Business Studies

6^th October 1998

In a simplified definition, marketing is Ä ‘The management process which identifies, anticipates and satisfies customer requirements efficiently and profitably’. In a more formal definition, ‘marketing may be about analysis, planning, implementation and control in order to develop a competitive advantage’. The common theme that runs through this variety of viewpoints about what marketing entails is that marketing is a set of activities or, more specifically, a set of managerial activities or functions required to be performed in an organisation.

Certainly marketing does encompass activities such as selling, researching markets, attracting and keeping customers and developing and implementing plans. In short, it is true that it is a managerial function. In fact this managerial function of marketing is enshrined in the Chartered Institute of Marketing’s (CIM’s) own definition of marketing which is indicated above by the symbol ‘Ä ’.

The marketing mix incorporates four traditional ingredients, they include; the Price of the product, the Place that this product is to be manufactured, the Product that will be produced and the Promotional strategy which the business will undertake when promoting the product. In more recent times however, three more additional P's have been added, they are: the People involved in the marketing process, the Process of developing the product and the Physical evidence that there is for the product.

If the marketing mix represents the major controllable tool of the marketing manager, planning these elements requires great research and analysis. A further key tool of the marketer therefore is marketing research and information.

A key distinguishing characteristic of effective as opposed to ineffective marketing is the extent to which the individual elements of the marketing mix are co-ordinated and combined so as to give a consistent and planned approach to the market.

As we have seen, each of the four P’s call for wide-ranging and complex decisions that have to be taken about each product as it is assessed before entering into a market. The four traditional P’s are not the only influential factor when determining the marketing mix of a product. For example, within the sub-category of Price, one may also identify the costs from the accountancy department. Similarly, new product development decisions may require the expertise and inputs from R+D, design and production. Because of this, it is vitally important that someone takes responsibility for ensuring that these individual decisions hang together in a co-ordinated manner. That someone, or indeed function, is marketing.

Effective marketing planning requires that all activities that impinge on the satisfaction of customer needs must be co-ordinated by marketing. This means co-ordinating activities in functions outside the marketing function in the organisation, and includes the co-ordination of external organisations such as the market-research or advertising agencies.

If market does not take responsibility for this co-ordination, then it is almost inevitable that decisions about Product, Place, Price and Promotion will be taken unilaterally. If this happens, there will be little consistency between the elements of the marketing mix, and even less synergy.

The marketing mix represents those elements over which the marketer has a large degree of discretion and control. In other words, they are key decision areas. However, in planning marketing strategies the marketer must also consider those elements over which he or she has very little control. This second group of element constitutes the ‘marketing environment’ and comprises of:

• Political factors
• Economic factors
• Social / cultural factors
• Technological factors

In addition to these PEST factors, there are also factors such as competitors, suppliers, and distributors, which must also be taken into account in planning marketing decisions.

Trends and changes in the marketing environment give rise to major marketing ‘opportunities’ and ‘threats’. It is through the marketing mix that the marketer can respond and adapt these trends and changes, minimizing threats and taking advantage of opportunities as so to maintain a competitive edge and keep the company in business.

It is relatively easy to find examples of how the marketer might use the marketing mix to respond to environmental opportunities and threats. For example:

• An economic downturn, which depresses disposable incomes, may require the marketer to introduce ‘budget versions’ in the product range.
• A new and aggressive competitor may necessitate more competitive prices
• The social / cultural trend whereby more women now have careers has opened up significant opportunities for marketers to develop time-saving products and services for the home

In addition to the marketing environment, decisions regarding the marketing mix should also take into account internal factors in the organization. In particular these decisions should reflect company ‘strengths’ and ‘weaknesses’. These strengths and weaknesses represent if you like, the other side of the coin to opportunities and threats. The marketer should build on strengths to take advantage of opportunities while minimizing the weaknesses of the organization.

I shall now look at more depth into the traditional four P’s and then in greater depth and the more modern additional 3 P’s.

The ‘product’ element of the marketing mix for products requires that decisions be made on the following three aspects:

• The type and range of services
• The quality and attributes of the services
• Warranties, after-sale facilities etc.

As regards product life cycle management and NPD, all the tools and concepts of physical-product marketing apply, although, as mentioned previously, given the intangible nature of services, concept testing of new ideas for services takes on particular significance and can be extremely difficult to conduct

Again the basic methods of price determination and alternative pricing strategies, such as market skimming versus market penetration, apply equally to services. However, the perishability of services means that the careful matching of demand and supply is crucial. Because of this, we should expect to find that a much more flexible approach to pricing and margins is appropriate to services.

One should also note that the intangible nature of service products also tends to heighten the use by customers of price as an indicator of quality.

Once again we find that the intangible nature of service products raises special consideration for their marketing. You will recall that the marketer of service products needs to stress the benefits rather than the features of his service. So, for example, a college needs to promote, say, the job prospects for its graduates as much as the details of the course it offers.

Personal selling is particularly important in the promotional mix for services. Often the customer is purchasing the qualities and skills of the service provider, so that an ability to develop close relationships and win customer confidence is crucial.

Remember that the perishable nature of service products stems from the fact that they cannot be stored. This means that with one or two exceptions physical distribution is not a key a problem. As regards channels, we have also noted that inseparability demands that many services are sold direct by producer to consumer. However, some type of agent or broker is often used to market financial or travel services, for example, and increasingly franchising has become an important method of widening the distribution and market spread of many types of service, particularly in the fast-food market.

Owing primarily to the intangible and inseparable characteristics of service products, a key factor in how the customer perceives the service and the degree of satisfaction received by the customer is the person(s) actually providing the service at the point of contact. Often the extent to which a customer is happy with a service is due to the attitude, skills and appearance of the people the customer comes into with when consuming the service. In fact very often a customer will purchase a service primarily because of the people that he or she deals with.

For example, many people will use a particular hair salon primarily because of the hair-dresser. Similarly, although one might be able to have one’s teeth filled by any dentist, we usually go back to the same dentist because we are happy with either him or her.

The importance of the people element cannot be over-estimated. Because of this, it is important that this element of the mix is planned. Time and resources should be spent on factors such as staff training, appearance, selling skills and so on.

A somewhat unusual term, relates to those factors that can help to shape the customer’s perception and image of the service provider. For example, you have probably notices that many hotels these days provide writing paper, pens, advanced entertainment facilities, minibars, information and so on in their bedrooms – thus producing an image of caring and quality. Similarly, many of the fast-food outlets take great care over the design and layout of the outlets and how they are furnished.

Increasingly service marketers are focusing their attention on the design and provision of a total service concept designed to create a pre-planned atmosphere or image

The final element of the marketing mix for services, is based on the idea that the ways in which the service is provided, e.g. systems of delivery, are also important. A number of factors can be included under this element of the marketing mix, including systems of order processing, processes for dealing with customer queries and complaints, parking facilities, booking facilities, and systems for dealing with excess demand.

Competition, both from abroad and at home, has meant that successful marketing is a vital component to maintaining a businesses market share. UK businesses have also had to respond to the sophisticated marketing techniques of US and Japanese companies. This has meant that the expenditure on marketing by many UK firms has risen as a share of total expenditure. Increasingly, the rising value of the pound on the foreign exchange rates means that UK businesses wishing to export must place great emphasis on key components of their marketing mix for their products.

The number of products competing for the consumer’s attention is constantly rising. There has been increasingly competition from foreign products in UK markets and a greater availability of foreign services. Because of this, UK businesses wishing to undermine and remove foreign competition have had to market their products, with greater emphasis on quality and price, whilst also emphasizing that the product is of British origin. More open trade with the EU has created more competition for UK firms.

Each firm must individually decide upon it’s own marketing mix. It is very important that the right balance between price, product, place and promotion is achieved.

The mix that a firm chooses will depend on the following factors:

• The type of product that they are selling. For example, a firm marketing highly technical products is likely to emphasize its product qualities rather than giving a free good as a promotion. However in the analysis of how business adapt when in competition, a business may wish to emphasize it’s lower price or as an alternative strategy chose the same method of promotion that the competitor uses.
• The market they are selling to. Firms selling consumer goods aimed at the mass market are likely to emphasize the promotional and price aspects of their marketing mix. Firms selling machinery or industrial goods are likely to stress the product itself.
• The degree of competition that the business faces. For example, in an oligopoly market, each different firm will attack the marketing mix in different ways, for example one business may decide that it’s approach to the marketing mix and ultimately an attempt to gain a grater market share of it’s market will be through heavy emphasis on the price that it will charge for it’s product. It will attempt to cut costs throughout every stage of the products development, this may be implemented through the change of production process from for example flow production, to just-in-time production which minimizes costs but eliminating waste and loss of time in the management process.
• The marketing mix that the competition uses. Firms cannot afford to ignore the mix chosen by competitors. For example, confectionery manufacturers lay particular emphasis upon the availability of their products in a wide range of retail outlets. This ideology may also be seen in petrol stations, newsagents and off-licenses. Any firm wishing to compete in this market would, therefore, be unable to overlook the importance of place in this marketing mix.

In conclusion therefore, a business will need to think carefully about how it chooses it’s marketing mix for it’s service products. If the business lies within a monopoly market, then it will need to place less emphasis on price and will most likely be more of an either production-orientated or product-orientated business. If the business in question is in an oligopoly market, then it is more likely to be either a sales-orientated or marketing-orientated business with great emphasis placed on price.

There is of course the obvious point to make that if businesses do not differentiate their products using the marketing mix and products all end up being promoted, produced, distributed and priced in the same fashion then product differentiation would not happen and so consumers would have no way of differentiating between the products they see in front of them, apart from the name on the box for example.

And so, in conclusion a business will market it’s products differently from that of the competition because otherwise it will see it’s market share diminish and in an increasingly more competitive business environment, if a business starts to lose it’s market share then it will find it near impossible to regain back it’s share without re-analyzing it’s marketing-mix for the product.