Download CHAPTER II CONCEPTUAL FRAMEWORK

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CHAPTER II
CONCEPTUAL FRAMEWORK
2.1. THE MARKETING PROCESS
Marketing is about creating value for customers, in order to capture
value from customers in return. The value creation process consists of five
Understand the marketplace and customer
needs and wants
Design a customer-driven marketing strategy
Construct integrated marketing program that
deliver superior value
Build profitable relationship and create
customer delight
Create value for customers and build
customers relationship
major phases, as described in Figure 2.1.
Capture value from customers to create
profit and customer equity
Figure 2.1 The Marketing process (Kotler and Keller, 2009)
Value creation in the marketing process is the outcome of
segmentation, targeting, positioning and differentiation.
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2.1.1. Market Segmentation
Market segmentation is the process of dividing the market into
smaller groups of buyers with distinct needs, characteristics, or
behavior. There are many ways of segmenting consumer market, either
based on geographic, demographic, psychographic and behavioral, as
described in Figure 2.2.
Geographic Segmentation
Nations, Regions, States,
Counties or Neighborhoods
Demographic Segmentation
Age, Gender, Income,
Occupation, Education, or Race
Psychographic Segmentation
Social Class, Lifestyle, or
Personality
Behavioral Segmentation
Occasions, Benefits, User status,
Usage rate
Figure 2.2 The Marketing segmentation (Kotler and Keller, 2009)
2.1.2. Targeting, Positioning and Differentiation
Market targeting is the process of evaluating market segments
attractiveness and select one or more market segments to enter.
Positioning consists of arranging market offering to occupy a clear,
distinctive, and desirable place relative to competing products in the
minds of target consumers. The term differentiation refers to actually
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differentiating the firm’s market offering to create superior customer
value.
Target market consists of a set of buyers who share common
needs or characteristics that the company decides to serve. In selecting
target market, there are four strategies: mass marketing, segmented
marketing, niche marketing, and micromarketing.
Table 2.1 Targeting Strategies (Kotler and Keller, 2009)
Targeting
Description
Strategy
Measurable
Size, Purchasing power, Profiles of segments
can be measured.
Accessible
Segments must be effectively reached and
served.
Substantial
Segments must be large or profitable enough
to serve.
Differential
Segments must respond differently to
different marketing mix elements and
actions.
Actionable
Must be able to attract and serve the
segments.
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Product position is the way product is defined by consumers on
important attributes –the place the product occupies in consumer’s
minds relative to competing product. This position should be summed
up in a positioning statement.
2.2. PRODUCT
2.2.1. Perceived Quality as Product Differentiation
Product is a bundle of physical, service and symbolic attribute
designed to satisfy a customer’s wants and needs. In order to offer
higher value for customer, product has to differentiate itself from
others. Quality, along with price, reliability or performance can serve
as the basis for product differentiation.
To be specific, Garvin proposed a framework to discuss ways
of competing strategically on quality, based on eight dimensions:
performance,
features,
reliability,
conformance,
durability,
serviceability, aesthetics and perceived.
Table 2.2 Garvin’s eight product quality dimensions (Garvin,
1987)
Dimension
Definition
Performance
The primary operating characteristics of a
product.
Features
The secondary characteristics of a product
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that supplement its basic functioning.
Reliability
The product’s probability or failure-free
performance over a specified period of time.
Conformance
The degree of which a product physical and
performance
characteristics
meet
design
specifications.
Durability
A measure of useful product life, i.e. the
amount of use a customer gets from a product
before it detoriates or must be replaced.
Serviceability
The ease, speed, courtesy, and competence of
repair.
Aesthetics
How the product looks, feels, sounds, tastes
or smells, a matter of personal preference.
Perceived
Quality based on image, brand name, or
advertising rather than product attributes
andis subjectively assessed.
The eight product quality dimension is the outcomes of three
approaches in defining quality: product-based, user-based and
manufacturing-based.
Table 2.3 Approach to quality and its outcome
Approach
Description and Outcomes
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Product-based
This view of quality is based on measurable
characteristic of the product. Differences in
ingredients or attribute of the product are
considered to reflect differences in quality.
Outcome: performance, features and
durability.
User-based
Quality is the degree to which a product or
service meets or exceeds customer
expectations, and is deeply subjective.
Outcome: aesthetics and perceived quality
Manufacturing-
Quality is defined as conformance to
based
specifications or design standards.
Outcome: conformance and reliability
Consumer’s perception on quality (perceived quality) has an
effect on product decision. Claims of product quality have become
strategically crucial to maintaining a competitive advantage.
2.2.2. Branding
Brand is a name, term, sign, symbol, design or some
combination that identifies the products of one firm while
differentiating these products from competitor’s offering. Brand
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management is about managing customer’s perception toward product
therefore it is crucial for marketer to clearly position their brand in
target customer’s mind.
There are three level of brand positioning:
(1) Based on product attributes. At this level, the brand is
positioned in line with certain product characteristics,
features, uniqueness or ingredients.
(2) Based on benefits. The brand is positioned beyond product
attribute, to the benefit the product will bring to customer’s
life.
(3) Based on beliefs and values. At the final stage, the brand
is positioned to touch customer’s emotional level, to their
beliefs and values of using or purchasing the product.
2.2.2.1.
Brand development strategies
Business has four strategies to develop a brand, as
shown in figure 2.6. These strategies are from whether it’s a
existing or new brand and whether the product category fall as
existing or new.
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Figure 2.3 Brand development strategies
(1) Line Extension. The company extends the existing brand
name to new forms, colors, sizes, ingredients or flavor of
an existing product category. In this strategy, the company
is leveraging the muscle of existing brand to introduce new
product in the same category. However, there is a risk that
overextended brand name might lose its specific meaning,
or causing confusion and frustration among consumers.
(2) Brand Extension occurs when the company extends
current brand name to new or modified products in a new
category. This strategy gives new products instant
recognition and faster acceptance but there is risk of
consumer confusion.
(3) Multibrand is introducing new brand names in the same
category. Multibranding offers a way to establish different
features and appeal to different buying motives. However,
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drawback of this strategy is that each brand only obtains
small market share or even small profit.
(4) New brand is a strategy when company decided to
introduce a new brand when entering a new product
category. The risk is that the company might have lots of
brand that requires abundant resources to manage, resulting
in low profitability.
Another strategy to develop brand is creating umbrella
brand and flanker brand. Umbrella brand is the core product.
Customer’s accumulated exposure and experience with the
core product solidifies certain image and quality expectation.
Umbrella branding involves the transfer of quality
perception derived from the core product to the line extension
that uses the same brand name.
2.2.2.2.
Brand name as differentiation
A great deal of brand strategy goes into the creation of
specific brand names. However difficult, a good brand name
can boost a product success. Research (del Rio, Vazquez,
Iglesias, 2001) suggest that product investments are aimed not
only at attempting to attain a technical or functional
differentiation, but also at promoting brand name related
benefits.
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Robertson (Robertson, 1989) suggested guidance in
selecting brand name for product, service or company. Brand
name should: (1) be a simple word, (2) be a distinctive word,
(3) be a meaningful word, (4) be a verbal or sound associate of
the product class, (5) elicit a mental image, (6) be an emotional
word, (7) make use of the repetitive sounds generated by
alliteration, assonance, consonance, rhyme and rhythm, (8)
make use of morphemes and phonemes.
2.3. INTEGRATED MARKETING COMMUNICATIONS
In the concept of integrated marketing communications, company
carefully integrates its many communications channel to deliver a clear,
consistent, and compelling message about the organization and its brands. The
channels used for communication is called marketing communications mix,
that consist of advertising, sales promotion, public relations, personal selling
and direct marketing.
Table 2.4 Marketing communications mix (Kotler, 2008)
Promotion Tools
Description
Advertising
Any paid form of non-personal presentation
and promotion of ideas, goods or services by
an identified sponsor.
Sales Promotion
Short-term incentives to encourage purchase.
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Building good relations with the company’s
Public Relations
various publics.
Personal presentation by the firm’s sales
Personal selling
force for the purpose of making sales and
building customer relationships.
Direct
Direct connections with carefully targeted
marketing
individual
consumers
to
both
obtain
immediate response and cultivate lasting
customer relationship.
2.3.1. Customer Response
Marketing communication objectives include:
(1) Building awareness about product or service.
(2) Reinforce the message to sustain a desired level of
retention with respect to key benefits, and name
recognition over time.
(3) Stimulate action, to motivate target customers to
take a specific action in relatively short time.
There are five hierarchy of customer response to the marketing
communication activities: aware, comprehend, interested, intentions
and action. On each phase, customer might response negatively to
become unaware, don’t comprehend, not interested and no action.
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Figure 2.4 Marketing communication phase and customer
response
However, there are potential causes of low customer response.
The causes of poor response are described in table 2.5.
Table 2.5 Marketing causes of low levels of customer response
Poor response
Marketing
Causes
Problem
Low
Marketing
Poor media selection,
awareness
Communications
insufficient frequency,
poor ad copy
Poor
Marketing
comprehension Communications
Low interest
Insufficient frequency,
poor ad copy.
Product positioning Insufficient benefits, weak
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value proposition, poor ad
copy.
Low intentions
Price and
High price, need for low-
transaction cost
cost trial, high switching
cost.
Low purchase
Distribution and in- Not readily available, hard
level
store
to find in-store,
insufficient sales or
service.