Model is based on the comparison of customers’ [expectations] and their [perceived performance] ratings. Specifically, an individual’s expectations are confirmed when a product performs as expected. It is negatively confirmed when a product performs more poorly than expected. The disconfirmation is positive when a product performs over the expectations(Churchill & Suprenant 1982). There are four constructs to describe the traditional disconfirmation paradigm mentioned as expectations, performance, disconfirmation and satisfaction." [3] "Satisfaction is

considered as an outcome of purchase and use, resulting from the buyers’ comparison of expected rewards and incurred costs of the purchase in relation to the anticipated consequences. In operation, satisfaction is somehow similar to attitude as it can be evaluated as the sum of satisfactions with some features of product." [3] "In the literature, cognitive and affective models of satisfaction are also developed and considered as alternatives(Pfaff, 1977). Churchill and Suprenant in 1982, evaluated various studies in the literature and formed an overview of Disconfirmation process in the following figure:" [3]

Construction[edit]

Organizations need to retain existing customers while targeting non-customers.[4] Measuring customer satisfaction provides an indication of how successful the organization is at providing products and/or services to the marketplace.

"Customer satisfaction is measured at the individual level, but it is almost always reported at an aggregate level. It can be, and often is, measured along various dimensions. A hotel, for example, might ask customers to rate their experience with its front desk and check-in service, with the room, with the amenities in the room, with the restaurants, and so on. Additionally, in a holistic sense, the hotel might ask about overall satisfaction 'with your stay.'"[1]

Customer Satisfaction Measurement Touch Screen Device In a Hotel

As research on consumption experiences grows, evidence suggests that consumers purchase goods and services for a combination of two types of benefits: hedonic and utilitarian. Hedonic benefits are associated with the sensory and experiential attributes of the product. Utilitarian benefits of a product are associated with the more instrumental and functional attributes of the product (Batra and Athola 1990).[5]

Customer satisfaction is an ambiguous and abstract concept and the actual manifestation of the state of satisfaction will vary from person to person and product/service to product/service. The state of satisfaction depends on a number of both psychological and physical variables which correlate with satisfaction behaviors such as return and recommend rate. The level of satisfaction can also vary depending on other options the customer may have and other products against which the customer can compare the organization's products.

Work done by Parasuraman, Zeithaml and Berry (Leonard L)[6] between 1985 and 1988 provides the basis for the measurement of customer satisfaction with a service by using the gap between the

customer's expectation of performance and their perceived experience of performance. This provides the measurer with a satisfaction "gap" which is objective and quantitative in nature. Work done by Cronin and Taylor propose the "confirmation/disconfirmation" theory of combining the "gap" described by Parasuraman, Zeithaml and Berry as two different measures (perception and expectation of performance) into a single measurement of performance according to expectation.

The usual measures of customer satisfaction involve a survey [7]  from software providers such as Confirmit, Medallia and Satmetrix [8]  with a set of statements using a Likert Technique or scale. The customer is asked to evaluate each statement and in term of their perception and expectation of performance of the organization being measured. Their satisfaction is generally measured on a five-point scale.

"Customer satisfaction data can also be collected on a 10-point scale."[1]

"Regardless of the scale used, the objective is to measure customers’ perceived satisfaction with their experience of a firm’s offerings."[1] It is essential for firms to effectively manage customer satisfaction. To be able do this, we need accurate measurement of satisfaction.[9]

Good quality measures need to have high satisfaction loadings, good reliability, and low error variances. In an empirical study comparing commonly used satisfaction measures it was found that two multi-item semantic differential scales performed best across both hedonic and utilitarian service consumption contexts. According to studies by Wirtz & Lee (2003),[10] they identified a six-item 7-point semantic differential scale (e.g., Oliver and Swan 1983), which is a six-item 7-point bipolar scale, that consistently performed best across both hedonic and utilitarian services. It loaded most highly on satisfaction, had the highest item reliability, and had by far the lowest error variance across both studies. In the study,[10] the six items asked respondents’ evaluation of their most recent experience with ATM services and ice cream restaurant, along seven points within these six items: “pleased me to displeased me”, “contented with to disgusted with”, “very satisfied with to very dissatisfied with”, “did a good job for me to did a poor job for me”, “wise choice topoor choice” and “happy with to unhappy with”.

A semantic differential (4 items) scale (e.g., Eroglu and Machleit 1990),[11] which is a four-item 7-point bipolar scale, was the second best performing measure, which was again consistent across both contexts. In the study, respondents were asked to evaluate their experience with both products, along seven points within these four items: “satisfied todissatisfied”, “favorable to unfavorable”, “pleasant to unpleasant” and “I like it very much to I didn’t like it at all”.[10]

The third best scale was single-item percentage measure, a one-item 7-point bipolar scale (e.g., Westbrook 1980).[12] Again, the respondents were asked to evaluate their experience on both ATM services and ice cream restaurants, along seven points within “delighted to terrible”.[10]

It seems that dependent on a trade-off between length of the questionnaire and quality of satisfaction measure, these scales seem to be good options for measuring customer satisfaction in academic and applied studies research alike. All other measures tested consistently performed worse than the top three measures, and/or their performance varied significantly across the two service contexts in their study. These results suggest that more careful pretesting would be prudent should these measures be used.[10]

Finally, all measures captured both affective and cognitive aspects of satisfaction, independent of their scale anchors.[10] Affective measures capture a consumer’s attitude (liking/disliking) towards a product, which can result from any product information or experience. On the other hand, cognitive

element is defined as an appraisal or conclusion on how the product’s performance compared against expectations (or exceeded or fell short of expectations), was useful (or not useful), fit the situation (or did not fit), exceeded the requirements of the situation (or did not exceed).[13]

Methodologies[edit]

American Customer Satisfaction Index (ACSI) is a scientific standard of customer satisfaction. Academic research has shown that the national ACSI score is a strong predictor ofGross Domestic Product (GDP) growth, and an even stronger predictor of Personal Consumption Expenditure (PCE) growth.[14] On the microeconomic level, academic studies have shown that ACSI data is related to a firm's financial performance in terms of return on investment (ROI), sales, long-term firm value (Tobin's q), cash flow, cash flow volatility,human capital performance, portfolio returns, debt financing, risk, and consumer spending.[15][16][17] Increasing ACSI scores has been shown to predict loyalty, word-of-mouth recommendations, and purchase behavior. The ACSI measures customer satisfaction annually for more than 200 companies in 43 industries and 10 economic sectors. In addition to quarterly reports, the ACSI methodology can be applied to private sector companies and government agencies in order to improve loyalty and purchase intent.[18] ASCI scores have also been calculated by independent researchers, for example, for the mobile phones sector,[19] higher education,[20] and electronic mail.[21]

The Kano model is a theory of product development and customer satisfaction developed in the 1980s by Professor Noriaki Kano that classifies customer preferences into five categories: Attractive, One-Dimensional, Must-Be, Indifferent, Reverse. The Kano model offers some insight into the product attributes which are perceived to be important to customers.

SERVQUAL or RATER is a service-quality framework that has been incorporated into customer-satisfaction surveys (e.g., the revised Norwegian Customer Satisfaction Barometer[22]) to indicate the gap between customer expectations and experience.

J.D. Power and Associates provides another measure of customer satisfaction, known for its top-box approach and automotive industry rankings. J.D. Power and Associates' marketing research consists primarily of consumer surveys and is publicly known for the value of its product awards.

Other research and consulting firms have customer satisfaction solutions as well. These include A.T. Kearney's Customer Satisfaction Audit process,[23] which incorporates the Stages of Excellence framework and which helps define a company’s status against eight critically identified dimensions.

For B2B customer satisfaction surveys, where there is a small customer base, a high response rate to the survey is desirable. The American Customer Satisfaction Index (2012) found that response rates for paper-based surveys were around 10% and the response rates for e-surveys (web, wap and e-mail) were averaging between 5% and 15% - which can only provide a straw poll of the customers' opinions.

In the European Union member states, many methods for measuring impact and satisfaction of e-government services are in use, which the eGovMoNet project sought to compare and harmonize.[24]

Market SegmentationMarket segmentation can be defined as the process of dividing a market into different homogeneous groups of consumers.

Market consists of buyers and buyers vary from each other in different ways. Variation depends upon different factors like wants, resources, buying attitude, locations, and buying practices. Bysegmentation, large heterogeneous markets are divided into smaller segments that can be managed more efficiently and effectively with products and services that match to their unique needs. So, market segmentation is beneficial for the companies serving larger markets.

Criteria for selecting Market Segments

MeasurableA segment should be measurable. It means you should be able to tell how many potential customers and how many businesses are out there in the segment.

AccessibleA segment should be accessible through channels of communication and distribution like: sales force, transportation, distributors, telecom, or internet.

DurableSegment should not have frequent changes attribute in it.

SubstantialMake sure that size of your segment is large enough to warrant as a segment and large enough to be profitable

Unique NeedsSegments should be different in their response to different marketing efforts (Marketing Mix).

Consumer and business markets cannot be segmented on the bases of same variables because of their inherent differences.

Bases for Consumer Market Segmentation

There are number of variables involved in consumer market segmentation, alone and in combination. These variables are:

Geographic variables Demographic variables Psychographic variables Behavioral variables

Geographic SegmentationIn geographical segmentation, market is divided into different geographical units like:

Regions (by country, nation, state, neighborhood) Population Density (Urban, suburban, rural) City size (Size of area, population size and growth rate) Climate (Regions having similar climate pattern)

A company, either serving a few or all geographic segments, needs to put attention on variability of geographic needs and wants. After segmenting consumer market on geographic bases, companies localize their marketing efforts (product, advertising, promotion and sales efforts).

Demographic SegmentationIn demographic segmentation, market is divided into small segments based on demographic variables like:

Age Gender Income Occupation Education Social Class Generation

Family size Family life cycle Home Ownership Religion Ethnic group/Race Nationality

Demographic factors are most important factors for segmenting the customers groups. Consumer needs, wants, usage rate these all depend upon demographic variables. So, considering demographic factors, while defining marketing strategy, is crucial.

Psychographic SegmentationIn Psychographic Segmentation, segments are defined on the basis of social class, lifestyle and personality characteristics.Psychographic variables include:

Interests Opinions Personality Self Image Activities Values Attitudes

A segment having demographically grouped consumers may have different psychographic characteristics.

Behavioral SegmentationIn this segmentation market is divided into segments based on consumer knowledge, attitude, use or response to product.Behavioral variables include:

Usage Rate

Product benefits Brand Loyalty Price Consciousness Occasions (holidays like mother’s day, New Year and Eid) User Status (First Time, Regular or Potential)

Behavioral segmentation is considered most favorable segmentation tool as it uses those variables that are closely related to the product itself.

Bases for Business Market SegmentationBusiness market can be segmented on the bases consumer market variables but because of many inherent differences like

Businesses are few but purchase in bulk Evaluate in depth Joint decisions are made

Business market might be segmented on the bases of following variables:

Company Size: what company sizes should we serve? Industry: Which industry to serve? Purchasing approaches: Purchasing-function organization, Nature of existing

relationships, purchase policies and criteria. Product usage Situational factors: seasonal trend, urgency: should serve companies needing quick

order deliver, Order: focus on large orders or small. Geographic: Regional industrial growth rate, Customer concentration, and international

macroeconomic factors.

Market Competition 101: The 3 types of competitors to keep an eye onDaniel BursteinSeptember 28th, 2012

1 comment Leave a comment

I was reading The Wall Street Journal one morning about food makers using mobile games to market to children. It struck me that content marketing has a major effect on how some companies, especially publishers and media companies, must regard their competition. (It also struck me that my kids need to spend less time on the iPad, but I digress.)

So, I thought I would use that article as inspiration for an example to teach a quick marketing 101 lesson on the three types of competitors you must account for when marketing your product or service. For the sake of this blog post, our company is Spacely Games, and we make mobile games aimed at children.

I also got some input from Paul Clowe, Sr. Director of Finance & Operations, MECLABS, who has recently conducted competitive research here at MECLABS.

 

Click to enlargeDirect Competitors

A direct competitor is “someone that offers the same products, with the same end game,” Paul said. “They make money from the same thing you do.”

A direct competitor is probably what most commonly comes to mind when you think of the word “competition.” When I was a communications consultant, I used to work with the competitive sales office of an IT company. They focused on direct competitors – creating a win/loss report for every deal

where the sales team went head-to-head against other IT companies offering similar products and services.

Spacely Games Example: In this case, the direct competitor is Zynga. They also make games aimed at children, and seek to derive revenue directly from those games.

 

Indirect Competitors

“Indirect competitors offer the same stuff but have a different goal,” Paul said. “They don’t drive revenue the same way.”

Here’s where content marketing can really have an impact. Essentially, a company’s marketing can compete with your paid product, as we’ll see in the example …

Spacely Games Example: SuperPretzel is an indirect competitor of Spacely Games. While it derives revenue from selling soft pretzels and not software, it produces a free mobile game called “SuperPretzel Factory” as part of its content marketing that children could choose to play instead of the paid offerings from Spacely Games.

 

Replacement Competitors

“A replacement competitor is something someone could do instead of choose your product,” Paul remarked. “But they’re using the same resources they could have committed to your product.”

These are the most challenging competitors to identify. However, we must remember that our customers define our competition. After all, the competition is simply the other choices they may choose to make. So we must interview customers, listen to their social media conversations, and understand macro trends to gain an understanding of what choices they are really making.

Spacely Games Example: The Magic Tree House series of children’s books is a replacement competitor for Spacely Games. Essentially, if children have a free hour in their day, they can either decide to download a game or to read a book.

Of course, I’m being a little idealistic assuming the average 8-year-old in 2012 is really considering reading a book instead of playing a mobile game, but that’s my end point. You have to be a bit of an anthropologist and really study your customers to determine what they consider as replacement competition for your products and services.

So does an 8-year-old consider a book as competition for a mobile game? I’m guessing no. However, does a major influencer on that purchase decision (in this case, the parent) consider a book to be a replacement competitor? Well, this parent certainly does

If you think that developing a strategic marketing plan is something only big, fancy corporations need to do, think again.  You need one, too!  It’ll help you better understand your business, your customers and your strategy for success.

Most people fall into the trap of thinking that “marketing” just means advertising, PR or promotion.  But marketing and a marketing plan is so

much more than that, and includes everything fromunderstanding the market to which you’ll sell your products and services, to choosing specific tactics you’ll use to reach that market (which is actually where things like advertising come into play – they’re tactics!).

Here’s the marketing plan sections you’ll be writing:

Overview or Summary – no longer than one page, the summary should briefly describe your business and the major points of your plan (so write it last)

Situation analysis – a detailed and brutally honest assessment of your market, your competitors, and the opportunities and challenges for your business

Marketing strategy – your specific business revenue goals, as well as a strategy for tackling the market opportunities you identified in the situation analysis

Marketing tactics – your action plan for executing on the strategy you outlined in the previous section

Marketing budget and timeline – the projected costs and timeline related to your marketing tactics

Situation analysisSimply put, your situation analysis is the foundation of your marketing plan, and gives a clear “lay of the land” for your market and business.  Remember all of that market research and competitive analysis you did for your business plan?  The good news is, you get to use it again!  For your situation analysis, clearly define:

Your potential customers, including current market size and projected growth

Your competitors, including current and projected market share, and product or market segment focus

Your realistic assessment of your own business, including both strengths and weaknesses, with a summary of your plan to overcome the weaknesses

Marketing strategyWhen you decided to start your business, you undoubtedly found an unmet or underserved need in your target market, and felt that you could address that need.  The marketing strategy section is where you actually spell out how your business is going to do just that, by setting goals and high-level strategies.

Start by setting the goals for your business, typically for at least one year.  Make them realistic, achievable and measurable.  No sense in setting yourself up for failure right out of the gate.  State them in simple, straightforward terms – for example, “ABC Widgets will achieve $100,000 in sales of Widget A by the end of this year.”

Wrap up the strategy section of your marketing plan by outlining the particulars of your business offering – in marketing parlance, you’ll be defining what are known as the “four Ps” for your business:

Product – description of your product or service, including features and benefits

Price – initial pricing strategy Place – distribution channel for your product or service, i.e. where

you’ll sell Promotion – the methods and channels used to reach customers and

let them know about your product or service

Marketing tacticsTo take your marketing plan to yet another level of detail, you’ll dream up some tactics to actually meet the goals you set in the previous section.  Common marketing tactics include advertising (print, online, radio, etc.), trade show or event attendance/participation, public relations, grassroots andviral marketing campaigns and email marketing.

As you choose your tactics, summarize what it is, why you should use it, what you expect to get out of it, and how much it’s going to cost.   Finally,

set a timeline for each tactic and pick a team member to champion getting it done.

Marketing budget and timelineWrap up your entire marketing plan with a bow by summarizing your costs and timelines from the previous section.  And then measure, measure, measure.  Check your marketing budget at least monthly, and determine whether you’re getting the return you expected from each tactic.  It’s never too late to make some changes to your marketing plan.

Your marketing timeline can help you understand if your tactics are driving any sales.  Compare sales during timeframes when you’ve done some marketing activities and check for any growth to see if there was an impact.

 

Writing a marketing plan should become at least a yearly ritual for your business.  Not to mention that it’s probably a good idea to revamp your marketing plan when you are releasing new or significantly changed products or services.  Just remember that writing a marketing plan is time well spent for any sized business, because it’s the process for thinking honestly and thoroughly through how you’re going to connect with your customers.

THE MARKETING MIX Mobile EditionPRODUCT STRATEGIESRelated Links: Pricing | Place | Promotion | Service Marketing Mix | Emarketing Mix

Introduction

When an organisation introduces a product into a market they must ask themselves a number of questions.

1. Who is the product aimed at?2. What benefit will customers expect?3. How does the firm plan to position the product within the market?4. What differential advantage will the product offer over their

competitors?

We must remember that Marketing is fundamentally about providing the correct bundle of benefits to the end user, hence the saying ‘Marketing is not about providing products or services it is essentially about providing changing benefits to the changing needs and demands of the customer’ (P.Tailor 7/00)

Building Product Benefits

Philip Kotler in his book "Principles of Marketing" devised a very interesting concept of benefit building with a product.

 

Kotler suggested that a product should be viewed on three levels.

Level 1: Core Product

What is the core benefit your product offers? For example customers who purchase a camera are buying more than just a camera, they are purchasing memories.

Level 2: Actual Product

All cameras capture memories, therefore your aim is to persuade them to capture memories with your camera. The strategy at this level is to add branding, features and benefits which offer a differential advantage over your competitors.

Level 3: Augmented Product

This level is about exploring if there are any additional non-tangible benefits you can offer. Competition at this level is based around after sales service, warranties, delivery and so on. For example John Lewis a retail department store offers a free five year guarantee with television purchases. A five year guarantee offers their customers peace of mind that their television will be repaired or replaced should a fault develop.

Product Decisions

When placing a product within a market many factors and decisions have to be taken into consideration. These include:

Product Decision Example

Product design

Will the design be the selling point for the organisation as we have seen with the iPad,  the new VW Beetle or the Dyson Ball vacuum cleaner.

Product quality

Quality has to consistent with other elements of the marketing mix. A premium based pricing strategy has to reflect the quality a product offers

Product features

What features will you add that may increase the benefit offered to your target market? Will the organisation use a discriminatory pricing policy for offering these additional benefits?

Product branding

One of the most important decisions a marketing manager can make is about branding. The value of brands in today’s environment is phenomenal. Brands have the power of instant sales, they convey a message of confidence, quality and reliability to their target market.

                

Above left: Apples iPad and centre Dysons Ball vacuum cleaner, both examples of good design

Internet Branding

Internet branding is now becoming an essential part of the branding strategy game. Generic names like Bank.com and Business.com have been sold for millions of pounds. Online firms need to make sure that potential customers understand what their brand is about. As single and double word registration online run short we are seeing triple worded internet firms. Within the UK comparethemarket.com which is a insurance comparison site is backed by a wonderful campaign using Meerkats, who have their own spoof website which supports comparethemarket.com. Take a look,comparethemeerkat.com

More On Branding

Brands have to be managed well, as some brands can be cash cows for organisations. In many organisations they are represented by brand managers, who have hugh resources to ensure their success within the market.

A brand is a tool which is used by an organisation to differentiate itself from competitors. Ask yourself what is the value of a pair of Nike trainers without the brand or the logo? How does your perception change?

Increasingly brand managers are becoming annoyed by ‘copycat’ strategies being employed by supermarket food retail stores particular within the UK . Coca-Cola threatened legal action against UK retailer Sainsbury after introducing their Classic Cola, which displayed similar designs and fonts on their cans. 

How to Create a Distribution Strategy …That Banks

by THOM HOLLAND

How many times have you heard marketers talk about creating a distribution strategy?…You can probably count the numbers of times on one hand.The truth is, marketing “gurus” love to tell you how to promote your products. They get stuck on things like pay per click advertising and building a social media presence.Now, I enjoy talking about the marketing and sales process just as much as the next guy, however, there’s certainly much more to marketing than simply promoting your product.Great marketers know that, if you want to succeed, you need to have a sound marketing mix strategy that fits well within your overall business growth plan.

Of course, laying out your company’s distribution strategy won’t be the sexiest thing you’ve ever done as a business person.But then again, who care’s about being sexy, right? …we just want to get paid.Let’s dig in.

What is a distribution strategy?

Before we dig into the details, let’s first answer the obvious question, what exactly is a distribution strategy?In simple terms, your distribution strategy lays out the details of how you plan to get your product in the hands of your customers.Consider the traditional distribution model below.

In the distribution model above, let’s say that you’re the manufacturer. Your distribution strategy would identify which paths you intend to take in order to get your products to the end user.You may decide to sell to wholesalers, retailers, or both.Either way, you’ll need a strategy that identifies and outlines how you plan to move your product so you can generate the best return on your investment.

Step 1:  Evaluate the end-user

Before you can sell to someone, you need to have a good understanding of what it is they want and how they want to go about buying it.This comes down to conducting a little market research.

I won’t get into that much here, but start by asking yourself questions such as these:

1. Does the end user need personalized service? If so, who is the best person to provide that service to them?

2. Is the end user more likely to purchase this product online or at a physical store?3. How much will you need to educate the end user on your product? Who is in the

best position to help you educate the end user?

Once you’ve evaluated the end user, start working your way backwards in the distribution model.Keep in mind that, if you plan to have distribution partners, you’ll need to evaluate their needs as well.

Step 2: Identify potential marketing intermediaries

Once you have a clear understanding of your end user, it’s time to start crunching the numbers and laying out a game plan.To help us speed things up, I created a spreadsheet. Feel free to make a copy and use it yourself.

The first thing we’ll need to do is to identify potential marketing intermediaries.Generally speaking, there are only two ways for you to sell product to the end user:

1. Directly - you can sell directly to the end user through a sales force.2. Indirectly - or you can sell indirectly to the end user through marketing

intermediaries.

Marketing intermediaries, in short, help you sell your product to the end user.You can typically group potential marketing intermediaries into a couple different categories:

1. Agents and Brokers - Agents and brokers are marketing intermediaries that act, essentially, like an outsourced sales force. The main difference here is that agents and brokers don’t typically buy the product from you. Instead, they sell it for you and make a fee or commission.

2. Wholesalers and Distributors - Wholesalers and distributors are marketing intermediaries who purchase product in bulk from the manufacturer and store it until they can sell it to retailers or contractors at a profit.

3. Retailers - Retailers typically purchase products from wholesalers/distributors and resell it to contractors and end users.

4. Value Added Resellers - And lastly, value added resellers such as contractors typically purchase products, bundle them within their service, and sell it to the end user.

Take a few minutes to brainstorm potential marketing intermediaries and enter them into the spreadsheet along with the additional information needed.

Under the “revenue projections” tab, you should see that the revenue projections were automatically calculated for you. This information will be important for measuring your progress.

Step 3: Research potential marketing intermediares

Once you’ve identified several marketing intermediaries that you think you could possibly partner with, start doing your research to see what you can find.If you can, reach out to these potential distribution partners and offer to buy them a cup of coffee.Get to know them and consider what type of business relationship the partnership could turn into.The point here is to make sure that you really get to know them…more than just what’s written on paper.

Use the “research intermediares” tab to keep track of these potential partners.Here are a few questions that you may want to consider asking:

1. What are some ways that you think we may be able to partner?2. What are some of your weaknesses that we could potentially address?3. What are some of your strengths that we may be able to take advantage of?4. Who would you sell to and at what markup?

Step 4: Narrow in on the profitable distribution channels

Now that we have a good idea of who would make for a good distribution partner, we now need to find which types of distribution channels are available and then narrow in on the most profitable distribution channels.Remember, as with anything, your distribution program is going to cost you money so the idea is to find distribution channels that generate the best return on your investment.Distribution channels are, essentially, paths that you push your products through. In most cases, it’s common to have multiple channels of distribution that you manage. Different channels of distribution may have different sets of marketing intermediaries who help you move your product.Distribution can typically be grouped into three primary categories:

1. Intensive distribution - intensive distribution means there are a lot of intermediaries. An example of intensive distribution may be snack foods; one product may be stocked in many stores and may have many different channels of distribution.

2. Selective distribution - selective distribution  means there are a few intermediaries. An example of selective distribution might be a particular type of fruit that is only sold within a certain geographical area.

3. Exclusive distribution - exclusive distribution means only a few intermediaries and those intermediaries have to carry only their products. An example of exclusive distribution might be high end fashion products that are only sold in very specific stores.

The types of distribution channels you will be able to utilize will differ slightly depending on where you are in the distribution model and who you are trying to sell to.For example, if your end user is the typical consumer, the types of distribution channels available may look something like this..

If you sell to business users, the types of distribution channels may be slightly different…

And lastly, if you provide a service, the types of distribution channels would probably resemble something like this…

By now you should, at least, have an idea of which distribution channels are likely to have the most potential.To back up those assumptions with proof,  go into the “channel pricing” tab and enter in the markups of your distribution partners.

Next, enter in how much it cost you to make the product and your desired profit margin.

Once you have those details figured out, it’s time to negotiate the numbers with your distribution partners.Keep in mind that your distribution partners are, essentially, you’re customers. Of course, in this case, your customer’s goal is to make money. That means that you need to work with them to come up with a mutually beneficial agreement so you can both make money.

Step 5: Manage your channels of distribution

As with any investment, you’re going to need to manage your channels of distribution to make sure that you are maximizing your return on investment.Make sure that you track the progress of each distribution channel against the goals that you laid out in the previous steps.If a distribution channel starts to under perform, meet with your distribution partners and figure out where the leak is in your distribution model.More importantly, determine how you can get things back on track and optimize each channel of distribution.You need to predictably be able to make progress.

Conclusion

As I  mentioned earlier, laying out your company’s distribution strategy won’t be the sexiest thing you’ve ever done as a business person.

The truth is, however, sometimes putting funds into improving your distribution strategy is a better investment than simply throwing more money at promotion.That means that we’ll need to take a minute to crunch the numbers.Hopefully this post has helped with that.

NOT INCLUDED HERE. PLEASE DOWNLOAD!

1. www.jsu.edu/ccba/mm/faculty/thomas/497/497intro.ppt2. www.jsu.edu/ccba/mm/faculty/thomas/497/497intro.ppt3. Download www.business.txstate.edu slides on Consumer

Behaviour. (Appears second or third in a Google search of ‘Consumer Behavior’