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Marketing Auditing & Segmentation.
Introduction.
Today, marketers have an extremely difficult task, when deciding on how to sell their products, where to sell them and most importantly, to whom. The global market has become highly competitive and consumers increasingly demanding and difficult to satisfy. Markets are full with products and services, which are very similar in features, thus it's much harder to differentiate one's product offer. Consequently, marketers have to constantly monitor market trends; new products and services entering the market but above all, they have to pay special attention to consumers - what their needs, tastes and wants are; and what their buying behaviour is. It is crucial to the company's success, to be able to determine what drives the customer to buy a specific product.
Customer value and satisfaction.
All consumers have basic needs and wants which the try to satisfy. To identify those needs and wants is at the basis of sound marketing practice. According to Maslow's hierarchy of needs (please refer to Appendix 1), people have different needs they seek to satisfy, such as basic physiological needs - air, water, sleeping, eating, love etc. Once those basic needs are met, people seek to satisfy needs related to 'self-actualisation', e.g. career satisfaction, status and power.
Wants are closely related to needs and are often based on different cultural values and background (Kotler, 2001). As Kotler states (2001), wants are shaped by one's society and are described in terms of objects that will satisfy needs. Once consumers can pay and thus obtain what they want, wants become demands (Kotler, 2001). Generally, consumers will choose the product that best fits their needs and that will give them the best value for money.
An organisation that wants to introduce a new product or service should carefully study what consumers want. Many companies assume that just because they feel they have a great product to offer, that consumers will doubtlessly buy it, once it's on the market. This is a costly mistake for companies to make. A product or service, which will not satisfy consumers' needs, won't be successful. Consumers want to be sure that the product they will acquire will benefit them, some way. As Kotler states (2001):
Many sellers make the mistake of paying more attention to the specific products they offer than to the benefits produced by these products. They see themselves as selling a product rather than providing a solution to a need. Therefore, a product or service should be viewed as something that will help consumers satisfy their needs and wants.
As mentioned above, markets are full with various products and services, hence consumers face a number of challenges when having to select a product that will best satisfy their needs. How do consumers make their final decision on which product to acquire? Obviously, price is an important factor, and the customer will also evaluate the benefits of buying a specific product. However, the customer will base his/her decision on the 'value' they attribute to the product, or better still the 'perceived value'. Perceived value is very subjective. For instance, what's the value of owning a pair jeans designed by Giorgio Armani or one designed by Benetton? They're both good quality jeans, both renowned labels/brands but Armani's jeans cost, at least, double the price. The difference is that Armani's confer higher status and image levels to the customer, so much so that the customer might be willing to pay a premium price. Basically, consumers will base their buying decision on how they value a product - customer value. Kotler (2001) writes,
Customer value is the difference between the values the customer gains from owning and using a product and the costs of obtaining the product.
Another underlying concept in evaluating consumers' needs and wants is 'customer satisfaction'. Customers are satisfied when the product they buy meets their expectations on the perceived product value. Kotler (2001) states, If the product's performance falls short of the customer's expectations, the buyer is dissatisfied. If performance exceeds expectations, the buyer is delighted.
Organisations have realised how important it is to keep customers satisfied, as now - more than ever before - consumers have gained more bargaining power.
Another element, which is fundamental to keeping customers satisfied, is quality. To constantly improve the quality of products and services has been one of the top priorities. Total Quality Management programmes have been widely adopted by most companies, as organisational focus has shifted from simply 'achieving sales' to 'keeping customers satisfied'. As Kotler states (2001), satisfied customers make repeat purchases. An example of a TQM programme is 'Six Sigma'. Six Sigma is a quality programme, which was first developed by Motorola and quickly adopted by General Electric. Six Sigma is a statistical measure that strives to identify by how much a process deviates from perfection. The aim is to achieve zero defects. In the process of measuring the number of defects, customers' input is very important, in order to understand what has gone wrong and what needs to be changed. 'Voice of the Customer' is a tool used to assess customers' satisfaction or dissatisfaction (please refer to Appendix 2).
Penske Logistics
Penske Logistics is an American company - a subsidiary of Penske Truck Leasing and General Electric - which started its European operations in 1997. One of the main services it offers, it's management of the total transport function on behalf of customers - thus outsourcing activities. The logistics market is highly competitive and overcapacity is one of the main features of the European logistics industry.
When Penske Logistics started to offer freight management services, companies in Europe were still working in the old-fashioned way, which consisted of negotiating lower tariffs with various carriers, on a yearly basis. Penske had to convince companies to change the way they worked and that outsourcing their transport function was the best way to operate. Consequently, Penske Logistics compiled a list with all the benefits the customer would gain from using this kind of service. Firstly, they outlined the fact that pushing down transport tariffs was not really leading to cost savings - carriers face increased costs e.g. fuel, road tax etc - thus, inevitably, the quality of the service would suffer, if forced to charge lower rates. Penske suggested to start looking at the customer's internal processes instead and see if cost savings could be achieved by modifying those areas related to transportation. Penske argued that by outsourcing their transport function, companies would achieve higher cost savings and better quality. By outsourcing this activity, companies would save money in staffing - less people would be needed to work with the high number of carriers companies use: Penske would deal with the carriers instead. Furthermore, being part of the GE's family, means that Penske has a sound quality programme in place - Six Sigma - and carriers' performance would be thoroughly monitored. Moreover, Penske offered the benefits of state-of-the-art technology: companies would have to invest a large sum to acquire the latest technology, themselves. Another benefit is the multi-lingual staff available at Penske.
PEST Analysis.
The logistics sector - has been recently predicted - will experience a downturn, in the coming years; mainly due to rather gloomy global economic forecasts. Europe will be the continent to suffer the most. However, companies that have global presence and offer a variety of services, will be able to survive.
With regard to political factors, the access of other Eastern European countries into the EU, will have a major impact: more competition coming from the East; those companies usually tend to charge much cheaper rates than their Western counterparts. Furthermore, stricter regulations from the EU on Environmental Policy (pollution) will affect logistics companies greatly - fuel charges; higher road tax; vehicle specifications, laws concerning the management of ADRs (hazardous goods) etc.
Technological advances will continue to take place; the aim is to make logistics processes as automated as possible. In this kind of environment, consumers will have a wider selection of logistics companies available - those joining from the East. Since the economic forecast is not so positive, consumers might be tempted to switch to those carriers offering lower rates. On the other hand, quality issues might arise.
Most likely, however, customers will keep working with their current logistics providers, especially if they have global reach. Developing long-term relationships with customers, has been the focus of many companies. Nowadays, it's more important to 'retain' current customers than constantly seeking new ones. The concept of 'customer relationship management (CRM) has made it very clear that it's more profitable to keep existing customers. Consequently, customer care programmes have been created specifically to this end. Thus, consumers are likely to continue to work with their current logistics partners.
Market segmentation
Dividing the market into segments is a very useful method for companies to better target their selected markets. Segmentation allows to use the company's resources more efficiently because it targets smaller, specific market segments. Consumers have different tastes and their buying behaviour differs from place to place. Through segmentation the company can more easily assess consumers' tastes and wants.
Segmentation is the identification of a subset of buyers within a market who share similar needs and who demonstrate similar buyer behaviour (marketingteacher.com).
There are many ways of segmenting the market. The company can further segment a sub market by focusing on specific niche markets or sub segments. Niche marketing allows to define a group, further. The most used segmentation bases are geographic segmentation; demographic segmentation; psychographic segmentation and behavioural segmentation.
When considering geographic segmentation, an organisation divides a specific territory into geographical areas, such as regions or countries. Geographic segmentation is useful because people in various geographic markets like different things; they place a different value on products or services. Thus, by splitting the market into geographic segments, the company is able to serve individual needs, in a better way.
A very popular segmentation method used by companies is demographic segmentation. In this case, consumers are divided, as Kotler (2001) writes, into groups based on variables such as age, gender, income, occupation, education, religion, ethnic community and nationality. Demographic segmentation allows the company to assess more personal information about the consumer and thanks to this data, the company is able to develop products and services that better satisfy consumers' wants. Income segmentation is relevant, for example, in the automotive market or luxury goods sectors. Gender segmentation is useful in the fashion and cosmetics industries. Ethnic segmentation can be useful when analysing multi-cultural societies, as a product has to be adapted to the various ethnic groups existing within a market.
Further segmentation consists of 'psychographic segmentation'. Consumers are divided based on their social class, lifestyle and personality characteristics (Kotler 2001). The latter is an interesting way of segmenting, as marketers try to liken products' characteristics to people's personalities.
Lastly, behavioural segmentation seeks to split consumers according to their knowledge, attitudes, uses (Kotler 2001) regarding a specific product. Behavioural segmentation consists of occasion segmentation - when buyers are prompted to buy - and 'benefits segmentation' - to determine which benefits buyers require from a product.
As far as Penske Logistics are concerned, the company used geographic segmentation and income/revenue segmentation. Penske's geographic segments comprise: Northern Europe including Scandinavia, Central Europe and Southern Europe. This segmentation has allowed the company to put together, people with similar attitudes towards buying logistics services. Another segmentation type the company has used is income or revenue segmentation. Penske has identified a minimum annual revenue a company should have, in order to be able to afford the specialised services that Penske Logistics provide. Penske Logistics' target customer profiles can be described as follows:
Companies operating and shipping internationally
Specific industries where logistics costs are relatively high, e.g. the automotive industries, the pharmaceutical industry etc
Preferably, it should be stackable, palletised material - to allow for better truck / space utilisation and optimisation
Companies which have a minimum annual revenue of 5 million.
Marketing mix
As stated by Palmer (2004), A marketing manager can be seen as somebody who mixes a set of ingredients to achieve a desired outcome. The classical marketing mix framework takes four major elements into account: products, pricing, place and promotion. A company has to constantly adapt these four elements to the needs of individual customers. For instance, a company operating in different geographic regions has to adapt the basic product to local needs, as consumers tastes differ.
Penske Logistics have to base their activities on their European customers' needs. In terms of the service offer, Penske Logistics supply a wide range of service meant to target and serve various customer profiles. Customers can choose from : freight management services; dedicated transport; sea freight; airfreight etc. With regard to pricing, the company charges a management fee for its freight management services and transport rates based on weight for normal transportation A to B.
As far as the 'place' is concerned, the company is present in major European countries and subcontracts well-known agents to be part of their network. Promotional activities within Penske Logistics consist mainly of personal selling. The company hires sales managers in each European country covered in order to sell their services.
Recommendations
Penske Logistics' marketing mix does not really require major changes.
As we have seen, the company has a very flexible service offer and its solutions are usually taylor-made to the customer's specific needs. The pricing system adopted by the company is also the standard pricing methodology used within the industry, thus it is widely accepted.
For the future, my recommendation to Penske Logistics would be to grow it's presence not only witching Europe but also on other continents, e.g. Asia, in order to offer increased service levels to their customers. In addition, the company should be more active in the promotional side. During the past three years, the company seems to have stopped its promotional activity: advertising and PR should be reconsidered and developed further in every market they operate.
Conclusion
We have seen that, nowadays, it's of vital importance to pay close attention to consumers' needs and wants, as they drive the global market. Hence, the objectives of an organisation should be centred on the consumer's needs; in order to achieve and maintain customer satisfaction, as opposed to concentrating purely on 'sales'.
As GE preaches, 'keep the customer delighted'. Customer relationship management is key to a company's success, as organisations seek to develop close long-term relationships with their customers and suppliers.
Bibliography.
- Kotler P.; Armstrong G.; Saunders J.; Wong V. 2001. Published Harlow, Essex: Prentice Hall Europe.
- Palmer A. 2004 Published New York: Oxford University Press Inc.
- Article - Special feature: economic forecasts point to logistics downturn. May 15, 2005. Source: Principles of Marketing; P. Kotler; G. Armstrong; J. Saunders; V. Wong
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