In this Coursework, I wish to explain, using examples of Companies and Firms, factors that should be taken into account when making Product Decisions. This will include the 4 (7) P's, and how each is inter-dependant and inter-related. Included is analysis of Marketing Planning, and the benefits and disadvantages of certain models. The Marketing Mix can be defined as the combination of detailed strategies, tactics, techniques, and activities.
The role of the Marketing Mix is to move marketing objectives and plans into reality, and ultimately achieves Company/Firms goals. The key to a successful Marketing Mix, lies with the Management, and the decision maker is crucial to any Marketing Department. Why? Because getting the right Product available, at the right Price, in the right Place with an appropriate Promotional Campaign behind it all - takes planning, strategy and tactics. This does not just happen through instinct alone.
The skill of the Marketing Manager lies in understanding how the four P's of the Marketing Mix interact, and using them in the most cost-effective way possible. (Morden,P420) The Marketing Planning process itself is essential for other reasons, namely to set objectives and strategies but also encourage internal support and commitment (Lecture One Notes), and to get a Firm or Company to jointly be focused on achieving the same end result, maximising the benefit of working together "one for all and all for one" (Dogtanian Cartoon, CITV, 1988).
The Marketing Plan is essentially a checklist for all knowledgeable marketers to simply re-asses, but gives a varied amount of data, and supportive evidence, to help keep the decision process as simple and knowledge-based as possible, allowing each decision to be made on fact rather than fiction, or instinct (Lecture One Notes). An interesting report from the Boston Consulting Group said, "Many brands are dying. Not the natural death of absence, but the slow painful death of sales and margin erosion. The managers of these brands are not complacent - in fact they are constantly tweaking the advertising, pricing and costs of their brand.
At the heart of the problem is a more fundamental issue: can the original promise of the brand be recreated and a new spark lit with today's consumers? We believe it can. Most brands can be reinvented through brand renaissance". Product factors on decision would begin with designing a good product that customers want to buy. This is challenging, and we know that customers do not simply buy the product; they seek benefits and are often willing to pay more for a brand that seems to solve all their (cleaning, cosmetic) problems.
Marketers can satisfy these needs by adding value to the product, with ingenious branding ideas, and packaging and other promotional tools. A prime example is L'Oreal; the French based Cosmetics and Personal Hair Care Company. L'Oreal knows that when it sells Shampoo and Conditioners, it sells much more than a bottle of coloured or fragrant soapy fluids; it sells what the fluids CAN do for (mostly) women who use them. Using the equivalent of chat up lines in the advertising women believe that the benefits of " shinier, healthier" hair are lasting.
The opinion is, from top Hair Stylist Sam McKnight, based in London, that the cosmetics sector is such an emotionally charge marketplace, a bad hair/make-up day means a unhappy woman. This is evident. So the overall name, feel of bottle, smell and even colour has to be taking into account, when deciding the ideal Product for the Market. (Kotler, 2002,P458-459). Pricing of the Product becomes another crucial decision. Set it too high and nobody buys, set it to low and "its not worth the candle" (The Economist Marketing Book, p157).
The action of following the Market Leader helps newcomers follow at a discrete distance, with a price that is competitively lower. Price levels have to be adjusted in light of consumers ' responses and competitors' behaviour. Price is related to Product, through the characteristics of the brand, it's packaging and overall image. People are buying into an ideal, not just the substance/item. The quality also comes into question; consumers believe that there is a link between quality of a product and the price.
Consumers also question what they are getting for their money. Brand Management, customer awareness and loyalty, is directly linked to the price, therefore maintenance of the relationship between brand images, quality and price have to be consistent (Morden, p156). The 1980's had a cult of "Brand Worship" and in 1988 when Swiss food-products company Nestle bought Rowantrees, the price paid was well over $1bn for something that had actually never appeared on a balance sheet, it was the value of names in its portfolio such as Polo, Kit Kat and After Eight.
This practise was not just cosmetic, it improved Companies ability to borrow from banks, and therefore their capacity to buy even more Brands. Although, there were side effects to this 'new' phenomenon, in 1990 sales of Perrier water were reduced heavily, due to the discovery of small quantities of benzene in samples taken from the water source. And later Nike and The Gap found themselves under fire for the conditions in overseas factories in their supply chains. (The Economist Book, p9).
Place relates to how the Product is going to get to where the customer is when the customer wants it. Including the types of wholesale and retail outlets to be used, geographical coverage, and sales force required. There is a need for Channel Management decisions, these relate to the channels of Direct Marketing, such as direct response selling via advertising, or direct mail etc. The channel of the Sales Force, relate to reps or another sales force, to sell directly to other companies, and what and how they should achieve gaining territory.
The final channel is Intermediaries, which are independent companies, such as wholesalers, who buy, and resell the goods, wholesalers sales force help reach many small customers at a low cost (Kotler, 2002, p752). Factors, which have to be taken into account in Product decision, whilst developing the Marketing Plan, are the levels of distribution and the correct channel has been decided, best for gaining advantage over competitors. The market exposure may range from Exclusive (Rolex) to Intensive (Smirnoff). (The Marketing Game, p33).
The Management, having taken into account what kind of Product it is, and the Price of it, will find the distribution channels easier to analyse. The channels performance must be regularly evaluated, against targets, and other strategies set out. Finally, Manufacturers must be sensitive to their dealers; this results in a symbiotic relationship, which in turn equals a better performance in that channel. (Kotler, 2002, p761) Promotion of this Product, will be related to Place, or channels, if its personal selling, then the Commission Budget will be higher, if its advertising then there will be a Promotional Budget.
Factors to consider when making further decisions relate to the use of Promotion, in an attempt to increase sales of Products. This may be through one-off advertising campaign, or trade shows, or broadcasts through the media. Promotion creates awareness and stimulates interest in the product or brand. Promotion persuades people and finally sells the product. The information has to be passed to consumer, in a clear and attainable level. Diffusion is vital, for new products.
And when aiming a promotional strategy, one has to decide which sector of market is being targeted, the early adopters, early majority or low majority. Laggards, need maybe less promotional aiming, due to the nature of their buying habits. (Lecture 4 Notes, 2003) The Promotional mix has controllable and non-controllable methods, such as word of mouth, versus advertising. The main forms of communication are controlled, which does cost money - the non-controllable methods are free, but any form of condemnation, can have a huge impact on market performance.
The nature and balance of Promotion must be devised with the stages of the PLC in mind, for example, if the Product is in early stages of existence, then it means more spend on advertising, demonstrations, literature etc, until it gets established into Maturity. (Morden, 1993, p219) The Boston Matrix model would be of use in this situation at later stages, helping to show which, in the portfolio, is in what section of Market Growth (if any). Strategies used in the combination of the above four P's, have came from years of testing and analysing and research.
Models have been adopted from Economists, Marketing Professionals and other Business ideas. The purpose of strategic planning is to find ways in which a company can use it's strength and weaknesses (SWOT) to take advantage of opportunities (Kotler, 2002, p86). The most commonly referred is the BCG Matrix, which uses the terms of Stars to Dogs, in relation to the Product Portfolio, and the cash investment each gets section gets. One would prefer a Star, to a Dog. The reason is that the growth-share matrix divides the grid, and it is easier to identify the four main groups, and then place strategies to counteract positioning.
The Ansoff Matrix also uses the idea of Product and Position in Markets, using a grid. The General Electric Gird is also a commonly used version. The matrix systems are being dropped by many companies, who are in favour of a more customised approaches better suited to their own situation. (Kotler, 2002, p89) Problems with these models, are they can be difficult to use, time consuming, and costly to implement. The main issue, with a launch of a new Product, is these models are used for classifying current businesses, but little advice for future planning.
Management must rely on judgement. (Kotler, 2002, p89) Mercedes Benz used the Product/Market grid to help return to profits after a loss a e1bn loss in mid 1990. Mercedes decided to enter the small car market, with the A-class small family saloon. (Kotler, 2002, p91) In conclusion, the four P's and Marketing Planning, and Strategy should be aware of the growing customer-orientation, there is now a tendency to relate to the four C's, Customer Value, Cost to the Customer, Convenience to the buyer and Communication, rather than the four P's.
What does this mean for Marketing Audits and Mission Statements, I believe we are entering a new stage of Marketing in the Twenty First Century, and how we approach consumers will have to be thought out longer and harder than ever before, before expecting them to part with their hard earned cash for goods and services. Holistic and more gentle marketing are being seen as appealing.