The Increasingly Competitive Business Environment Marketing Essay
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Published: Mon, 5 Dec 2016
The increasingly competitive business environment is due to the tremendous increase of organizations is pressing businesses to rethink its marketing philosophy, in order to stand out from the crowded and information overload global environment. Many marketing concepts and philosophies are suggested, by theoreticians, academicians, practitioners and consultants. In this writing, the most basic but practical marketing concepts and ideas will be introduced. These concepts and models are powerful as it is straightforward, rational and have been applied successfully in many business contexts. The effective marketing concepts to be introduced and discussed here is the Segmentation-Targeting-Positioning Value Delivery Process and the 4P Marketing Mix framework. For practicality purposes, a case study on these subjects will also be presented, to understand how these concepts are being applied successfully in the real life. Recommendations on how to further improve marketing activities are also presented later. The article conclude with acknowledgement that although complicated marketing theories and frameworks are available, successfully executing the fundamentals and marketing principles is already sufficient to ensure a company to achieve competitive advantages in the marketplace.
The Concepts and Definition of Marketing
Theoretically, marketing is a broad term dealing with identifying and delivering value to human and society. Marketing is about meeting human and society needs, and from the business standpoints, to meeting those needs in a profitable manner. There are various definitions concerning the subject of marketing. For example, a widely cited definition of marketing as defined by the American Marketing Association is as follow: marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefits the organization and its stakeholder. Some researchers argue that such a definition is commercial-oriented and have been proposing a marketing definition that is more socially oriented. From the sociology perspective, marketing is the process whereby individuals or a team of individuals attain their needs by creating, promoting and exchanging valuable products and services with one another.
Generally, in today business environment, there are three broad categories of marketing concept. All of these concepts are based on a customer-oriented and sense-and-respond selling philosophy. The first type of marketing concept is called the reactive market orientation concept, where a company tries to understand and meet the customer’s expressed needs. The second type of marketing concept is the proactive marketing orientation concept, where the company takes initiative to understand the hidden needs of customers and find ways to meet those untold needs. Lastly, the third one is the total marketing orientation concept, where the company will practice both the reactive and proactive marketing philosophy in delivering values to the society.
Marketing is essentially a process to create, deliver and satisfy consumers or customers’ needs and wants. The entire marketing process is thus often described as a value delivery process – where it is concerning about how an organization create and deliver its value proposition to the society.
There are various philosophy and perspectives in defining how an organization should deliver value to the society. Generally speaking, the value creation and delivery process contain three stages. The first stage is to choose the specific value proposition. In this stage, the market must perform comprehensive researches on the marketplace before he can expect to successfully deliver valuable goods and services to the marketplace. The STP formula is a widely known marketing concept in this stage, where STP stands for segmentation, targeting and positioning. Specifically, the marketer must segment the market, select the relevant market target and then to develop the value offering’s positioning. In the second stage, marketer provides value to the society. The concepts of marketing mix, namely the 4P or the 7P framework is often applied here. In this stage, marketer decides how he is going to provide the value to society from the products, price, place, and promotion dimensions. In the third stage, the market must communicate the value proposition to the society, and this can be done through promotion, advertising, sales force, branding and even by exercising Corporate Social responsibility in the marketplace.
The STP Process – Segmentation, Targeting and Positioning
According to Kotler et. al. (2004), the formula of STP, namely – segmentation, targeting and positioning – is the essence of strategic marketing. As mentioned before, the three steps are important for a marketer to plan how the value offered is to be delivered to the society. The paragraphs below will discuss these steps in details.
Market Segmentation. Market segmentation is an adaptive strategy. It consists of the partition of the market with the purpose of selecting one or more market segments which the organization can target through the development of specific marketing mixes that adapt to particular market needs. But market segmentation need not be a purely adaptive strategy: The process of market segmentation can also consist of the selection of those segments for which a firm might be particularly well suited to serve by having competitive advantages relative to competitors in the segment, reducing the cost of adaptation in order to gain a niche. This application of market segmentation serves the purpose of developing competitive scope, which can have a powerful effect on competitive advantage because it shapes the configuration of the value chain. Through market segmentation the firm can provide higher value to customers by developing a market mix that addresses the specific needs and concerns of the selected segment.
Targeting. Once the firm has chosen a market segment it must choose a generic competitive strategy. At this point it is also necessary to review the selected strategy across segments and explore general strategic approaches. In some cases it might become apparent that a counter-segmentation strategy is applicable. In other cases, the development of distinct mixes for each segment uncovers inconsistencies or lack of resources at the corporate level and so it is necessary to revert to the segment evaluation stage. According to Kotler (2004) the only sustainable generic strategy in a segmented market is differentiation. He explains that the only other generic competitive strategy alternative (low cost) is not sustainable in a segmented market. In addition, a strategy successful at differentiating must generate customer value, provide perceived value, and be difficult to copy. At this point in the process the company selects those ways in which it will distinguish itself from its competitors. In most cases the differentiation involves multiple elements. One way to differentiate is through brand equity building. A strategy based on brand is likely to be sustainable because it creates competitive barriers. A brand strategy permits the strategist to work with complex concepts and not limit the differentiation strategy to just a few competitive differences. This approach is consistent and reinforces the STP approach. A successful brand strategy builds barriers to protect the selected position by creating associations of the positioning variables with the brand name in the prospect’s mind.
Positioning. According to researchers, the positioning strategy should include three components: customer targets, which are the product of the segmentation study; competitor targets, which are a product of the analysis of external environment; and competitive advantage, which is also a product of the environmental analysis. In developing the positioning objective, researcher is arguing that positioning is not what you do to the product, but what you do to the mind. Understanding how the mind receives, stores or rejects information will improve the chances of making the positioning objective coincide with actual positioning in the target audience.
The 7P marketing Mix Framework is a famous and practical tool widely used by researchers or practitioners. In the following section, all these elements of 7P will be discussed in details.
Product. This is about defining the characteristics of your product or service to meet the customers’ needs. It must provide value to a customer but does not have to be tangible at the same time. Basically, it involves introducing new products or improvising the existing products.
Price: This is about deciding on a pricing strategy. Even if you decide not to charge for a service, it is useful to realize that this is still a pricing strategy. Identifying the total cost to the user (which is likely to be higher than the charge you make) is a part of the price element. Pricing must be competitive and must entail profit. The pricing strategy can comprise discounts, offers and the like. Lots of factors affect the end price of a product, for example, the costs of production or the business need to maximize profits or sales. A product’s price also needs to provide value for money in the market and attract consumers to buy. There are several pricing strategies that a business can use: (a) Cost based pricing – this can either simply cover costs or include an element of profit; it focuses on the product and does not take account of consumers, (b) Penetration price – an initial low price to ensure that there is a high volume of purchases and market share is quickly won; This strategy encourages consumers to develop a habit of buying, and (c) Price skimming – an initial high price for a unique product encouraging those who want to be ‘first to buy’ to pay a premium price; This strategy helps a business to gain maximum revenue before a competitor’s product reaches the market.
Promotion. Promotion is how the business tells customers that products are available and persuades them to buy. Promotion is either above-the-line or below-the-line. Above-the-line promotion is directly paid for, for example TV or newspaper advertising. Below-the-line is where the business uses other promotional methods to get the product message across: (a) Events or trade fairs help to launch a product to a wide audience. Events may be business to consumer (B2C) whereas trade fairs are business to business (B2B), (b) Direct mail can reach a large number of people but is not easy to target specific consumers cost-effectively, (c) Public relations (PR) includes the different ways a business can communicate with its stakeholders, through, for example, newspaper press releases. Other PR activities include sponsorship of high profile events like Formula 1 or the World Cup, as well as donations to or participation in charity events, (d) Branding – a strong and consistent brand identity differentiates the product and helps consumers to understand and trust the product. This aims to keep consumers buying the product long-term, and (e) Sales promotions, for example competitions or sampling, encourage consumers to buy products in the short-term. Public Relations are included within Promotion by many marketing people (though PR people tend to see it as a separate discipline). It includes the various ways of communicating to the customers of what the company has to offer. It is about communicating about the benefits of using a particular product or service rather than just talking about its features.
Place/ distribution channel. Place refers to: (a) how the product arrives at the point of sale. This means a business must think about what distribution strategies it will use and (b) where a product is sold. This includes retail outlets like supermarkets or high street shops. It also includes other ways in which businesses make products directly available to their target market, for example, through direct mail or the Internet.
People. Good information services are not likely to be delivered by people who are unskilled or de-motivated; People refer to the customers, employees, management and everybody else involved in it. It is essential for everyone to realize that the reputation of the brand that you are involved with is in the people’s hands.
Process. This is about the way in which the user gets hold of the service (e.g., the way in which a document or a search can be ordered). It refers to the methods and process of providing a service and is hence essential to have a thorough knowledge on whether the services are helpful to the customers, if they are provided in time, if the customers are informed in hand about the services and many such things.
Physical evidence. It refers to the experience of using a product or service. When a service goes out to the customer, it is essential that you help him see what he is buying or not. For example- brochures, pamphlets etc serve this purpose. It is the material part of a service. Strictly speaking there are no physical attributes to a service, so a consumer tends to rely on material cues. There are many examples of physical evidence, including some of the following: packaging; internet/web pages; paperwork (such as invoices, tickets and dispatch notes); brochures; furnishings; signage (such as those on aircraft and vehicles); uniforms; business cards; the company’s building and etc.
CASE STUDY: NIVEA
Introduction to the Company
NIVEA® is an established name in high quality skin and beauty care products. It is part of a range of brands produced and sold by Beiersdorf. Beiersdorf, founded in 1882, has grown to be a global company specializing in skin and beauty care. In the UK, Beiersdorf’s continuing goal is to have its products as close as possible to its consumers, regardless of where they live. Its aims are to understand its consumers in its many different markets and delight them with innovative products for their skin and beauty care needs. This strengthens the trust and appeal of Beiersdorf brands. The business prides itself on being consumer-led and this focus has helped it to grow NIVEA into one of the largest skin care brands in the world.
Beiersdorf’s continuing programme of market research showed a gap in the market. This led to the launch of NIVEA VISAGE® Young in 2005 as part of the NIVEA VISAGE range offering a comprehensive selection of products aimed at young women. It carries the strength of the NIVEA brand image to the target market of girls aged 13-19. NIVEA VISAGE Young helps girls to develop a proper skin care routine to help keep their skin looking healthy and beautiful. The market can be developed by creating a good product/range and introducing it to the market (product-orientated approach) or by finding a gap in the market and developing a product to fill it (market-orientated approach). Having identified a gap in the market, Beiersdorf launched NIVEA VISAGE Young using an effective balance of the right product, price, promotion and place. This is known as the marketing mix or ‘four Ps’. It is vital that a company gets the balance of these four elements correct so that a product will achieve its critical success factors. Beiersdorf needed to develop a mix that suited the product and the target market as well as meeting its own business objectives.
Analysis on the Marketing Mix of NIVEA
The first stage in building an effective mix is to understand the market. NIVEA uses market research to target key market segments which identifies groups of people with the same characteristics such as age/gender/attitude/lifestyle. The knowledge and understanding from the research helps in the development of new products. NIVEA carries out its market research with consumers in a number of different ways. These include, (a) using focus groups to listen to consumers directly; (b) gathering data from consumers through a variety of different research techniques; and (c) product testing with consumers in different markets.
Beiersdorf’s market research identified that younger consumers wanted more specialized face care aimed at their own age group that offered a ‘beautifying’ benefit, rather than a solution to skin problems. NIVEA VISAGE Young is a skin care range targeted at girls who do not want medicated products but want a regime for their normal skin. Competitor products tend to be problem focused and offer medicated solutions. This gives NIVEA competitive advantage. NIVEA VISAGE Young provides a unique bridge between the teenage market and the adult market. The company improved the product to make it more effective and more consumer-friendly. Beiersdorf tested the improved products on a sample group from its target audience before finalizing the range for re-launch. This testing resulted in a number of changes to existing products. Improvements included: (a) Changing the formula of some products. For example, it removed alcohol from one product and used natural sea salts and minerals in others, (b) Introducing two completely new products, (c) a new modern pack design with a flower pattern and softer colors to appeal to younger women, (d) Changing product descriptions and introducing larger pack sizes. Each of these changes helped to strengthen the product range, to better meet the needs of the market.
As NIVEA VISAGE Young is one of the leading skin care ranges meeting the beautifying needs of this market segment, it is effectively the price leader. This means that it sets the price level that competitors will follow or undercut. NIVEA needs to regularly review prices should a competitor enter the market at the ‘market growth’ point of the product life cycle to ensure that its pricing remains competitive. The pricing strategy for NIVEA is not the same as that of the retailers. It sells products to retailers at one price. However, retailers have the freedom to use other strategies for sales promotion. These take account of the competitive nature of the high street. They may use: (a) loss leader: the retailer sells for less than it cost to attract large volume of sales, for example by supermarkets, and (b) discounting – alongside other special offers, such as ‘Buy one, get one free’ (BOGOF) or ‘two for one’.
NIVEA VISAGE Young aims to use as many relevant distribution channels as possible to ensure the widest reach of its products to its target market. The main channels for the product are retail outlets where consumers expect to find skin care ranges. Around 65% of NIVEA VISAGE Young sales are through large high street shops such as Boots and Superdrug. Superdrug is particularly important for the ‘young-end’ market. The other 35% of sales mainly comes from large grocery chains that stock beauty products, such as ASDA, Tesco and Sainsbury’s. Market research shows that around 20% of this younger target market buys products for themselves in the high street stores when shopping with friends. Research also shows that the majority of purchasers are actually made by mums, buying for teenagers. Mums are more likely to buy the product from supermarkets whilst doing their grocery shopping.
NIVEA distributes through a range of outlets that are cost effective but that also reach the highest number of consumers. Its distribution strategies also consider the environmental impact of transport. It uses a central distribution point in the UK. Products arrive from European production plants using contract vehicles for efficiency for onward delivery to retail stores. Beiersdorf does not sell direct to smaller retailers as the volume of products sold would not be cost effective to deliver but it uses wholesalers for these smaller accounts. It does not sell directly through its website as the costs of producing small orders would be too high. However, the retailers like Tesco, feature and sell the NIVEA products in their online stores.
NIVEA chooses promotional strategies that reflect the lifestyle of its audience and the range of media available. It realizes that a ‘one way’ message, using TV or the press, is not as effective as talking directly to its target group of consumers. Therefore NIVEA does not plan to use any above-the-line promotion for NIVEA VISAGE Young. The promotion of NIVEA VISAGE Young is consumer-led. Using various below-the-line routes, NIVEA identifies ways of talking to teenagers (and their mums) directly. A key part of the strategy is the use of product samples. These allow customers to touch, feel, smell and try the products. Over a million samples of NIVEA VISAGE Young products will be given away during 2008. These samples will be available through the website, samples in stores or in ‘goody bags’ given out at VISAGE roadshows up and down the country.
NIVEA VISAGE Young launched an interactive online magazine called FYI (Fun, Young & Independent) to raise awareness of the brand. The concept behind the magazine is to give teenage girls the confidence to become young women and to enjoy their new-found independence. Communication channels are original and engaging to enable teenagers to identify with NIVEA VISAGE Young. The magazine focuses on ‘first time’ experiences relating to NIVEA VISAGE Young being their first skincare routine. It is promoted using the
Hit40UK chart show and the TMF digital TV channel.
Discussions on NIVEA Marketing Mix
NIVEA VISAGE Young is a skincare range in the UK market designed to enhance the skin and beauty of the teenage consumer rather than being medicated to treat skin problems. As such, it has created a clear position in the market. This shows that NIVEA understands its consumers and has produced this differentiated product range in order to meet their needs. To bring the range to market, the business has put together a marketing mix. This mix balances the four elements of product, price, place and promotion. The mix uses traditional methods of place, such as distribution through the high street, alongside more modern methods of promotion, such as through social networking sites. It makes sure that the message of NIVEA VISAGE Young reaches the right people in the right way.
All aspects of the marketing mix must function together as a whole in order to create a useful marketing campaign and get a product the sales it needs. The marketing mix must suit the company and the products it sells. Luxury items like mp3 players must have a good promotional campaign, be a quality product, be distributed in all the needed places and also have a competitive price that shows its value. This marketing strategy is extremely important to the success of a particular good or service which in turn could determine the success of the organization in the future. When marketing managers attempt to develop and manage their product it is extremely important that they look at various different aspects. Firstly, they must look at those relating to the marketing mix: which the company has control over because they are able to develop their marketing strategies depending on the consumers needs and wants. Then, managers should also investigate those that make up the marketing environment: which include elements that the company has little or no control of e. g. certain government rules and regulations. Thirdly, a market opportunity analysis should also be performed: this exists when a company is given the chance to take action towards researching a particular group of customers. Fourthly, it is critical to research on the subject of target market selection: which involves selecting a group of potential customers for whom a firm creates and maintains a marketing mix that specifically fits the needs and wants of that particular group. Last but not least, the process of Marketing Management should be applied: this is the process of planning, organizing, implementing, and controlling marketing activities to facilitate changes effectively and efficiently.
By using this type of marketing strategy organizations are given the opportunity to market a very successful product, so it would be true to say that the marketing mix and its manipulation are vital for the success of a business. However, their good or service may only be successful if the organization provides products that satisfy consumers needs and wants through a coordinated set of activities that also allow the organization to achieve its goals. Customer satisfaction should be the major aim of the marketing concept. But the process does not end here because the organization should continue to alter, adapt and develop products to keep pace with customers changing desires and preferences. Organizations should be aware of the importance of customers and release that marketing activities begin and end with the customer. In attempting to satisfy customers, businesses must consider not only the short and medium term needs but also the long term desires as it is vital to the long term success of the business and probably the best way to do this would be to link the different departments of the company together i.e. Production, Finance, Accounting, Personnel etc A company adopting this particular marketing strategy must not only satisfy its consumers preferences but it also must achieve the objectives that it hoped to achieve by using this strategy. The best way of achieving your objectives is to satisfy the customer and an adequate marketing mix strategy is an excellent way to satisfy the customer who means that implementing the marketing mix strategy should benefit the organization as well as the consumer.
In short, we have seen how the traditional, simple but highly practical method of 4P framework is used successfully in our case study. The concepts of STP and Marketing Mix is very important in assisting managers to plan for marketing efforts to local and international market, and in fact, such a framework serves as the founding principles for development of more complex and advanced marketing strategies in the modern days. These concepts are not only theorectical popular and widely taught in business schools, but are also useful in practice, in analysis or planning successful marketing campaign or strategies for organizations.
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