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STRATEGIC MARKETING MANAGEMENT
STUDY GUIDE
Copyright © 2016
MANAGEMENT COLLEGE OF SOUTHERN AFRICA
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without the written permission of the publisher. Please report all errors and omissions to the following email address:
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MBA - Strategic Marketing Management
Table of Contents
INTRODUCTION TO THE STRATEGIC MARKETING MANAGEMENT MODULE GUIDE .................................. 1
CHAPTER 1: UNDERSTANDING MARKETING MANAGEMENT ......................................................................... 5
CHAPTER 2: CAPTURING MARKETING INSIGHTS.......................................................................................... 38
CHAPTER 3: CONNECTING WITH CUSTOMERS ............................................................................................. 53
CHAPTER 4: BUILDING STRONG BRANDS ...................................................................................................... 80
CHAPTER 5: CREATING VALUE (Product, Service, Price) .............................................................................. 100
CHAPTER: 6: DELIVERING VALUE (MARKETING CHANNELS) .................................................................... 129
CHAPTER 7: COMMUNICATING VALUE ......................................................................................................... 137
(Integrated Marketing Communication) .............................................................................................................. 137
CHAPTER 8: CREATING SUCCESSFUL LONG TERM GROWTH .................................................................. 161
BIBLIOGRAPHY ................................................................................................................................................ 181
APPENDIX A: SUPPLEMENTARY ELECTRONIC RESOURCES .................................................................... 183
APPENDIX B: CASE STUDY 1.......................................................................................................................... 208
RADICAL HOLDINGS (PTY) LTD: ENGINEERING MOBILITY FOR ACCESSIBILITY ..................................... 208
APPENDIX C: CASE STUDY 2 ......................................................................................................................... 225
GLORIA JEAN’S COFFEE IN MALAYSIA ......................................................................................................... 225
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INTRODUCTION TO THE STRATEGIC MARKETING
MANAGEMENT MODULE GUIDE
1. INTRODUCTION
Mancosa welcomes you to an exciting but challenging course in Strategic Marketing
Management, a core module on the MBA Programme. The Strategic Marketing Management
component of the study programme is designed against the background of a practical and
experiential learning process with the specific objective of integrating marketing theory and
knowledge into the work environment as well reflecting on its integral relationship in the
broader discipline of Business Management in general.
As students who have been exposed to the work environment, it becomes critical to identify
and reflect on differences between acquired theory and what happens in practice. An essential
element of the current learning process is to identify the differences that exist and bridge the
divide. As a student and a practitioner, you will be tasked to use initiative, creativity and current
marketing knowledge by applying the most current marketing tools cemented in academic
theory that you are being exposed to bring about the desired outcomes of this study module in
its application in a strategic business setting.
As a post-graduate student it is incumbent on you to exercise considerable expertise,
independence and creativity in your studies by working through problems to find creative
solutions to achieve the outcomes of “work-integrated learning”. The module guide provides a
framework and is in no way a substitute for the prescribed text and additional reading material
that has been suggested. You have to use the both prescribed text and the journal articles in
conjunction with the study guide when studying. On successful completion of this module you
will be able to competently and strategically support and apply Marketing Management
practices in your role as a manager. You will also have a thorough understanding of how the
application of Marketing Management differs within advanced markets and emerging markets.
Understanding how management practices differ in Africa and other emerging markets is a
theme which underpins the MBA programme, and is just as applicable to Marketing
Management as it is to other disciplines. In this regard Ewah & Ekeng (2009: 188) note the
following:
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“In spite of the fact that the concept [of Marketing Management] evolved in the advanced
countries, the boundaries of marketing have extended remarkably to different frontiers.
Generally, marketing strives to serve and satisfy human insatiable needs and wants.
Therefore, marketing can be considered as a strategic factor in the economic structure of any
society (either developed or developing). This is because it directly allocates resources and has
a great impact on other aspects of economic and social life. Thus the link between marketing
and growth and development of contemporary economies is quite obvious.”
2.
STRUCTURE OF THIS MODULE GUIDE
This Study Guide is structured as follows:
Introduction to Strategic Marketing
Provides an overview of the Strategic
Management
Marketing Management Study Guide and
Study Guide
how to use it.
Overview of Marketing Management
Curriculum
This part of the Study Guide details what
you are required to learn.
1.
Introduction to Marketing Management
2.
Capturing Marketing Insights
3.
Connecting with Customers
Specific learning outcomes
4.
Building Strong Brands
Essential reading (textbooks and journal
5.
Creating Value
articles)
6.
Delivering Value
An overview of relevant theory
7.
Communicating Value
Questions for reflection
8.
Creating Successful Long Term Growth
Each chapter details:
Appendix A provides you with electronic
resources for each chapter. You are
Appendix A: Supplementary Electronic
required to listen to the podcasts and
Resources
answer the questions and read the journal
articles.
Appendix B: Case Study 1
Appendix B & C provide two case studies.
Appendix C: Case Study 2
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3.
STRUCTURE OF EACH CHAPTER
Each chapter of this Module Guide is structured as follows:
Specific Learning Outcomes
Essential (Prescribed) Reading
Brief Overview of Relevant Theory
Questions for Reflection
3.1
Specific Learning Outcomes
Learning outcomes are listed at the beginning of each chapter. These detail the specific
outcomes that you will be able to competently demonstrate on successful completion of the
learning that each particular chapter requires.
3.2
Essential (Prescribed) Reading
Your essential (prescribed) reading comprises the following:
International Textbook
Kotler, P. & Keller, K.L. (2016) Marketing Management. 15th Edition. Essex: Pearson
Education.
This textbook will provide you with a strategic understanding of Marketing Management within
advanced economies.
South African Textbook
Cant, M.C., Van Heerden, C.H. & Ngambi, H.C. (2014) Marketing Management. A South
African Perspective. 2nd Edition. Cape Town: Juta.
This textbook will provide you with an understanding of Marketing Management within the
South African context. It also touches on Marketing Management within other developing
economies.
Journal Articles
Journal articles have been prescribed for each chapter. They are available from the EBSCO,
Emerald and Sabinet databases that are accessible through the http://mymancosa.com
website. These journal articles will provide you with an understanding of Marketing
Management within developed and emerging markets, with particular focus on countries in
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Africa and Asia. It is imperative that you acquire and read these journal articles, as they form a
key part of the curriculum.
3.3
BRIEF OVERVIEW OF RELEVANT THEORY
Each chapter contains a very brief overview of theory relevant to the particular Marketing
Management topic. The purpose of the overview is to introduce you to some of the general
and emerging market issues regarding each Marketing Management topic. Once you have
read the overview, you need to explore the topic further by reading the prescribed textbooks
and journal articles listed under “Essential Reading” for each chapter.
3.4
QUESTIONS FOR REFLECTION
At the end of every chapter there are questions for reflection. You need to attempt these on
completion of your study of the entire chapter. The questions are designed to enable you to
reflect on what you have learnt, and consider how what you have learnt should be applied in
practice.
4. CASE STUDIES
Case studies form an integral part of developing competence in Strategic Marketing
Management. Apart from the case studies in the prescribed text, two additional case studies,
based on companies operating globally and in Africa, are included in Appendix B and Appendix
C of this Module Guide. You are required to analyse these case studies in your Study Groups.
Study Groups will be required to present their case study analyses at Marketing Management
Workshop 2 and Marketing Management Workshop 3.
5. ELECTRONIC LEARNING RESOURCES
Additional electronic learning resources are available to supplement your learning. These are
detailed in the document “Supplementary Electronic Learning Resources”. These resources
seek to build on, and expand, the learning that is facilitated through the Strategic Marketing
Management Module Guide and the Marketing Management workshops. They include video
podcasts, audio podcasts, individual activities, as well as additional recommended reading on
Marketing Management focusing particularly on emerging markets.
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CHAPTER 1: UNDERSTANDING MARKETING
MANAGEMENT
SPECIFIC LEARNING OUTCOMES
The overall outcome for this chapter is that, on its completion in conjunction with the prescribed
textbook and journal articles, the student should be able to demonstrate a broad understanding
of the field of strategic marketing management within both advanced economies and emerging
economies. This overall outcome will be achieved through the student’s mastery of the following specific outcomes, in that the student will be able to:
1.
Identify and discuss the scope of marketing management.
2.
Apply marketing concepts in the business environment.
3.
Identify and critically discuss the various macro-environmental, industry, and microenvironmental factors influencing and impacting marketing management.
4.
Identify and critically discuss the various conceptual philosophies underpinning marketing
management practice.
5.
Critically discuss the Four Ps of the marketing mix and the Four Ps of modern marketing
management and how companies can implement the SAVE model.
6.
Identify and explain the key competencies of an effective marketing manager.
7.
Explain the relationship between business strategy and marketing strategy.
8.
Discuss and evaluate the marketing strategy development process.
9.
Understand and critically discuss the role and implementation of marketing management
within emerging markets.
10.
5
Evaluate the key factors impacting marketing management within emerging markets.
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ESSENTIAL READING
Students are required to read ALL of the textbook chapters and journal
articles listed below.
Textbooks:
Kotler, P. & Keller, K.L. (2016) Marketing Management. Essex: Pearson Education.
Chapter 1: Defining Marketing for the New Realities
Chapter 2: Developing Marketing Strategies and Plans
Cant, M.C., Van Heerden, C.H. & Ngambi, H.C. (2014) Marketing Management. A
South Africa Perspective. Cape Town: Juta.
Chapter 1: The World of Marketing
Chapter 14: Marketing Planning, Implementation and Control
Journal Articles & Reports:
Atsmon, Y., Kertesz, A. & Vittal, I. (2011) “Is Your Emerging Market Strategy Local Enough?” McKinsey Quarterly. Issue 2, pp 50 – 61. (available from EBSCO)
Chironga, M., Leke, A., Lund, S. & Van Wamelen, A. (2011) “Cracking the Next Growth Market: Africa.” Harvard Business Review. May, pp 117 – 122. (available from EBSCO)
Deloitte (2012) “Growth Strategies: What Can Work in Emerging Markets?” CFO
Insights. Deloitte. (available from www.deloitte.com/us/cfocenter)
Jansen Van Rensburg, M., Venter, P. & Strydom, J.W. (2012) “The Perceived Contribution of the Practise of Strategic Marketing on the Performance of South African
Companies.” Journal of Contemporary Management. Vol 9, pp 24 – 47. (available
from Sabinet)
Norbett, D., Leke, A. & Van Wamelen, A. (2010) “Africa on the Move: The $2.6 Trillion
Opportunity.” McKinsey Quarterly. Issue 4, pp 56 – 61. (available from EBSCO)
Sheth, J.N. (2011) “Impact of Emerging Markets on Marketing: Rethinking Existing Perspectives & Practices.” Journal of Marketing.
75 (July 2011), pp 166 – 182. (Available from EBSCO)
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1.1
INTRODUCTION TO MARKETING MANAGEMENT
Marketing has become an increasingly essential ingredient for the financial success of
businesses. Finance, operations, accounting, and other business functions will come to zero if
there is not sufficient demand for products and services that organisations provide to make a
profit.
Marketing managers must make strategic decisions such as what features to design into new
products, what prices to offer customers, where to sell products, and how much to spend on
advertising and sales against the background of a highly competitive business environment.
Marketing Management is about meeting human and social needs profitably and may be
defined as “the activity, set of institutions, and processes for creating, communicating,
delivering and exchanging offerings that have value for customers, clients, partners and society
at large” (American Marketing Association cited in Kotler & Keller, 2012: 27). Marketing Management is integral to achieving the survival, profitability and growth objectives of most
companies and therefore it is important that it is aligned with a company’s strategy. Marketing Management also has a critical role to play in ensuring a company’s success in competing in
emerging markets. Various forces, namely: rapidly advancing technology, globalisation,
privatisation, deregulation, empowerment, customisation, convergence, disintermediation,
market fragmentation, increased and aggressive competition, consumer information and
changing demographics are impacting business environments and changing the nature of
businesses and markets (Kotler and Keller, 2012)
Lancaster and Massingham (2011:19) defines strategic marketing as “A process of strategically
analysing environmental, competitive and business factors affecting business units and
forecasting future trends in business areas of interest to the enterprise; participating in setting
objectives and formulating corporate and business unit strategy; selecting target market
strategies for product markets in each business unit; establishing marketing objectives and
developing, implementing and managing program positioning strategies for meeting target
market needs.”
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ACTIVITY 1.1
1. Compare the definition of marketing provided against current definitions of marketing and
evaluate which definition is most appropriate in the 21st century and why?
2. Consider the broad shifts in marketing. Are there any themes that emerge from these shifts?
Can they be related to the major societal forces?
1.2
KEY MARKETING MANAGEMENT CONCEPTS
An overview of Marketing Management fundamentals is provided in Figure 1.1.
Marketing Management Fundamentals
Who Markets?
What is marketed?
Marketers & Prospects
Goods
Services
Events
Experiences
Persons
Places
Properties
Organisations
Information
Ideas
Markets
Key Customer Markets
o
o
o
o
Consumer markets
Business markets
Global markets
Non-Profit / Governmental
markets
Marketplaces, MarketSpaces & Meta-Markets
Core Marketing Concepts
Needs, Wants, Demands
Target Markets,
Positioning, Segmentation
Offerings & Brands
Value & Satisfaction
Marketing Channels
Supply Chain
Competition
Marketing Environment
Figure 1.1: Marketing Fundamentals (Kotler & Keller, 2012: 27 – 34).
ACTIVITY 1.2
Kotler and Keller (2016: 29) presents a structure of flows in a modern exchange economy (Fig
1.1) and the central role that marketing plays in facilitating this exchange process. Establish the
position of marketing management within the broader discipline of business management.
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Company Orientations towards the Marketplace
According to Kotler and Keller (2012:40), the competing concepts under which organisations
have conducted marketing activities have evolved over the years moving away from focusing
on the production to focusing on the customer and society while employing a holistic model.
Figure 1.2 provides an overview of the orientations.
Figure 1.2: Marketing Orientation Evolution
ACTIVITY 1.3
1. As per Figure 1.2 above, provide reasons and examples as to why marketing had evolved
and in your opinion which is a better concept for the present day marketing environment.
2. Identify organisations that are engaging in the following and describe these initiatives and
how they contribute to the organisation’s sustainability:
1. Corporate social marketing
2. Cause marketing
3. Cause –related marketing
4. Corporate philanthropy
5. Corporate community involvement
6. Socially responsible business practices
The Holistic Marketing Concept Framework
The Holistic Marketing Concept is driving organisations’ approaches to marketing in the twentyfirst century. The concept recognises the scope and complexities of marketing activities and
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acknowledges that a broad integrated perspective is necessary. Figure 1.3 provides an
overview of the Holistic Marketing concept.z
Holistic Marketing Dimensions
Internal
Marketing
Integrated
Marketing
Marketing
Department
Communications
Products & Services
Senior Management
Other Departments
Channels
Holistic
Marketing
Performance
Marketing
Relationship
Marketing
Sales Revenue
Customers
Brand & Customer
Equity
Channel
Partners
Ethics
Environment
Legal
Community
Figure 1.3: Holistic Marketing Dimensions (Kotler & Keller 2012: 41).
1.3 THE MARKETING MIX: OLD & NEW
Mullins, Walker, Boyd and Larrèchè (2006:18) describes the marketing mix as the combination
of controllable marketing variables that a manager uses to carry out a marketing strategy in
pursuit of the firm’s objectives in a given target market. Marketing mix decisions must be made for influencing the trade channels as well as the final consumers.
In recent years the traditional “Four P” Marketing Mix has been refined and updated, as shown
in Figure 1.4 below, creating 8Ps that firms must consider when developing their marketing
strategies. In addition to these 8P’s, two additional P’s play a pivotal role: the 9th P =
Philosophy, the firms products/services should reflect the firm’s underlying philosophy and the 10th P= Payment Options, due to customers on demand nature, the need for easy &
innovative payment options, targeting the poorest in the market in remote areas and increased
levels of fraud, firms are seeking various innovative payment options to suit the diverse needs
of their target markets.
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Traditional Marketing Mix (4Ps) + Modern Marketing Management (4Ps)
Marketing Mix: 4 Ps
Modern Marketing Management: 4 Ps
Figure 1.4: Traditional Marketing Mix plus Modern Marketing Management
(Kotler & Keller, 2012: 47)
Some researchers have indicated that the 4P’s are dead. However, according to other
researchers and marketers, the 4P’s will never die, but are being adapted to suit the current consumer, thus giving rise to the 10 P’s and now the SAVE Model.
Save Model
According to the Harvard Business Review (Jan-Feb 2013), a five-year study involving more
than 500 managers and customers found that the “4 P’s model undercuts B2B marketers in three important ways and that the 4 P’s are not irrelevant, but have to be interpreted in a different manner taking in account B2B marketers and the well informed, connected and
somewhat disloyal consumer. The model, SAVE, shifts the emphasis and focus from:
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Products
Solutions
Place
Access
Price
Value
Promotion
Education
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TALKING POINT
Based on the discussion above on the marketing mix, some researchers have indicated that
the 4P’s are dead, however according to other researchers and marketers, the 4P’s will never die. Some question the relevance of the 8Ps. What are your views on this?
The customer of present day thrives on connectivity, mobility and social media. Brands and
companies that create their go-to market strategy from the customer’s point of view will attain immense leverage over their competitors. To do this, marketers need to follow and engage with
the customer but by not over-powering and annoying the customer; but through creating an
omni-channel experience; unify, simplify and innovate content and commerce; always be
available; empower the team to work together, respond timeously to opportunities and
problems; co-create with customers, make decisions using good consumer insight information
and always innovate to be different and exciting.
Thus, marketing at present day is about creating customer value and building
relationships, as seen in Figure 1.5
1.5 MARKETING AND CUSTOMER VALUE CREATION
Create value for customers & build customer relationships
Understand the
market place &
customer needs
& wants
Design a
customer driven
marketing
strategy
Construct an
integrated marketing
programme that
delivers superior value
Build profitable
relationships &
create customer
delight
Capture value
from customers
in return
Capture value from
customers to create
profits & customer
equity
Research
customers & the
marketplace
Manage
marketing
information &
customer data
Select
customers to
serve: market
segmentation &
targeting
Product & service
design: build strong
brands
CRM: build
strong
relationships with
chosen
customers
Decide on a
value
proposition:
differentiation &
positioning
Pricing: create real
value
Partner
relationship
management:
build strong
relationships with
marketing
partners
Distribution: manage
demand & supply
chains
Create satisfied,
loyal customers
Capture customer
lifetime value
Increase share of
market and share of
customer
Promotion:
communicate the value
proposition
Harness marketing
Manage global
markets
Ensure ethical & social
responsibility
technology
Figure 1.5: Expanded Marketing Process (Kotler & Armstrong, 2014: 41)
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The traditional view of marketing according to Kotler and Keller (2012:55-56) is that the firm
makes something and then sells it. Marketing will not work in economies where people face
abundant choice. The new belief of marketing begins with the planning process and the
customer, aiming to build valued relationships resulting in profits.
Holistic Marketing can provide insight into the process of capturing customer value. Figure 1.6
shows the interaction between customers, company, collaborators, and value-based activities
(value exploration, value creation, and value delivery) to create, maintain, and renew customer
value (Kotler and Keller, 2012:58).
Figure 1.6 – The Holistic Marketing Framework (Kotler & Keller, 2009:78)
In addition to the Holistic Marketing Framework, Tapinfluence (2015) indicates that companies
can use the concept influencer marketing in their strategies to convince customers to purchase.
Influencer marketing ideally identifies key individuals (influencers) that command influence in
the market/social media and ranks them in terms of importance and influence. Marketers
thereby markets content/products/services to the influencer to increase awareness of the
organisation and through the influencer, increase further awareness in the influencers’ social circle thereby turning influencers into brand/company advocates of the organisation with the
goal of influencing consumers purchase decisions towards the product/service. This tactic is
not word of mouth marketing, but plays a key component in the process of influencer
marketing.
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1.6 DEVELOPING MARKETING STRATEGIES AND PLANS
A marketing strategy details the means by which an organisation’s marketing will be achieved. Marketing strategies and their supporting implementation plans need to be developed so that
they support the organisation’s overall strategy (Du Plessis, Strydom & Jooste, 2012: 17). The integration of marketing strategy with the organisation’s overall strategy management process is shown in Figure 1.7 below. Refer to the prescribed text book for detailed information.
Typical components of a marketing strategy include:
1. Company’s mission statement, marketing objectives and target market
2. A situation analysis (taking into account a SWOT analysis, PESTLE analysis,
Porters 5 Forces and Competitor analysis),
3. The actual marketing strategy (8 Ps), and
4. Financials and controls (Kotler & Keller, 2012: 82 – 86).
Integration of Marketing Strategy with Overall Organisational
Mission Statement
Strategy
Corporate Objectives
Corporate Strategies
Marketing
Objectives
Human
Resource
Objectives
Financial
Objectives
Operations
Objectives
Marketing Strategies
Marketing
Communicatio
n Objectives
Product
Objectives
Pricing
Objectives
Place
(Distribution)
Objectives
Strategy
Implementation
Evaluation & Control
Figure 1.7: Integration of Marketing Strategy with Overall Organisational Strategy
Source (Du Plessis, Strydom & Jooste, 2012: 17)
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ACTIVITY 1.4
1. Research various companies’ mission statement and philosophy and critique the appropriateness of it and how they integrate it into their marketing strategies.
2. Determine the fit and interaction between corporate strategy and marketing strategy in
achieving the organisational goals.
SITUATION ANALYSIS
Marketing Opportunity Analysis
Accessing growth opportunities according to Kotler and Keller (2012:64) involves planning for
new businesses and downsizing or terminating old businesses. Marketers should begin with an
external analysis, scanning the macro-environment to identify opportunities and threats,
thereafter conduct an internal analysis to identify the company’s strengths and weakness and determine possible opportunities and minimise threats.
There are various tools the company can use in strategic planning, namely:
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Pestle Analysis
The macro-environment is dynamic and constantly changing which often impacts businesses
quickly and at times drastically, thus requiring continuous and vigilant monitoring. Marketers
must assess these factors before making business decisions, namely: political/legal
environment,
international
environment,
physical/natural
environment,
technological
environment, economic environment and the social cultural environment.
Porters Five Forces
According to Michael Porter’s framework, the industry is influenced by 5 factors i.e. bargaining
power of suppliers, bargaining power of buyers, threat of new entrants, threat of substitutes and
rivalry between existing direct competitors. The internet and wide easy access to information is
reducing the power and or influencing the factors.
SWOT Analysis
A SWOT analysis evaluates the company’s overall strengths (S), weaknesses (W), opportunities (O) and threats (T).
Gap Analysis
If there is a gap between future desired sales and projected total sales, corporate management
would have to develop or acquire new businesses to fill it. Figure 1.8 illustrates the Strategic
Planning Gap used to ascertain desired sales against the current portfolio. Cant et al. (2014:6)
suggest that these gaps can be classified as a:
1. Space gap: Porsche motor vehicles are manufactured in Germany. Due to there being
few buyers in South Africa, a limited number of dealerships exist in major cities, thus
there being a geographical (distance) gap between the consumer and the
manufacturer.
2. Time gap: Time exists between the manufacture of the product and the consumption of
the product for example tropical fruit that is only harvested in summer yet available the
entire year round.
3. Information gap: There is a lack of information on products and companies.
4. Ownership gap: Many consumers purchase items on credit or financed through the
banks thus, only take actual ownership of the product once it is paid up.
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5. Value gap: Often there is a discrepancy in the value attached to product by the seller
and the buyer thereby affecting purchase decisions.
Figure 1.8: The Strategic Planning Gap (Kotler & Keller, 2012:64)
Product Portfolio Analysis (BCG Model)
In addition to reviewing existing and potential business opportunities, corporate managers’ should review their existing portfolio of products and business units. Figure 1.9 shows the
Boston Consulting Group Growth Share Matrix, which companies can use to review their
existing products and business units.
Figure1.9: BCG Growth Share Matrix
Product Life Cycle
In addition to the above strategic tools, marketers must also assess the product life cycle of the
product and adapt the strategies according to the respective stages.
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GROWTH STRATEGIES
Intensive Growth
The corporate manager’s first course of action should be a review of opportunities for improving
existing businesses. Figure 1.10 shows Ansoff’s “product-market expansion grid.”
Current
Products
New
Products
Current
Markets
New
Markets
Figure1.10: Ansoff’s Product-Market Expansion Grid (Kotler & Keller, 2009:85)
Integrative Growth
An organisations sales and profits may be increased through backward, forward, or horizontal
integration within its industry. Figure 1.11 provides an example of integrative growth. Company
X, usually responsible for manufacturing items, acquires a supplier (Backward integration). It
then uses its end product to open up its own retail outlet (forward integration). It also forms a
joint venture with Company Y, a market research company (horizontal integration).
Backward
Supplier
Forward
Company X
Company Y
Horizontal
Retailer
Figure 1.11: Forward and Backward Integration
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Diversification Growth
Diversification growth makes good sense when opportunities are found outside the present
business and the company has the right mix of business strengths to be successful. Several
types are possible:
1)
New products that have technological or marketing synergies with existing
product lines.
2)
New products unrelated to the current industry.
3)
New businesses unrelated (Kotler and Keller, 2012:67).
Downsizing and Divesting Older Businesses
Companies must not only develop new businesses; they must also carefully prune, harvest, or
divest tired old businesses in order to release needed resources and reduce costs. Weak
businesses require a disproportionate amount of managerial time/talent (Kotler and Keller,
2012:67).
Porter’s Generic Strategies
Michael Porter has proposed three generic strategies that provide a good starting point for
strategic thinking and creating differential advantage:
1. Overall cost leadership
2. Differentiation
3. Focus
Upon completing the situation analysis and assessing the growth opportunities, marketers must
develop for each product level (product line, brand), a marketing plan for achieving its goals.
The Nature and Contents of a Marketing Plan
A marketing plan is a written document that summarises what the marketer has learned about
the marketplace and indicates how the organisation plans to reach its marketing objectives.
Marketing plans are becoming more customer and competitor orientated. The plan draws more
input from all the business functions and is team developed. See Kotler and Keller (2016: 83)
for a sample of a marketing plan.
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Table1.1: Contents of a Marketing Plan (Kotler & Armstrong, 2012: 69)
Structure of a Marketing Plan
Executive Summary
Current
Situation
Marketing
Presents a brief summary of the main goals and recommendations of the plan for
management review, helping top management find the plan’s major points quickly. A table of contents should follow the executive summary.
Describes the target market and a company’s position in it, including information
about the market, product performance, competition, and distribution. This chapter
includes the following:
• A market description that defines the market and major segments and then
reviews customer needs and factors in the marketing environment that may affect
customer purchasing.
• A product review that shows sales, prices, and gross margins of the major
products in the product line.
• A review of competition that identifies major competitors and assesses their
market positions and strategies for product quality, pricing, distribution, and
promotion.
Threats
And
Opportunities Analysis
Objectives And Issues
Marketing Strategy
Action Programs
Budgets
Controls
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• A review of distribution that evaluates recent sales trends and other
developments in major distribution channels.
Assesses major threats and opportunities that the product might face, helping
management to anticipate important positive or negative developments that might
have an impact on the firm and its strategies.
States the marketing objectives that the company would like to attain during the
plan’s term and discusses key issues that will affect their attainment. For example, if the goal is to achieve a 15 percent market share, this chapter looks at how this
goal might be achieved.
Outlines the broad marketing logic by which the business unit hopes to create
customer value and relationships and the specifics of target markets, positioning,
and marketing expenditure levels. How will the company create value for
customers in order to capture value from customers in return? This chapter also
outlines specific strategies for each marketing mix element and explains how each
responds to the threats, opportunities, and critical issues spelled out earlier in the
plan.
Spells out how marketing strategies will be turned into specific action programs that
answer the following questions: What will be done? When will it be done? Who will
do it? How much will it cost?
Details a supporting marketing budget that is essentially a projected profit-and-loss
statement. It shows expected revenues (forecasted number of units sold and the
average net price) and expected costs of production, distribution, and marketing.
The difference is the projected profit. Once approved by higher management, the
budget becomes the basis for materials buying, production scheduling, personnel
planning, and marketing operations.
Outlines the control that will be used to monitor progress and allow higher
management to review implementation results and spot products that are not
meeting their goals. It includes measures of return on marketing investment.
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TALKING POINT
Kotler and Keller indicate that it is important for companies to have a marketing plan, which
provides is a strategic direction to achieving the marketing objectives of the organisation.
Bearing this in mind, many companies still do not have marketing plans yet are still operational.
Is this sustainable taking into account the current market and marketing environment and
should marketing plans differ for a profit and non-profit organisation?
Paramount to the success of implementing the marketing plan in an organisation, ensuring the
entire organisation excels at delivering superior customer service and value is the type of
leadership employed both by the management and employees at all levels within the
organisation.
1.7 LEADERSHIP IN MARKETING
To be an effective leader, the individual must not only understand the market trends and
dynamics, the competitors, possess the required business management skills and knowledge,
they must also have socio-cultural knowledge of the markets and emotional intelligence to
understand how people think, feel and respond to stimuli, products and or situations. Also, an
understanding of the employees is essential to help motivate and empower them to deliver
creative, innovative, value adding and customer-satisfaction oriented outputs. For an
organisation to gain leverage over its competitors and attain customer value, it needs its
marketer to possess leadership characteristics.
Cant et al. (2014:26) postulate that overtime a few contemporary leadership styles have
emerged which will vary by organisation type and stages in the product/project life cycle,
namely:
Table 1.2: Contemporary Leadership Styles (Cant et al. 2014: 26)
Leadership Style
Characteristic
Contingent reward Management closely supervises personnel and facilitates all staff
leadership
activities and tasks
Laissez-faire
Laissez-faire leadership is laid back and non-directive, where
leadership
management has minimal involvement in daily activities of personnel
Management
exception
by Management intervenes only when personnel’s performance standards have not been met
leadership
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Transformational
Leaders use inspiration and charisma to stimulate the sales personnel
leadership
intellectually and treat each employee as an individual. The ultimate aim
is to move personnel beyond their own self-interests toward those of the
organisation
Democratic
Based on the principle of giving direction and guidance in the
leadership
organisation but does not impose rigid authority.
Cant et al. (2014.677) indicates that for a marketer to be successful, he/she will need to make a
paradigm shift from not only managing to but to leading, as per Figure 1.12,. The model depicts
the leader as a “ member of the collective good and a servant, either to customers, colleagues or other stakeholders…this notion of collectiveness in a leader is reflected in the African community-based philosophy of ‘ubuntu’”. The model indicates that firstly, leadership is a
synergistic process between the leader and his team and the customer, in a given environment
for a particular product/service. Secondly, the framework is not static but fluid.
This fluidity is due to the availability of the product/service. Cant et al. (2014: 678) go on to say
that for a leader to be successful as a marketer, the leader will need to:
1. “Assume responsibility for the survival and growth of the organisation;
2. Mobilise employees to focus their efforts on goal achievement;
3. Empower co-workers to discharge their responsibilities effectively;
4. Consider the emotions of staff, which contributes to building trust; and
5. Determine what constitutes customer value.”
Product/Service
Figure 1.12:
The Synergistic Approach for Analysing Leadership in Marketing
(Cant et al. 2014: 678)
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The influence of leadership on marketing performance
Taking into account the synergistic nature of leadership as per Figure 1.13, the marketer
cannot be an expert at only applying the 7P’s to marketing strategies to create market influence
and value.
The marketer must be able to influence performance as well by relating the 7P’s to the ICE leadership attributes (Cant et al. 2014: 682), as per Figure 1.13 below. See Cant et al (2014:
683-686) on applying the ICE leadership attributes to the 7Ps’ in the marketing mix. The proposed leadership model for marketing begins with the marketing environment,
organisational performance, seven ICEs of leadership, and marketing excellence at the apex.
See Cant et al. (2014:691).
Figure: 1. 13: The ICE Triangle of Leadership Attributes (Cant et al. 2014: 682)
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ACTIVITY 1.5
In relation to the leadership styles and attributes discussed above, assess the appropriateness
and effectiveness of leadership style and traits employed by the marketing manager in your
organisation. Has it led to effective internal and external marketing resulting in profitability,
market leadership, brand awareness and customer satisfaction? Determine the key strengths
and weaknesses in this leadership style and propose an alternate appropriate leadership style.
1.8 MARKETING MANAGEMENT IN EMERGING MARKETS
With sluggish growth in the advanced economies, companies have now turned their attention to
emerging markets with their compelling growth potential. Indeed, a report by one of the leading
management consultancies, Deloitte, asserts that “in 2010 gross domestic product (GDP) in emerging economies grew by 7.3%, compared to growth of 3% in the United States, 1.8% in
the Euro area, and 4% in Japan. Looking forward, Deloitte research projects that emerging
markets will likely account for 58% of growth in global GDP from 2010 to 2015, compared to
32% for the advanced economies of the G7” (Deloitte, 2012:1).
1.8.1
The Impact of Emerging Markets on Marketing Strategies & Practices
“Just as the last century was about marketing in the advanced economies, this century is likely to be all about marketing in the emerging markets” (Sheth, 2011: 166). However, this focus on
emerging markets raises the fundamental question of “will the emerging markets be driven by marketing as we know it today, or will the emerging markets drive future marketing practice and
the discipline?” (Sheth, 2011: 166).
Sheth (2011: 168) identifies five dimensions on which
emerging markets differ significantly from mature markets. Each of these dimensions impact
on at least one area of marketing (i.e. marketing theory, marketing strategy, market policy and
marketing practice). These five dimensions are shown in Figure 1.14
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Five Characteristics of Emerging Markets Impacting Marketing
Figure 1.14:
Five Characteristics of Emerging Economies Impacting Marketing
Source: (Sheth, 2011: 168)
Market Heterogeneity: Emerging markets tend to be “local, fragmented, low scale and mostly served by owner-managed small enterprises.” They have pre-industrialisation
characteristics and have a heterogeneity comparable to a faming economy (Sheth, 2011:
168). Approximately 40% - 50% of consumers are below the official poverty level and
therefore companies need to focus on demand fulfilment, rather than demand creation.
Affordability and accessibility are more important for differential advantage than the
superiority of an expensive product (Sheth, 2011: 168).
Socio-Political Governance: Emerging markets tend to be governed more by sociopolitical institutions and less by competition. Such institutions include religion, government,
business groups, NGOs and local community. Furthermore, a few highly diversified trading
and industrial groups (e.g. Tata in India) tend to dominate emerging markets. As emerging
markets become more accessible, so “this market imperfection and asymmetry of market
power by national marketers (both government and business groups) will require us to
rethink our theories of competitive advantage anchored to industry structure or resource
advantage perspective.” (Sheth, 2011: 168 – 169).
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Unbranded Competition: Unbranded products and services comprise as much as 60% of
consumption in emerging markets. This is due to the fact that many branded products and
services are still not available in the rural markets within the emerging economies. Used
products are often direct competitors to new products, and “adulteration, duplication and imitation are far more prevalent due to lack of regulation, standardisation, compliance and
enforcement” (Sheth, 2011: 169). Barter exchange or reciprocal offerings are also
prevalent. Such unbranded competition implies that “market creation (from making to
buying) and market development may be more necessary (and potentially more profitable)
than market orientation” (Sheth, 2011: 169). Chronic Shortage of Resources: Shortage of resources such as power (electricity),
skilled labour and raw materials tend to make production sporadic and inconsistent.
Therefore “our current perspectives of resource or capability-based advantage may need to
be supplemented by resource improvisation advantage...this means innovating low-cost
affordable products and services that are also consumption efficient and versatile in
alternate access and exchange” (Sheth, 2011: 169). Inadequate Infrastructure: Infrastructure includes physical roads, logistics, storage,
communication and information technologies, as well as market-transaction enablers (e.g.
point of sale terminals) and basic banking functions. Large metro-areas may have
adequate infrastructure, but this may not be the case in the rest of the market (Sheth,
2011: 169). The absence of infrastructure can “derail a marketing manager’s efforts to facilitate efficient and profitable exchange...therefore non-traditional channels and
innovative access to consumers may be both necessary and profitable in emerging
markets” (Sheth, 2011: 169).
The impact of these five dimensions on marketing suggest that companies’ perspectives and practices around marketing theory, strategy, policy and practice need to be reconceptualised.
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Table 1.4:
Rethinking Existing Perspectives About Marketing in Emerging Markets
Rethinking Existing Perspectives About Marketing in Emerging Markets
Marketing Theory
Marketing Strategy
Marketing Policy
Marketing Practice
From
To
Differential advantage
Aggregation advantage
Industry structure
Government policy
Resource possession
Resource improvisation
Market orientation
Market development
Relationship marketing
Institutional marketing
Customer satisfaction
Convert nonusers to users
Compliance
Inclusive growth
Excessive consumption
Mindful consumption
Finance driven marketing
Purpose driven marketing
Glocalisation
Fusion
Diffusion of innovation
Democratisation of innovation
Country of origin advantage
Nation brand advantage
Source: (Sheth, 2011: 171 – 180)
The Africa Trend Bulletin, March 2015: Candid Consumption indicates that in 2015 companies
and their brands will undergo the Africa Inquisition, as increasingly agitated consumers across
Africa demand total accountability, transparency and information. The reports goes on to say
that African consumers will not only call out opaque organisations, but will also patronise and
support those that are more open, honest, real and transparent.
This revolution is being fuelled by:
1. Digitally Empowered Consumers – between 2000-2014 internet users on the continent
grew from 4.5 million to 298 million (Internet World Statistics, June 2014) resulting in a
more informed and vociferous customer ;
2. Returning Globals’ And Richer Locals – between 2000-2014 the middle class
households tripled across 11 key African markets (Standard Bank Group, 2014),
resulting in citizens who not only expect but also demand more from their
governments, brands and society;
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3. Iviva La Revolucion!.. African Style – many Africans are no longer waiting for change
but are catalysing it. Consumers are engaging with organisations on issues both
serious and trivial. The daring tech savvy African youth realise that a click or hashtag
can be very powerful in gaining global momentum; and
4. More Competitors = More Choice
How can companies address this Candid Consumption Trends?
The report puts forth three actionable opportunities for companies and brands, to use to their
advantage, namely:
1. Candid Exposure – companies should partner with a platform that makes them more
transparent.
2. Embedded Candidates – companies are embedding a degree of openness and
accountability in their products and services.
3. Candid on Call – companies must be transparent and informative however, more
importantly they must do it at the right time – even real time.
1.8.2 The Changed Marketplace
The changed marketplace is characterised by new Company Capabilities, new Consumer
Capabilities, New Digital Age, and Rapid Globalisation, heightened awareness on Ethics and
Social Responsibility and Growth of Non-Profit Marketing. Expanding on a few of the
characteristics:
New Company Capabilities
Companies of present day can:
1. Use the internet as a powerful information and sales channel;
2. Collect fuller and richer information about markets, customers, prospects and
competitors;
3. Reach customers quickly and efficiently via new and improved distribution channels,
social media and mobile marketing;
4. Send targeted ads, coupons and informative relevant content;
5. Improve purchasing, recruiting, and internal and external communications;
6. Improve on cost efficiency from all areas in business;
7. Adapt, change and integrate business model in quick time frame; and
8. Be solution vehicles and partners to their customers.
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New Customer Capabilities
Customers of present day:
1. Can use the internet as a powerful information, purchasing and comparison aid;
2. Can search, communicate and purchase on the move;
3. Can tap into social media to share opinions and express loyalty;
4. Can actively interact with companies;
5. Can become brand advocates and product developers of companies; reject
marketing/content they find inappropriate;
6. Can inform companies strategies;
7. Can communicate to different people, using different mediums at the same time;
8. Want the products they want, to their specifications; want to be contacted when they
want, in the medium they want and want value for money;
9.
Are technologically savvy and communicate more using mobile, social media and their
fingers. Word of mouth and finger talking is king!
10. Are experts now and not ignorant anymore, hence you cannot fool them;
11. Are disloyal and switch companies/products as and when they feel;
12. Want answers to their questions or queries within minutes; and
13. Are the hunters and the company is the hunted.
New Digital Age
The explosive growth in computer, telecommunications, information depth and access,
transportation etc. has had a major impact on the ways firms bring value to their customers.
1. Connected and always on consumer and business market;
2. Instantaneous communication;
3. Innovative
ways
to
learn
about
and
track
customers
and
create
personalised/customised products and services;
4. Effective and efficient means of distribution channels. Omni-channel distribution is
taking forefront;
5. Improved communication methods to customers, within organisations and
stakeholders;
6. Creation of effective online databases that are available 24/7;
7. Creation of or improved on CRM or MIS databases thereby providing for better
informed decision making and direct marketing initiatives;
8. New wave of communication and advertising tools: cell phones, iPods, etc.
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9. Due to the Internet, the consumer buying decision process happens on the couch of
the consumer or as the consumer is on the move, with delivery taking place within 24
hrs to the customers door step.
10. More than 80% on internet users are using their mobile phones to access the internet.
Ethics and Social Responsibility
Marketers are re-evaluating the way they do business and communicate to their consumers
and partners, the communities they operate in and the environment, “Mother Earth” that sustains them.
Companies are taking greater responsibility for the social and environmental impact of their
actions due to legislation and consumers and communities’ preference to interact and buy products from ethical socially responsible companies. Companies are building social
responsibility and action into the value of their business and mission statements for example,
Pick n Pay. Companies are employing green marketing as well using terms such as
‘environmentally friendly’, ‘biodegradable’, ‘recyclable’, and ‘organic’ in the their advertising campaigns. In addition, to these, companies are modifying their products, changing their
production process, packaging, employing alternative distribution methods and communication
methods to promote corporate social responsibility and sustainability efforts.
According to Kotler and Armstrong (2014:602), many South African consumers are concerned
as to how well the marketing system is serving their interests. They go on to say that consumer
advocates, government and other critics have accused marketers of harming consumers
through high prices, deceptive practices, forced-selling, low quality or unsafe products, planned
obsolescence and poor service to disadvantaged and ill literate consumers. In addition to these
unethical behaviours, marketers have also misled vulnerable consumers to live beyond their
means resulting in a spiralling debit crisis.
This has resulted in many social ills like: false wants and increased materialism; greater need
for private goods (cars) resulting in pressure on government to commensurate it with the
adequate public goods (public roads); cultural pollution occurring through marketing collateral
constantly polluting people’s minds with messages of status, materialism, sex and power;; greater political/authoritative power of companies over the mass media preventing the truth
about products being reported on; and unfair competitive practices.
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Due to consumers viewing businesses as the root cause to many social ills, movements such
as consumerism and environmentalism has taken forefront to keep businesses in line,
accountable, transparent and affording rights and power to the consumer in relation to the
business services and products sold. The King Report iii, is a formalised approach of a triple
bottom line approach holding organisations responsible for the social, environmental and
economic performance which is underpinned by responsible governance.
Many organisations in South Africa are using this approach in their business models and
building corporate social responsibility into their vision and strategies. This is underpinned with
codes of ethics and professionalism. This commitment to change and ethical behaviour
requires total organisational commitment and form part of the organisations culture.
Organisations have responded positively towards consumerism and environmentalism, seeing
the benefits of acting responsibly as a way of creating greater customer value and building
stronger relationships.
Kotler and Armstrong (2014: 619) postulate that companies are
employing enlightened marketing, i.e. “the firms marketing should support the best long-term
performance of the marketing system”. Enlightened marketing consists of 5 philosophies:
1. Consumer-orientated marketing;
2. Customer-value marketing;
3. Innovative- marketing;
4. Sense-of-mission marketing; and
5. Societal marketing
Growth of Not-for-Profit Marketing
In the past, marketing was mainly done in the profit business sectors. However, due to many
factors affecting not-for-profit organisations income supply, they have adopting marketing
techniques to attract membership, support and brand awareness. Examples of not-for-profit
organisations are public universities, public hospitals, zoos, churches, welfare organisations,
government agencies, etc.
ACTIVITY 1.1
Evaluate and compare the implications of the changed marketplace dynamics in emerging and
developed markets for B2B and B2C companies.
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1.8.3
Marketing Practices That Work in Emerging Markets
Research conducted by Deloitte found that the following marketing practices are regarded to be
the most successful in facilitating growth within emerging markets:
Use of local sales / service centres;
Design products / services specifically for emerging market country or region;
Offer different value proposition for customers / consumers; and
Employ company-owned supply chain (Deloitte, 2011: 2).
Notably, all of these practices focus on a drive to be local. Indeed, Deloitte (2011:2) found that
“organisations that evolve their value propositions with the needs of customers and segments in particular emerging markets in mind will likely produce higher revenue impact. In fact, rather
than simply exporting their existing offerings, many companies looking for larger growth design
products / services to meet the needs of emerging market customers at multiple value points.” 1.8.3.1 Africa
Chironga, Leke, Lund & Van Wamelen (2011: 117) point out that “most of Western executives, unsure of the size of Africa’s consumer markets, prefer to invest in Asia’s dragon and tiger economies rather than in Africa’s economic lions. ‘Is it truly Africa’s time?’ they wonder.” Such
uncertainty about Africa’s consumer markets stems from the continent’s poor infrastructure, scarce talent, poverty and political turmoil. However, research conducted by McKinsey &
Company found that presently the continent is amongst the fastest expanding economies and
the prospects for companies are positive. Africans spent $860 billion on goods and services in
2008 which is 35% more than the $635 billion which consumers in India spent during this year.
Chironga et al (2011: 117) asserts that “if Africa maintains its current growth trajectory, consumers will buy $1.4 trillion worth of goods and services in 2020” which is close to the
spend of other emerging economies. In particular opportunities exist in retailing,
telecommunications, infrastructure-related industries, banking, resource-related businesses,
and the agricultural industry (Chironga et al, 2011: 118).
South Africa:
A recent study into the strategic marketing practises of South African
companies found that although most companies confirmed that they perform strategic
marketing activities, they were uncertain as to whether these activities established a
competitive advantage or customer insight (Jansen Van Rensburg, Venter, Strydom, 2012: 44).
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1.8.3.2 Asia & South America
Atsmon, Kertesz & Vitaal (2011) argue that “there is no one-size-fits-all strategy for capturing
consumer growth in emerging markets. What’s clear, though, is that traditional country strategies and other aggregated approaches will miss the mark because they can’t account for the variability and rapid change in these markets. As the battle for the wallet of the emergingmarket consumer shifts into high gear, companies that think about growth opportunities at a
more granular level have a better chance of winning.” China: Atsmon et al (2011) assert that “by segmenting Chinese cities according to such factors as industry structure, demographics, scale, geographic proximity, and consumer
characteristics, we identified 22 city clusters, each homogenous enough to be considered one
market for strategic decision making.” It is advised that companies prioritise the most attractive
city clusters for targeting so as to enhance the effectiveness of their distribution networks,
supply chains, sales forces and media and marketing strategies. A key benefit of focusing
resources on selected clusters “is the opportunity to exploit scale and network effects that stimulate faster, more profitable growth” (Atsmon et al, 2011).
India: While Atsmon et al (2011) also recommend a cluster approach in India, it is noted that
India is less urbanised than China and at a stage of earlier economic development. This
presents a challenge to cost effectively access consumption growth. Atsmon et al (2011)
therefore advises that to “make things more manageable, companies need to walk away from averages and adopt more granular approaches...some companies will be well served by
focusing on 12 clusters around India’s 14 largest cities.” Alternatively a company may wish to
focus its efforts on a few states (Atsmon et al, 2011).
Brazil: In many respects, Brazil is different from China and India. However, as with China and
India, identifying growth opportunities within Brazil “increasingly requires a detailed
understanding of vast regional variations in competition levels, income, product growth rates,
consumer preferences and retail channels” (Atsmon et al, 2011).
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1.9 MARKETING TRENDS FOR 2015
More than ever, companies need to re-strategise the way they connect and communicate with
customers as customers buying processes are still evolving due to the rapid adoption of online
shopping, the use of smartphones and social media. Silverpop (2014) indicates that consumers
still prefer receiving content through emails provided it is engaging, personalised and relevant.
On that note, improving customer experience & shopping value with greater understanding and
engagement with the customer is taking precedence.
Silverpop (2015) put forth 7 Key Marketing Trends for 2015 and tactics for succeeding in the
New Year:
Trend 1: Stored payments change the way people shop as reducing friction
becomes priority.
Mobile email and website interaction has increased over the years however, majority of the
conversions still take place on the desktop/laptop computers or tablets. Companies will be
inventing various easy quick payment methods via mobile to help increase conversion for
example the app, Apple Pay, as opposed to email calls-to-action routing to a website to
complete a transaction. Within the app customers will simply need to push their thumb to the
screen, at which point payment will instantly transfer the credit card on file to the retailer. For
marketers, this means the entire buying cycle will shorten and change, where they will need to
know how to deliver the right value and the right message to drive the conversion while the
customer is interacting with you on their smartphone.
Trend 2: Mobile apps 2.0 shift the way companies market to on-the-go customers
Companies will increasingly look to build and update apps to offer content and value that
entices customers to download and repeatedly interact with them as well as accept push
notifications with personalised content. In addition, the collection of valuable customer
behaviour and actions to a CRM database is vital.
Trend 3: Emails become skeletal frameworks for delivering relevant, timely content
based on database values.
There is a shift to data driven email frameworks with greater personalisation and relevance.
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Trend 4: The customer journey moves to centre stage in digital marketing
Companies will begin to focus more on digital marketing providing a seamless journey,
delivering personalised, behaviour driven content engaging with the customer at all touch
points online.
Trend 5: Content becomes the secret weapon for breaking through the clutter
Companies are realising that pushing generic non personalised email to customers is showing
a sign of diminishing returns thus, by giving subscribers a compelling reason to open and
interact with the emails using innovative informative content designed for their needs is vital.
Trend 6: Marketers place a great emphasis on the post-purchase experience
Due to low database growth, technological advancements, tighter margins and increase
competitor activities, marketers are realising the invaluable potential for repeat purchase if they
place crucial emphasis on the post-purchase time frame when the relationship with the brand
begins.
Trend 7: Marketing departments evolve to better enable cross-channel execution,
integrated data flow and measurement
More than 80% of customers today are using social, local and mobile technologies to do a
combination of activities yet, many companies do not have a seamless omni-channel
experience for their customers due to silo mentally and operations. Thus, companies do not
benefit from the cross-channel consumer insights they need to deliver relevant, timely,
personalised content and products. Marketers are thereby shifting to create more automated
programmes driven by customer behaviours example, the virtual whiteboard in the cloud.
According to the Africa Trend Bulletin, December 2014, there are 10 Key African Trends for
2015, namely:
1. Heart on Sleeves
:The increase use of tangible, visible wearables
2. Info- Chameleons
: Information will become jollification
3. Benevolent Brands :
Being nice pays…
4. Destination Africa
: Explosion of intra-continental tourism
5. Better Tech
: Greater improvement in technology implementation in the
continent
6. Creative
: Greater collaboration, curation, creation
7. Eco-Reverence
: Creating sustainable solutions for beyond 2015
8. New African Deal
: Empowering the laypeople
9. On-Demand Delight
: The “Uberfication” of everything arrives in Africa
10. Brand Stands
: Brands will increasingly call out corruption
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Africa Pulse (October 2014) provides 7 game changing innovations that are taking the
market by storm:
1. Online “Unradio’ Station streams shows on WeChat – CliffCentral.com. “The opportunity for allowing listeners to catch up on content via WeChat/podcasts, makes
radio a less fleeting, more on demand medium offering uncensored voices”.
2. Brands partnering with key partners to promote awareness on worthy causes – Easy
Taxi & Dettol partnering to raise awareness about Ebola virus.
3. The outsourcing of daily tasks online – “Washr” app provides on-demand laundry
service for Capetonians. This is due to the increase in working individuals and longer
working hours, single-parent households, increase in females in the workplace with
less to no time/capacity to do their regular household chores.
4. Platforms providing crowd sourcing, real-time information – Ma3Route platform
provides information to driver on traffic congestions and induced citizen policing, where
subscribers post pictures of traffic offenders in real time and identify stolen vehicles.
5. Brands taking real life public discontent and turning them into humorous socio-political
content -Nando’s: Blue Light Brigade.
6. Social Media Chat platforms for debating important social issues in the country –
263Chat. It allows consumers to talk freely and openly about issues in the country and
also giving the Diasporas access to local information and dialogue.
7. The growth of homemade items using traditional local ingredients –Orijin. A Nigerian
brewery launched a premium alcoholic beverage made from local Nigerian ingredients
that has medicinal properties, lower in alcohol content, well-refined and worthy for the
Nigerian elites and CEOs, who still want the buss of a traditional African drink, but not
the intense intoxicating effects.
ACTIVITY 1.6
To help you apply the theoretical knowledge gained, read and answer the caselets in the
prescribed text, Kotler and Keller (2016:53-55 & 80-82)
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Have You Completed the ‘Essential Reading’ for this Chapter?
Now that you have been introduced to this chapter on an “Introduction to Marketing Management”, source and work through the textbook chapters and
journal articles listed in the “Essential Reading” list at the beginning of this
chapter. It is essential that you read all of the textbook chapters and journal articles listed.
QUESTIONS FOR REFLECTION
After completing your study of this chapter on ‘Introduction to Marketing Management’, reflect on the following questions. (To adequately address these
questions you will need to have completed all the ‘Essential Reading’ listed at the beginning of this chapter.)
1. Obtain a copy of your organisation’s marketing strategy. Identify the key strengths and weaknesses of the strategy and provide recommendations on how you would
exploit the strengths and mitigate the weaknesses.
2. In the journal article “Impact of Emerging Markets on Marketing: Rethinking Existing Perspectives & Practices” Sheth (2011) identified five dimensions in emerging
markets that impact significantly on approaches to marketing theory, marketing
strategy, marketing policy and marketing procedure. To what extent have you
witnessed or experienced these five dimensions in the organisation in which you
work in South Africa (or other African country in which you reside).
3. Analyse the competitive structure of the mobile phone industry in your home
country using the Porter’s Five Forces Model.
4. Explain how ethical factors in marketing could impact on a company such as KFC
considering the various news reports in 2015 on their products and production
process.
5. Evaluate the factors that are pivotal to the changing market dynamics in Africa.
6. Using a company of your choice, perform a situation analysis and assess the
growth opportunities available to the company
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CHAPTER 2: CAPTURING MARKETING INSIGHTS
SPECIFIC LEARNING OUTCOMES
The overall outcome for this chapter is that, on its completion, the student should be able to
demonstrate an understanding of how to collect marketing information, forecast demand and
conduct marketing research within both advanced and emerging economies. This overall
outcome will be achieved through the student’s mastery of the following specific outcomes:
1.
Understand and apply the role and components of a modern marketing information
system (MIS) in your current organisation.
2.
Understand and assess the impact macro environmental factors have business and
marketing strategy.
3.
Evaluate the importance of accurate measurement and forecasting of demand.
4.
Identify and assess the characteristics of good market research.
5.
Critically discuss, apply and evaluate the marketing research process.
6.
Analyse how multi-national companies may benefit from the marketing of goods to
people at the ‘bottom of the pyramid’ within emerging markets.
7.
Assess the factors influencing the collection of information, forecasting of demand and
marketing research within emerging and developed markets.
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ESSENTIAL READING
Students are required to read ALL of the textbook chapters and journal
articles listed below.
Textbooks:
Kotler, P. & Keller, K.L. (2016) Marketing Management. Essex: Pearson Education.
Chapter 3: Collecting Information & Forecasting Demand
Chapter 4: Conducting Market Research
Cant, M.C., Van Heerden, C.H. & Ngambi, H.C. (2014) Marketing Management. A
South Africa Perspective. Cape Town: Juta.
Chapter 2: The Marketing Environment
Chapter 5: Marketing Research and Information Management
Chapter 15: Marketing Metrics
Journal Articles & Reports
Barbosa, F., Hattingh, D. & Kloss, M. (2010) “Applying Global Trends: A Look at China’s Auto Industry.” McKinsey Quarterly. Issue 3, pp 115 – 121.
(Available from EBSCO)
Du, R.Y. & Kamakura, W.A. (2012) “Quantitative Trendspotting.” Journal of Marketing
Research. 49 (4), pp 514 – 536. (available from EBSCO)
Immelt, J.R., Govindarajan, V. & Trimble, C. (2009) “How GE is disrupting itself.” Harvard Business Review. 87 (10), pp 56 – 65.(available from EBSCO)
Koksal, M.H. (2008) “How Export Marketing Research Affects Company Export
Performance: Evidence from Turkish Companies.” Marketing Intelligence & Planning.
26 (4), pp 416 – 430. (Available from Emerald).
Musyoka, S.M., Mutyauvyu, S.M., Kiema, J.B.K., Karanja, F.N., Siriba, D.N. (2007)
“Market Segmentation Using Geographic Information Systems (GIS): A Case Study of the Soft Drink Industry in Kenya.” Marketing Intelligence & Planning. 25 (6), pp 632 –
642. (available from Emerald)
Prahalad, C.K. & Hammond, A. (2002) “Serving the World’s Poor, Profitably.” Harvard
Business Review. 80 (9), pp 48 – 57. (Available from EBSCO).
Prinsloo, M. (2008) “Community Based Participatory Research.” International Journal
of Market Research. 50 (3), pp 339 – 354. (Available from EBSCO).
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2.1
INTRODUCTION
In order for marketing management to be successful, marketing insights need to be captured
through collecting information and forecasting demand, as well as conducting market research.
The concept of big data is one of the leading trends, where marketers are using more avenues
to collect marketing and consumer insights. It is essential for marketers to extract the relevant
information and use it to make informed marketing strategies. However, due to lack of
understanding of the data, poor data analytical analysis and information overload, often
valuable insights are not looked at. Effective leadership is essential to ensure the correct
marketing and consumer insights are collected and extracted, used effectively and evaluated.
2.2
OVERVIEW OF CAPTURING MARKETING INSIGHTS
2.1.1
Collecting Information & Forecasting Demand
A marketing information system (MIS) is critical to the analysis, planning, implementation and
control of marketing related initiatives within an organisation. An MIS essentially has three
components, refer to Figure 2.1:
A marketing research system allowing for the systematic design, collection, analysis
and reporting of data and findings relevant to a particular marketing situation.
Internal data (or an internal records system), including sales information.
External data (or a market intelligence system) which provides managers with
information on pertinent developments in the marketing environment (Kotler & Keller,
2012: 114).
Figure 2.1: Components of a Marketing Information System
INPUTS
PROCESSING
Marketing Research
(Planned collection of
information)
Marketing Models Marketing Mix
Models. Forecasting Models. New
Product Forecasting Models.
Advertising Models
Internal Data
(Sales Records,
Production Reports,
Financial Reports, etc.)
External Data
(Reports, Articles,
Statistical Records, etc.)
Databases
OUPUTS
Decision
Support
Systems
Information Processing
Specialists
Information
for
Marketing Decisions
Marketing Outcomes
FEEDBACK
Figure 2.1: Marketing Information System Components (from Cant et al, 2010: 117)
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Marketers seek out opportunities through trends and megatrends within the macroenvironment. The forces within the macro-environment which marketers need to monitor are
shown in Figure 2.2 below.
Figure 2.2: Major Macro-Environmental Forces
Demographic
Environment
Worldwide
Population
Growth
Population Age
Mix
Ethnic & Other
Markets
Educational
Groups
Household
Patterns
Figure 2.2:
Economic
Environment
Socio-Cultural
Environment
Natural
Environment
Consumer
Psychology
Income
Distribution
Income,
Savings, Debt,
Credit
Views of
Ourselves,
Others,
Society, etc.
High
Persistence of
Core Cultural
Values
Existence of
Sub-Cultures
Environmental
Regulations
Corporate
Environmentalism
Technological
Environment
Accelerating
Pace of Change
Unlimited
Opportunities
for Innovation
Varying R&D
Budgets
Increased
Regulation of
Tech Change
Political-Legal
Environment
Increase in
Business
Legislation
Growth of
Special Interest
Groups
Major Macro-Environmental Forces Impacting Marketing
Source: (Kotler &Keller, 2012: 96 – 106)
TALKING POINT
Should marketers target certain age groups or look at the cohort and generation effects? How
demographic factors changing and what are the implications on marketing strategies?
Importance of Environmental Scanning
Marketers have to constantly scan the macro environment. Van der Walt, Strydom, Marx and
Jooste (1996) assert that the importance of environmental scanning is clear from the following
points:
The environment is continually changing, so purposeful scanning by management is
necessary to keep abreast of change;
Scanning is necessary to determine which factors in the environment pose a threat to the
enterprise’s present goals and strategy;;
Scanning is also necessary to determine which factors in the environment present
opportunities for the more effective attainment of the goals of the enterprise by modifying
its present strategy; and
Enterprises that scan the environment systematically are more successful than those that
do not.
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TALKING POINT
If we don’t know what the problem is, how do we know we have a problem at all? Is preliminary research really necessary? Surely what we don’t know about can’t hurt us, so why go looking for trouble? (Blythe, 2006:214). Do you agree with this sentiment and can marketers adopt this attitude
in the current marketing environment? Use examples to support your discussion.
Forecasting & Demand Measurement
Market forecasting is the prediction of the size of the future market. Mathematical models,
advanced statistical techniques and computerised data collection procedures are used by
marketers to forecast market demand and company demand. Current demand is estimated
through a company’s determination of total market potential, industry sales and market share.
Future demand is estimated through surveying buyer’s intentions, soliciting the company’s sales force input, prior years demand and supply results and/or engaging in market testing
(Kotler & Keller, 2012: 114).
2.2.2
Conducting Market Research
Marketing research may be defined as “a formal and scientific process to solve a marketing related problem or pursue a market-related opportunity.
The process typically involves
identifying and formulating the problem or opportunity, gathering relevant data and examining
it, and sharing the resultant information with marketing management in order to solve the
problem or to pursue the opportunity in question.” (Du Plessis et al, 2012: 157).
An overview of the market research process is shown in Figure 2.3.
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Figure 2.3: Marketing Research
Process
Figure 2.3:
1
Description of Research Problem &
Objectives
2
Deciding on a Suitable Research
Design
3
Preparing the Research Design
4
Fieldwork
5
Processing, Tabulation & Analysis
6
Report the Research Results
Marketing Research Process (Cant et al, 2010: 123)
Data Sources
The researcher can gather secondary data, primary data, or both. Secondary data are data that
were collected for another purpose and already exist. Primary data are data freshly gathered
for a specific purpose or for a specific research project.
Table 2.1: Primary and Secondary data sources (Van der Walt et al., 1996:151)
PRIMARY DATA
SECONDARY DATA
Internal Sources
External Sources
Internal Sources
External Sources
Employees
Consumers
Company records
Libraries
Clients
Industrial associations
Retailers
Chamber of industry and commerce
Wholesalers
Government bodies
Competitors
Marketing research organisations
Universities
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Research Approaches
Primary data can be collected in five main ways:
Observational Research
Focus Group Research
Survey Research
Behavioural Data
Experimental Research
ACTIVITY 2.1
Africa Mutual Insurance wants to help companies of all sizes and types handle their retirement
and insurance needs. According to previous feedback, all business customers’ “receive the same quality of service and care”, and “the same freedom of choice” regardless of size.
a.
Which research approaches would be most helpful in identifying any problems that
customers might have experienced in working with Africa Mutual Insurance consultants?
b.
If company marketers decide to collect primary data, would you recommend they use
closed-end or open-end questions? Why?
c. Draft a brief questionnaire that Africa Mutual Insurance could use to identify additional
needs that the company might try to satisfy with new financial services products or
services.
2.2.3 Measuring Marketing Productivity
An important task of marketing research according to Kotler and Keller (2012:136) is to assess
the efficiency and effectiveness of marketing activities. Marketers, increasingly, are being held
accountable for their investments and must be able to justify marketing expenditures to senior
management. Marketing research can help address this increased need for accountability.
Companies use a multitude of metrics to measure the performance of marketing ranging from
those that measure the effectiveness of marketing strategies and actions, to those that
measure attitudinal and financial outcomes.
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Two complementary approaches to measure marketing productivity are:
Marketing metrics to assess marketing effects
Marketing mix modelling to estimate causal relationships and how marketing activities affect
outcomes.
Kaplan and Norton (1992) cited in Venter and Van Rensburg (2015) postulates the idea of a
Balance Score Card, which looks at both the operation and financial aspects, with four broad
perspectives that are interlinked:
Financial: How do we look to shareholders?
Customer: How do customers see us?
Internal Business: What must we excel at?
Innovation & learning: Can we continue to improve and create value?
Marketing Metrics
Kotler and Keller (2012:136) describe marketing metrics as a set of measures that help firms to
quantify, compare, and interpret marketing performance to ensure they have the desired effect
on the customers, resulting in the customers acting according to the planned objectives thereby
achieving the desired financial results.
Top Metrics by Category
Table 2.2: Top Metrics by Category (Venter & Jansen van Rensburg, 2015: 344)
CATEGORY
Profit & Loss
METRICS
Sales volume/value
Marketing investment (marketing costs)
Bottom line (economic profit)
Brand Equity
Brand Familiarity
Brand penetration
Brand preference
Customer satisfaction
Brand loyalty
Brand availability
Brand attitude
Customer
Sales
Market share or share of customer
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Cross sell-percentage
Customer satisfaction
Loyalty or retention
Average CLV
Net Promoter Score
Innovation
Strategy – awareness of goals, commitment to goals, active innovation
support and perceived resource adequacy
Culture – appetite for learning and freedom to fail
Outcomes- number of initiatives in process, number of initiatives launched
and percentage of revenue attributable to launches during the last three
years
Employee
Awareness & commitment to corporate goals
based equity
Employee satisfaction
Employee retention
Employee engagement
Staff competence
Customer knowledge
Product development
Systems performance
ACTIVITY 2.2
Assess the various metrics employed by your organisation of employment and the resulting
effectiveness. Recommend other metrics that could be more beneficial to your organisation.
Measuring Marketing Plan Performance
Marketers today have better marketing metrics for measuring the performance of marketing
plans. They can use four tools to check on plan performance: sales analysis, market-share
analysis, marketing expense-to-sales analysis, and financial analysis, refer to the prescribed
text book for detail information.
Sales Analysis
Market-Share Analysis
Marketing Expense-to-Sales Analysis
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Financial Analysis
Profitability Analysis
Marketing-Profitability Analysis
Marketing Mix Modelling
Kotler and Keller (2012:138) explain that marketing mix models analyse data from a variety of
sources to understand more precisely the effects of specific marketing activities. Multivariate
analyses are conducted to sort through how each marketing element influences marketing
outcomes of interest such as brand sales or market share. The findings from marketing mix
modelling are used to allocate or reallocate expenditures. Although marketing mix modelling
helps to isolate effects, it is less effective at assessing how different marketing elements work
in combination.
Marketers can use various marketing models to help them make informed decisions and have
relevant up-to-date information at their fingertips. These models are listed in Table 2.3. Refer to
the prescribed text book for detail information.
Table 2.3: Marketing Models (Cant & Van Heerden, 2014)
MODEL
Marketing Mix Models
EXAMPLES OF MODELS
ECONOMETRIC
MARKET RESPONSE MODELS
ADVISOR
BRANDAID
ADMOD
CALLPLAN
DETAILER
STRATPORT
BRANDFRAME
Forecasting Models
TIME SERIES MODELS
STATISTICAL DEMAND ANALYSIS
DELPHI TECHNIQUE
MARKET TEST
New Product Forecasting Models
NEWPROD
STEAM
PARAFIT-COLLINS MODEL
Advertising Models
ADBUG
MEDIAC
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ACTIVITY 2.3
Between strategy formulation, implementation and control, which one would you consider more
important for the success of an organisation and why? Critically discuss your point of view.
TALKING POINT
The markets of the world have evolved from being a producers market to that of a customer
driven market. To satisfy the diverse customer needs and an extremely competitive
environment, marketers cannot reply on the 4P’s to drive their business forward. Evaluate the
above statement and discuss the alternative options available to marketers.
2.3
OVERVIEW OF CAPTURING MARKETING INSIGHTS IN EMERGING MARKETS
2.3.1 Analysing the Macro-Environment
In their classic Harvard Business Review article published in 2002, Prahalad & Hammond
brought attention to the demographic environment of emerging markets. Prahalad & Hammond
(2002:49) pointed out that “the world’s poor are distressingly plentiful. Fully 65% of the world’s population earns less than $2,000 each per year – that’s 4 billion people...but despite the vastness of this market, it remains largely untapped by multinational companies.” Prahalad &
Hammond (2002: 48) assert that “by stimulating commerce and development at the bottom of the economic pyramid, MNCs could radically improve the lives of billions of people and help
bring into being a more stable, less dangerous world. Achieving this goal does not require
multinationals to spearhead global social development initiatives for charitable purposes. They
need only act in their own self-interest for there are enormous business benefits to be gained
by entering developing markets.” In serving the bottom of the pyramid, companies need to be innovative in their marketing. One
of the strategies which have proven to be impactful is that of ‘reverse innovation’. For example,
to accommodate the needs of the bottom of the pyramid in India and China, GE invented a
$1000 handheld electrocardiogram device for rural India and a PC-based ultrasound machine
was developed for rural China.
These devices, which were created for the bottom of the pyramid, are now being sold in
advanced economies such as the United States (Immelt, Govindaraja & Trimble, 2009: 56).
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2.3.2
Africa
Kenya: Management Information Systems
Musyoka, Mutyauvyu, Kiema, Karanja & Siriba (2007) detail a Kenyan study investigating how
a Geographical Information System (GIS), combined with statistical analysis techniques, may
be used to assist in marketing analysis.
The combination of GIS with statistical analysis enabled Nairobi Bottlers Company Ltd to create
a map showing the location and distribution of the Coca-Cola distribution outlets; generate a
map outlining the market zones and the distribution outlets within those market zones; and
create a mathematical model for predicting sales for the market zones (Musyoka et al, 2007:
641). The results of the study highlighted that the use of GIS together with statistical analysis
techniques “can deliver significant enhancement of performance, and potentially total turnaround in terms of marketing, sales, logistics, operational support and service delivery” (Musyoka et al, 2007: 641).
South Africa: Market Research
Prinsloo (2008: 339) identifies a challenge to the implementation of marketing research,
particularly in the form of surveys, within developing countries. In particular, “developing markets present problems in the paucity of information available and a desperate shortage of
skilled information gatherers” (Prinsloo, 2008: 339). So as to overcome these challenges the
company conducting the market research may either “import and utilise developed world researchers and interviewers to gather, input and process information at exorbitant costs, or to
adopt a community based approach to gathering information cost effectively” (Prinsloo, 2008:
339). Prinsloo (2008: 339) details how the community based participatory research (CBPR)
project has been successful in training, managing and paying previously unemployed people,
who are fairly well-educated, to provide the developing country of South Africa with information
on consumers and markets. This project has brought about benefits such as employment
creation, skills transfer, and improving the participants’ options for future employment. Prinsloo (2008: 353) concludes that “establishing similar community-based research initiatives in other
developing communities can work as well as this project is working in attracting economic and
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2.3.3
Europe & Asia
Turkey: Export Marketing Research
Improving exports is acknowledged as being vital for developing countries. Koksal, (2008: 416)
conducted research into the extent to which export marketing research improves export
performance within the developing country of Turkey. The research found that companies
collect export information from different sources and this information is used for various
purposes in their decision making. The research also indicated that “the differences in export information sources and information types employed, and information usage in decision
making, have different effects on their export performance, mainly measured in terms of sales,
market share and profitability” (Kosal, 2008: 416).
China
Barbosa, Hattingh & Kloss (2010) explore the interaction of global trends and forecasting
uncertainty within the context of China’s automobile industry. It is shown how the Delphi technique may be used to assist in generating forecasts of market demands.
2.3.4
South America
Brazil: Market Research
Keegan & Green (2011: 223) identify challenges for conducting market research in Brazil. In
particular, technological infrastructure for the gathering of data is minimal, and government
census reports are a poor source of population data. Security issues often require that
research is implemented in teams.
Privacy issues are also very important, with wealthy respondents being reluctant to answer
questions about their finances (Keegan & Green: 2011: 223).
TALKING POINT
If governments are so poor at controlling the economy, wouldn’t it be better to leave things well alone
and let nature take its course? (Blythe, 2006:33).
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ACTIVITY 2.4
To help you apply the theoretical knowledge gained, read and answer the cases in the
prescribed text, Kotler and Keller (2016:116-119 & 144-147).
Have You Completed the ‘Essential Reading’ for this Chapter?
Now that you have been introduced to this chapter on a “Capturing Marketing Insights”, source and work through the textbook chapters and journal articles
listed in the “Essential Reading” list at the beginning of this chapter. It is essential that you
read all of the textbook chapters and journal articles listed.
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QUESTIONS FOR REFLECTION
After completing your study of this chapter on ‘Capturing Marketing Insights’ reflect on the following questions. (To adequately address these questions you
will need to have completed all the ‘Essential Reading’ listed at the beginning of
this chapter.)
1. Consider the organisation for which you work.
1.1
Assess the effectiveness of the marketing information system (MIS) at your
organisation.
1.2
Has your organisation recently conducted marketing research?
If ‘yes’, how was the marketing research rolled out and what was the outcome of the research?
If your answer is ‘no’, would your company benefit from conducting market
research? Why / why not?
2. The prescribed journal article by Prahalad & Hammond asserts that companies
should focus on the ‘bottom of the pyramid’ in entering developing markets so as to
gain “enormous business benefits”. Critically discuss how it is possible for
organisations to earn a profit from selling a product / service to customers who are
poor.
3. Critically assess how the internet is changing research methods and the resulting
managerial implications for marketers.
4. Evaluate how the macro-environmental factors are changing market dynamics in
your country and the impact on marketing strategy development.
5. Research and evaluate the use of ‘big data’ in companies and provide recommendations as to how companies can overcome the gaps and shortfalls.
6. Develop a research proposal to assess the introduction of a new product of your
choice into an emerging market of your choice.
7. Recommend the appropriate research approaches to assess:
Drug addicts and their behaviour
Service quality at restaurant
Advertisement effectiveness
New product development
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CHAPTER 3: CONNECTING WITH CUSTOMERS
SPECIFIC LEARNING OUTCOMES
The overall outcome for this chapter is that, on its completion, the student should be able to
demonstrate a holistic understanding of connecting with customers within both developed
economies and emerging economies. This overall outcome will be achieved through the
student’s mastery of the following specific outcomes:
1.
Assess and apply the concept of connecting with customers from the holistic marketing
perspective.
2.
Understand how companies can deliver customer value, satisfaction and loyalty.
3.
Explain how marketing managers may go about maximizing the lifetime value of
customers.
4.
Postulate how companies can attract and retain the right customers.
5.
Evaluate the importance and effectiveness of database marketing.
6.
Analyse how consumer characteristics are changing and its influence on buying
behaviour.
7.
Explain and evaluate the psychological processes which influence consumer
responses to the marketing programme.
8.
Determine and evaluate how consumers make purchasing decisions for different
products and the various factors influencing these decisions.
9.
Tabulate the differences between the business market and individual consumer market
and apply appropriate marketing strategies.
10.
Apply the process of business purchasing.
11.
Analyse the nature of market segmentation and market targeting and its
appropriateness in global connected market.
12.
Explain and implement the requirements for effective market segmentation and
targeting.
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ESSENTIAL READING
Students are required to read ALL of the textbook chapters and journal
articles listed below.
Textbooks:
Kotler, P. & Keller, K.L. (2015) Marketing Management. Essex: Pearson Education.
Chapter 5: Creating Long Term Loyalty Relationships
Chapter 6: Analysing Consumer Markets
Chapter 7: Analysing Business Markets
Chapter 9: Identifying Market Segments & Targets
Cant, M.C., Van Heerden, C.H. & Ngambi, H.C. (2014) Marketing Management. A
South Africa Perspective. Cape Town: Juta.
Chapter 3: Consumer Behaviour
Chapter 4: Market Segmentation, Targeting & Positioning
Chapter 12: Customer Value & Retention
Chapter 19: Business-to-Business Marketing
Journal Articles:
D’Andrea, G., Marcotte, D., Morrison, G.D. (2010) “Let Emerging Market Customers
Be Your Teachers.” Harvard Business Review. 88 (12). Pp 115 – 120. (available
from EBSCO).
Darley, W.K. & Blankson, C. (2008) “African Culture & Business Markets: Implications For Marketing Practices.” Journal of Business & Industrial Marketing. 23
(6), pp 374 – 383. (available from EBSCO)
Gadiesh, O., Leung, P. & Vestring, T. (2007) “The Battle for China’s Good Enough Market.” Harvard Business Review. 85 (9), pp 80 – 89 (available from EBSCO).
Ichii, S., Hattori, S. & Michael, D. (2012) “How to Win in Emerging Markets: Lessons from Japan.” Harvard Business Review. 90 (5), pp 126 – 130. (available from
EBSCO).
Jacobs, G. & Smit, E.v.d.M. (2010) “Materialism and Indebtedness of Low Income Consumers: Evidence from South Africa’s Largest Credit Granting Catalogue
Retailer.” South African Journal of Business Management. 41 (4), pp 11 – 33
(available from Sabinet)
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3.1
INTRODUCTION
Connecting with customers is critical to the success of marketing management. It involves a
focus on creating long term loyalty relationships with customers, the analysis of consumer
markets and business markets, as well as the identification of market segments and targets.
How the company is positioned in the minds of the consumer and how the consumer perceives
this positioning is one of determinants of the success of the company. To ensure long-term
success, companies will have to employ competitive techniques that ensure sustainable
competitive advantage.
3.2
CREATING LONG TERM RELATIONSHIPS
Organisation’s today compete in a highly competitive business environment. In order to
achieve sustainable competitive advantage it is important that organisations adopt a holistic
marketing philosophy, based on strong customer relationships. This requires that marketing
managers connect with their customers using various customer relationship management
techniques. In particular, focus needs to be given to building customer value, satisfaction and
loyalty; maximising customer lifetime value; and cultivating customer relationships (Kotler &
Keller, 2012: 144 – 169).
Kotler and Keller (2012:145) argue that managers who believe the customer is the company’s only true “profit centre” consider the traditional organisational chart obsolete, as per Figure 3.1
below. With the rise of digital technologies like the Internet, today’s increasingly informed and connected consumers expect companies to do more than connect with them, more than satisfy
them, and even more than delight them.
VS
Traditional
Modern
Figure 3.1: Traditional Organisational Chart vs Modern Customer-orientated
Organisational Chart Source: (Kotler & Keller, 2012: 146)
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ACTIVITY 3.1
Assess Figure 3.1 and identify the shifts that lend to this inverted pyramid and how companies
can ensure their marketing is value-based.
Based on Figure 3.1 above to make the customer the true profit centre, marketing has evolved
from being transactional to value-based. The purpose of value-based marketing is to enhance
the value to the organisation by enhancing value to the customer thereby creating a win-win
situation. This type of marketing is difficult to achieve, as it requires committed sellers and
committed buyers which is dependent on high value products/services, deep understanding of
markets and segments and what they value. In addition to this, companies are placing greater
emphasis on enlightened marketing and influencer marketing, as discussed in Chapter 1.
Figure 3.2: Customer Relationship Groups (Kotler & Armstrong, 2014:35)
Building the right relationships with the right customers is what organisations should aim for
however, it is difficult as there are some loyal customers that are unprofitable and disloyal
customers that are profitable. Kotler and Armstrong (2014:35) indicate that companies can
classify their customers based on their potential profitability and projected loyalty, as per Figure
3.3 .
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Potential Profitability
High
profitabiliy
Low
Butterflies
True Friends
Good fit between firm’s offering & customer’s needs;; high profit potential but not loyal
Good fit between firm’s offering & customer’s needs;; highest profit potential and loyal
Strategy: Use short term promotional
blitzes to attract them
Strategy: continuous relationship
investments to delight them. Turn
them into “true believers”
Strangers
Barnacles
Little fit between firm’s offering & customer’s needs;; lowest profit potential but not loyal
Limited fit between firm’s offering & customer’s needs;; low profit potential but highly loyal. Most problematic
customers
Profitability
y
Strategy: Don’t invest in them unless their status changes
Strategy: Increase sales, increase
fees, reduce service to increase
profitability. If status does not change,
‘fire them’
Short-term customers
Long-term customers
Projected Loyalty
Figure 3.3: Customer Relationship Groups (Kotler & Armstrong, 2014:35)
ACTIVITY 3.2
1. Taking into account how marketing has evolved from transactional to value-based,
determine what approach to achieving competitive advantage predominates in your
organisation. What are the key strengths and weaknesses you see in this adopted approach?
2. Using the marketing orientation evolution in chapter 1 and Figure 3.2 above create a revised
marketing orientation for marketers of current day.
In order for companies to determine their customer’s profitability, they have to determine the customer’s perceived value and the customer’s lifetime value.
Customer Perceived Value (CPV)
Customers tend to be value-maximises. Customers estimate which offer will deliver the most
perceived value and act on it.
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Maximizing Customer Lifetime Value
Marketing is the art of attracting and keeping profitable customers. The 80/20 rule states that
the top 20 percent of the customers may generate as much as 80 percent of the company’s profits.
Measuring Customer Lifetime Value
Customer Lifetime Value (CLV) describes the net present value of the stream of future profits
expected over the customer’s lifetime purchases. CLV calculations provide a formal quantitative framework for planning customer investment and helps marketers to adopt a longterm perspective (Kotler and Keller, 2012:156).
Cultivating Customer Relationships
According to Kotler and Keller (2012:156) maximizing customer value means cultivating longterm customer relationships. Companies are moving to more precision marketing designed to
build strong customer relationships. Mass customisation is the ability of a company to meet
each customer’s requirements - to prepare on a mass basis individually designed products,
services, programmes, and communications.
Customer Relationship Management (CRM)
Customer relationship management (CRM) is the process of managing detailed information
about individual customers and carefully managing all customer “touch points” to maximise customer loyalty.
A customer “touch point” is any occasion on which a customer encounters the brand and product - from actual experience to personal or mass communications to casual observation.
Customer relationship management enables companies to provide excellent real-time customer
service through the effective use of individual account information.
Peppers and Rogers outlined a four-step framework for one-to-one marketing that can be
adapted to CRM marketing (Kotler & Keller, 2012):
1. Identify your prospects and customers
2. Differentiate customers in terms of: (1) their needs and (2) their value to your company
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3. Interact with individual customers to improve your knowledge about individual needs and
to build stronger relationships
4. Customize products, services, and messages to each customer
A key driver of shareholder value is the aggregate value of the customer base. Winning
companies improve the value of their customer base by excelling at strategies such as:
•
Reducing the rate of customer defection
•
Increasing the longevity of the customer relationship
•
Enhancing the growth potential of each customer through “share-of-wallet, cross-selling,
and up-selling”
•
Making low-profit customers more profitable or terminating them
•
Focusing disproportionate effort on high-value customers
•
Heightened customer service
Attracting, Retaining, and Growing Customers
Customers are becoming harder to please. Companies seeking to expand profits and sales
have to spend considerable time and resources searching for new customers. A 5% reduction
in customer defection rate can increase profits by 25 percent to 85 percent depending on the
industry. Customer profit rate tends to increase over the life of the retained customer.
Building Loyalty
There are different levels of investment in customer-relationship building:
•
Basic marketing
•
Holistic marketing
•
Reactive marketing
•
Accountable marketing
•
Proactive marketing
•
Partnership marketing
•
Services marketing
Reducing Customer Defection
Five main steps a company can take to reduce the defection rate:
•
The company must define and measure its retention rate;
•
The company must distinguish the cause of customer attrition and identify those that can
be managed better;
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•
The company needs to estimate how much profit it loses when it loses customers;
•
The company needs to figure out how much it would cost to reduce the defection rate; and
•
Finally, listening to customers.
Forming Strong Customer Bonds
Berry and Parasuraman (1991:136-142) have identified three retention-building approaches:
•
Adding financial benefits;
•
Adding social benefits; and
•
Adding structural ties.
TALKING POINT
In order for companies to compete effectively to achieve customer preferences, according to
Tracy and Wiserema (1995), they need to focus on achieving operational excellence, customer
intimacy, product leadership and brand leadership. Do you agree that these are the only key
variables?
Customer Databases and Database Marketing
A customer database is an organised collection of comprehensive information about individual
customers or prospects that is current, accessible, and actionable, for such marketing purposes
as lead generation, lead qualification, sale of a product or service, or maintenance of customer
relationships. Database marketing is the process of building, maintaining, and using customer
databases and other databases for the purpose of contacting, transacting, and building
customer relationships.
A database is typically used to:
•
identify prospects
•
decide which customers should receive a particular offer
•
deepen customer loyalty
•
reactivate customer purchases
•
avoid serious customer mistakes
The Downside of Database Marketing and CRM
Four problems can deter a firm from effectively using CRM.
•
Building and maintaining a customer database requires a large investment in computer
hardware, database software, analytical programmes, communication links, and skilled
personnel
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The difficulty of getting everyone in the company to be customer orientated and to use the
•
available information
•
Not all customers want a relationship with the company
•
The assumptions behind CRM may not always hold true - i.e. it might not be the case that
it costs less to serve the more loyal customers (Kotler and Keller, 2012:167).
TALKING POINT
Are a database and a CRM solution (database) the same? What are the key differences and
have marketers truly employed CRM databases?
3.3 ANALYSING CONSUMER MARKETS & BUSINESS MARKETS
The buying dynamics of individual consumers and businesses need to be understood by the
marketing manager so that he/she is able to market the right product / service to the right
customers in the right way.
Business markets have several characteristics that contrast sharply with those of consumer
markets. Table 3.1 outlines these characteristics.
Table 3.1: Business Markets and Consumer Markets
Business Markets
Consumer Markets
Fewer, larger buyers
Multiple sales call
Close supplier-customer relationship
Derived demand
Professional purchasing
Inelastic demand
Several buying influences
Fluctuation demand
Geographically concentrated buyers
Direct purchasing
An overview of the buying decision process of individual consumers, as well as that for
business consumers is indicated in Figure 3.4
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Individual Consumer Buying Process
Problem
Recognition
Information
Search
Evaluation of
Alternatives
Purchase
Decision
PostPurchase
Behaviour
The Business Procurement Process
Problem
Recognition
General
Need
Description
Supplier
Search
Order
Routine
Specification
Figure 3.4:
Proposal
Solicitation
Supplier
Selection
Performance
Review
Individual Consumer and Business Buying Processes
Source (Kotler & Keller, 2012: 188; 217 – 227)
Also, the urgency of the demand may influence the buying process as well, for example: Your
car tyre bursts while you on your way to an important meeting. Your priority is to get to the
meeting, hence you will purchase any brand of tyre at any price. With low involvement
products, stages in the buying process may be skipped; while for high involvement products the
buyer may go through all stages and undertake extensive research and evaluation.
ACTIVITY 3.3
Discuss and graphically represent a consumer’s decision making process for low involvement products and high involvement products and the factors that could alter these steps.
A consumer’s buying behaviour is influenced by cultural, social, and personal factors, as per Figure 3.5 below. Cultural factors exert the broadest and deepest influence (Kotler and Keller,
2012:173). Refer to the prescribed text for detailed information. Understand these factors well.
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3.4 FACTORS INFLUENCING CONSUMER BEHAVIOUR
Figure 3.5: Factors influencing buying behaviour
Cultural
Factors
Sub-Cultures
Cultural
Trends
Social Class
Social
Factors
Reference
Groups
Family
Roles &
Status
Personal
Factors
Age & Stage
in Life Cycle
Occupation
& Economic
Circumstanc
e
Income,
Personality &
Self-Concept
Lifestyle &
Values
Psychological
Factors
Perception
Motivation
Learning
Believes &
Attitudes
According to Kotler and Keller (2012:210) there are seven roles in the purchase decision
process which marketers should use to their advantage during the product life cycle.:
1. Initiators
–
first to request the product
2. Users
–
will use the product
3. Influencers
–
influence the buying decision
4. Deciders
–
make the decision of what to purchase
5. Approvers
–
authorise the purchase
6. Buyers
–
have the formal authority to purchase
7. Gatekeepers
–
have the power to prevent seller information from
reaching members of the buying centre
TALKING POINT
Due to globalisation, inter-racial marriages, the acceptance of gays, lesbians, transsexuals, a
larger educated work force that travels a lot, etc. one can debate whether marketers can truly
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According to Tapinfluence (2015) purchase decisions are now happening outside of the
traditional channels. The study found that 47% of online consumers use ad blocks, 92% of
people trust strangers over brands and 74% rely on social networks to guide purchase
decisions. Tapinfluence (2015), “On how to build an influencer marketing strategy”, provides a
worksheet, see Table 3.2 below, that will help marketers map out the steps their consumer
takes in making a buying decision. By working through each stage of the buying process, you’ll understand the information the target audience needs to assist them in finding the appropriate
product or services (e.g. buying gluten free bread).
Table 3.2: Consumer Buying Journey Worksheet (TapInfluence, 2015:3)
What are your
consumers’
motivations
at each stage?
Key messages
Awareness
“What brands
solve my
problem?”
Consumer
considers an initial
set of brands
based on
perceptions and
exposure to recent
touch points.
Example: A
consumer wants
to know which
breads are glutenfree. She might
read blogs
specializing in
gluten-free
cooking, ask
friends, or browse
the grocery aisle
to find options.
Consideration
“Which brand
best satisfies my
purchase
criteria?”
Consumer weighs
benefits,
compares brands,
and asks others
for opinions.
Example:
Consumer
evaluates glutenfree breads
against specific
criteria, including:
Do others say it
tastes good? Does
it have ingredients
I can’t eat? Will my kids like it?
Preference
“I think this one
is the best
choice.”
Decision/Purchase
“I’ll try it / I’ll buy
it.”
Consumer
narrows in on
the best option:
My local grocery
store carries a
brand of bread
that sounds
good.
Consumer selects a
brand at the
moment of
purchase.
Example:
Consumer
purchases bread. If
purchase is
successful, they
may buy again
and/or recommend
to others.
Make consumers
aware that your
product does X.
Explain how your
product does X.
Reinforce why
your product is a
good choice.
Show how
others use it and
like it.
Example:
Influencer posts
a sandwich
recipe that her
Make it easy for
consumers to
buy/try your
product.
Example:
Influencers with
gluten-free blogs
write posts about
your bread.
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Example:
Influencers write a
review of your
bread explaining
why it’s a safe choice for glutenfree diets.
Example:
Influencers give
away coupons for
your bread via
special offers.
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kids love, which
uses your bread.
Most likely to
respond to
these influencer
marketing
offers
Content should be
focused on buyers’ pain points (not your
brand or product).
Consumers become
aware of your
product via:
• In-store product
experience
•Expert
recommendations
via blogs, podcasts,
videos
• Infographics • Recipes • Articles • Product reviews
Explain to
consumers how your
product satisfies
their purchase
criteria through:
• Blog posts • Demonstration videos
• Articles • Product reviews • Word-of-mouth
recommendations
Justify why your
product is a good
choice using:
• Blog posts • Recipes
• Videos • Contests • Shared content • Expert and user reviews
Make it easy for
consumers to buy
your product with:
• Coupons • Online stores
3.5 IDENTIFYING TARGET MARKETS AND MARKET SEGMENTS
As it is not possible for organisations to satisfy the needs of all consumers, the market is
divided into segments that have similar characteristics and behaviours, and which are
manageable and meaningful (Du Plessis et al, 2012: 127). Market segmentation enables
organisations to better serve customers’ needs and wants, achieve higher profits, create opportunities for growth, ensure sustainable long term customer relationships, facilitate
targeted communication, stimulate innovation, and achieve higher market shares (Du Plessis et
al, 2012: 127 – 128).
The target market refers to “a market segment (group of customers) that share common needs or characteristics that an organisation will target with its market offering / marketing mix, also
called a target audience” (Du Plessis et al, 2012: 137).
Kotler and Keller (2012:236) confirm that a market segment consists of a group of customers
who share a similar set of needs and wants. The marketer does not create the segments. The
marketer’s task is to identify the segments and decide which one(s) to target.
The process to be followed to achieve market segmentation and targeting is shown in Figure
3.6.
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Market Segmentation & Targeting
Figure 3.6:
1
Define & Describe the Total Market
2
Analyse the Consumers’ Needs & Characteristics
3
Identify Bases for Market Segmentation
4
Profile the Market Segments
5
Identify the Target Market
6
Select Attractive Market Segments
Market Segmentation & Targeting (Du Plessis et al, 2012: 126)
In defining target segments, four types of business customers can often be identified, with
corresponding marketing implications. These are:
1. Price-orientated customers (transactional selling)
2. Solution-orientated customers (consultative selling)
3. Gold-standard customers (quality selling)
4. Strategic-value customers (enterprise selling)
Segmenting Consumer Markets
Kotler and Keller (2012) put forth four groups of variables that marketers can use to segment
consumer markets, as per Figure 3.7. Regardless of which type of segmentation scheme is
employed, the key is that the marketing programme can be profitably adjusted to recognise
customer differences.
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Figure 3.7: Consumer Market Segmentation
Geographic
Demographic
Psychographic
Behavioural
Geographical
units
Countries
Regions
Age & Stage in
Life Cycle
Family Size
Race
Gender
Income
Occupation
Education
Religion
Generation
Nationality
Personality &
Self-Concept
Lifestyle &
Values
Occasions
Benefits
Use of
/Response to
the Product
User Status
Buyer
Readiness
Attitude
Loyalty
Social class
The Conversion Model
The Conversion Model, Figure 3.8 below, has been developed to measure the strength of the
psychological commitment between brands, consumers, and their openness to change. The
model postulates that the entrenched and average users are secure users of the brand, while
the shallow and convertible users are classified as vulnerable users. On the spectrum of nonusers, brand managers can target the available and ambivalent consumers for conversion with
little or no effort being placed on the strongly un-available consumers.
Dholakiya (2013) asserts that there are 7 crucial elements that play a critical role in conversion,
namely:
Catalyst: What is the user’s motivation and traffic source?
Value – How unique, specific, and relevant is the solution for the user?
Usability: How intuitive is the user experience?
Persuasion: How clear is the value proposition, and what is the incentive to act on it?
Confidence: How much anxiety does the user have, and can they trust the brand?
Aesthetics: How does the appearance of the site impact their decisions?
Interactivity: How much does the site and the company respond to the user’s actions and individual needs?
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COMMITMENT
OPENESS TO TRYING THE BRAND
L
LOW
LOW
L
HIGH
HIGH
Figure 3.8:
Conversion Model (Hofmeyr & Rice, 2000)
ACTIVITY 3.4
Based on Figure 3.8 above, using suitable examples, develop strategies that will facilitate the
conversion for the various users and consumers.
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Segmenting Business Markets
Business markets can be segmented with some of the variables used in consumer market
segmentation but business marketers also use other variables.
Table 3.3 lists the major questions that business marketers should ask in determining which
segments and customers to serve.
Table 3.3: Segmenting for Business Markets (Kotler and Keller, 2012:252)
Segment
Criteria Used
Demographic
Industry: Which industries should we serve?
Company size: What size companies should we serve?
Location: What geographical areas should we serve?
Operating variables
Technology: What technologies should we focus on?
User/Non user status: Should we serve heavy, medium, light users or nonusers?
Customer capabilities: Should we serve customers needing many or few
services?
Purchasing
Purchasing-function organisation: Should we serve companies with highly
Approaches
centralised or decentralised purchasing organisations?
Power structure: Should we serve companies that are engineering
dominated, financially dominated and so on?
Nature of existing relationships: Should we serve companies with which we
have strong relationships or simply go after the most desirable companies?
General purchase policies: Should we serve companies that prefer leasing?
Service contracts? Systems purchases? Sealed bidding?
Purchasing criteria: Should we serve companies that are seeking quality?
Service? Price?
Organisational
Urgency: Should we serve companies that need quick and sudden delivery
Factors
or service?
Specific application: Should we focus on certain applications of our product
rather than all applications?
Size of order: Should we focus on large or small orders?
Personal
Buyer-seller similarity: Should we serve companies whose people and values
Characteristics
are similar to ours?
Attitudes towards risk: Should we serve risk-taking or risk-avoiding
customers?
Loyalty: Should we serve companies that show high loyalty to their
suppliers?
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Market Targeting
Once the firm has identified its market-segment opportunities, it has to decide how many and
which ones to target. It is vital for marketers to ensure that the segments are useful and
effective. Marketers are increasingly combining several variables in an effort to identify smaller,
better-defined target groups. This has led some market researchers to advocate a needsbased market segmentation approach.
Effective Segmentation Criteria
Selecting Segments
Measurable
Single-segment concentration
Substantial
Selective specialisation
Accessible
Product specialisation
Differentiable
Market Specialisation
Actionable
Full market coverage
There are four specific targeting strategies:
1. Niche or Concentration Strategies – focus on a single substantial segment and avoid
direct competition with large competitors, for example, Jimmy Choo and Lamborghini.
2. Mass Marketing Strategies – focus is on the entire market with one undifferentiated
offering, for example flour, sugar, bread and milk.
3. Differentiated Marketing Strategies – target two or more segments with different value
propositions, positioning and products, for example Spar stocks different brands for
different income segment customers.
4. Growth Market Strategies – focus on a few high-growth product-market segments.
(Venter & Jansen van Rensburg, 2015: 150)
Once the target segment is chosen, companies need to decide how they will position
themselves in that segment.
3.6 POSITIONING
Positioning a company, product or brand successfully in the desired target market, involves
three stages as per Figure 3.9 below.
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Positioning concepts is the position the company would like the product, brand or company to
occupy in the hearts and minds of customers that will set them apart from their competitors.
Positioning concepts may be functional, symbolic or experiential. Apart from this, companies
can position based on a number of other aspects, such as: product features, product benefits,
heritage, manufacturing process, ingredients, endorsements, competitive comparison,
environmental friendliness, value for money and service.
Figure 3.9:
Three Key Stages in Strategic Positioning
Source (Venter & Jansen van Rensburg, 2015: 152)
Positioning strategy coordinates the elements in the marketing mix so that positioning
objectives are attained. It is vital to tailor the offerings and service requirements to the customer
needs in each segment by employing CRM strategies. It is paramount that customer facing
staff be familiar with the positioning strategy and what it entails.
Positioning effectiveness is measured through pre-testing (concept testing, test marketing,
market research and market intelligence) and post-testing (market research) to ascertain if the
positioning objectives have been met
Positioning maps are a graphical representation of how the organisation, products, and or
brands are positioned using various attributes such as price, quality, performance,
attractiveness, innovation etc. against the relative competitor as per Figure 3.10.
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High Price
G
D
A
C
Low Quality
High Quality
E
F
Low Price
Figure 3.10: Positioning Map
ACTIVITY 3.5
Create a positioning map for the major retail outlets in your country or region.
3.7
CONNECTING WITH CUSTOMERS IN EMERGING MARKETS
3.7.1
The Emerging Market Consumer
“Multinationals have been slow to understand consumers outside Europe and North America” (D’Andrea, Marcotte & Morrison, 2010: 115 – 120). Research conducted in large retailers in six
emerging markets found the following:
The Demographic Middle: While in developed countries a mass market for a
sophisticated new product could be created through “first winning the approval of early adopters in the upper segments of the pyramid and then simplifying the offering and
reducing the price until the product is accepted by the much larger segments at the
bottom.” (D’Andrea et al, 2010: 116). However, in emerging markets this strategy is taking
effect as the growing ‘Black Diamonds’ and increasing ‘pink market’ seek to be trendsetters and associated with elite-ness.
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Mostly the Cheapest: While developed market consumers tend to buy across the
spectrum of price, within emerging markets consumer focus is on purchasing mostly the
cheapest and a little of the best (D’Andrea et al, 2010:17). With the growing middle class, this spectrum is changing as consumers are looking for status driven quality goods.
Lack of Product Knowledge: While consumers in developed economies tend to have
considerable product knowledge, within emerging economies consumers tend to be less
sophisticated and lack product knowledge. Sales assistants also lack product knowledge
and are therefore unable to adequately assist consumers’ queries about the product. However, with the internet this is changing.
Focus on Quality, Not Status: While in advanced economies, brands are used as status
symbols, in the low-end segments of emerging economies “the allure of status isn’t enough
to induce consumers to buy” (Ichii et al, 2010: 116). Therefore, marketing strategies built
on the status afforded by the product / service may not be successful. However due to the
growing middle class, Black Diamonds, the pink markets, improved education levels and
globalisation is taking effect within emerging markets as consumers want to be like those of
the developed markets.
Rapidly Changing Markets: While the consumer base is growing constantly, retailers
have to deal with this growth together with the challenges presented by rapidly changing
markets, including safety, lack of transportation and arranging credit (Ichii et al, 2010: 116).
To address these challenges, companies within emerging markets need to aim at the low-end
segment of customers; adapt to consumer habits by catering for the demand for the cheapest;
do not just focus on selling, but on educating consumers about the product as well; focus
brands appropriately; and develop flexibility enabling rapid transformation of the company when
necessary (D’Andrea et al, 2010: 120).
Cant et al. (2014:661) indicates that to conduct business effectively in developing markets,
companies should ensure
1. Products should be affordable yet maintaining good quality levels;
2. The needs of majority of the consumers in the country should be met with a
specific product;
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3. There should be convenient distribution networks;
4. Consumers are educated on the product;
5. The need for maintenance is low; and
6. Focus is on economies of scale.
3.7.2
Consumer Characteristics and Buying Behaviour in Emerging Markets
Cant et al (2014: 648) highlight the following about the characteristics and buying behaviour of
the emerging market consumer:
Middle class consumers are of key importance within emerging markets due to their strong
purchasing power.
Consumers from different countries have divergent characteristics, as do consumers
among the different segments of the same market. Different nationalities / ethnicities within
a particular country also have dissimilar preferences.
Market research is essential to understanding market segmentation in developing
countries, however most market research has been focused on developed countries.
Bottom of the pyramid customers - close to 4.5 billion of the poorest people live in
emerging and developing markets representing a $15 trillion economy, which is largely
untapped.
Consumers in emerging markets purchasing patterns, products, packaging and size of
purchases is influenced a lot by travel times and distances.
The high income group of black consumers, especially in South Africa, is increasing rapidly
and will be the dominant consumers in the high LSM groups 9-10. The preferences of this
group will not become similar to the high income white consumers.
There is a growing trend for branded products especially among black middle-income
consumers.
3.7.3
Market Segments and Targets
Ichii, Hattori & Michael (2012: 126) indicate that one of Japan’s shortcomings in competing in emerging markets is their tendency to focus on the top customer market segment, rather than
the middle and low-end segments, in which economies of scale could be achieved and profits
could be made. On the other hand, a company like LG’s (South Korean) decision to compete in
low-end customer market segments has proven to be successful in that “its extensive presence has given it bargaining power with retailers and distributors and has lowered its sales and
marketing costs.” (Ichii et al, 2012: 127).
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Going forward therefore, Japan so as to succeed in emerging markets needs to “re-examine
their stance on the consumer pyramid” (Ichii et al, 2012: 130).
3.7.4
China’s ‘Good Enough’ Market
Gadiesh, Leung & Vestring (2007: 82) assert that “given China’s share of the global market growth and the country’s role in preparing companies to pursue opportunities in other
developing regions, it’s becoming clear that businesses wanting to succeed globally will need to win in China first.” Winning in China requires that companies successfully compete in the
middle market segment, also known as the ‘good enough’ market segment in that companies do not need to strive for perfection, but rather need to produce a new product / service which is
good enough to make inroads into the existing competition (Gadiesh et al, 2007: 82). This is
particularly important as Chinese customers are “becoming less willing to shell out 70% to 100% premiums for international products...At most they may pay 20% to 30% more for worldclass brands” (Gadiesh et al, 2007: 87).
3.7.5
Africa’s Consumers
South Africa: Low-Income Consumers
There has been limited empirical research on consumer behaviour in South Africa (Jacobs &
Smit, 2010:11), and even less has been conducted into low-income consumerism. Research
by Jacobs & Smit (2010: 11) found that South Africa’s low income consumers are highly
materialistic. Low-income consumers also base their consumption decisions on affordability
rather than price. For example, a low-income consumer would rather pay R1000 for an
appliance through instalments over six months than pay R500 cash, as the instalment monthly
payment is more affordable than R500 upfront.
South Africa: High-Income Consumers
Cant et al (2014: 651) points out that the high-income group of black consumers in South Africa
is increasing at 20% per year, and in the next few years it is forecasted that they will dominate
this high income group. Currently within South Africa, the dominant customer group is the black
middle-income group. Furthermore, one of the key differences between black and white
consumers is that they differ significantly on brand preference (Cant et al, 2014: 651).
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Africa’s Business Consumers
Research conducted by Darley & Blankson (2008:374) highlighted the following regarding
interactions with business consumers in Africa:
The principle of reciprocity is inherent to African culture.
Respect for the elderly is important in buyer-seller interactions
The terms of collaboration for partnerships should be reached through consultation and
consensus.
A high-ranking employee team is important during negotiations.
In negotiations, a focus on a win-win outcome and a long-term relationship is preferred
(Darley & Blankson, 2008: 374)
3.7.6
Targeting Bottom of the Pyramid (BoP) Customers
Bottom of the pyramid customers are the poorest of the consumers in the market. Cant et al.
(2014:649) indicates that there are more than 4 billion people in emerging markets that can be
classified as being the poorest consumers in the market that is largely untapped rendering an
extraordinary opportunity for the company’s market expansion and bottom line growth not only because of the goods that is consumed but also as to what goods these people can produce.
The Global Business Summit Report, 2008, says that to realise this potential companies need
to bring needed services to these communities such as health care, water and sanitation,
education, finance.
Multinationals have identified the gold mine of an opportunity to increase profitability however
to achieve to profitability, it is suggested that the product must be sold in very high volumes at
extremely low prices with margins being low. High market penetration is paramount.
The authors go on to say that, for business to be successful targeting BoP customers, it is vital
that:
The company find business solutions to the problems stated above, providing
employment and upliftment to the community thereby creating trusted relations with the
communities.
The company has leverage of an existing infrastructure serving the middle to high
income markets;
The consumers are educated as to how to buy and use the products;
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The company must familiarise its self with the differences relating to culture, social
norms, language, religion, historical boundaries, work ethics, thereby aligning their
strategies accordingly.
The company must understand the differences between the consumers and identify
the right target markets and consumers thereby aligning the product and marketing
communications accordingly.
The company takes into cognisance distance as time and distance to travel to the
outlet affects purchasing decisions. Due to poor infrastructure and long distances, it is
essential to develop an efficient procurement and distribution model.
The company is to remove the stereo type notion that ‘Africa is corrupt’ as there is an improved focus on eliminating corruption and improving business conditions.
The company is to improve on its cost structures and processes to increase efficiency
and competitively cheaper priced products/services.
The company should partner with the communities and stores in the communities
termed social innovation to improve on the distribution networks, IT innovation and
customer –buy-in.
The company should seek in their initiatives to deliver social value, economic value
and human values to the targeted communities.
According to the website focused on the BoP strategies (www.thebopstrategy.com), an article
by C.K. Prahalad (2011), marketers can use the 4 A’s to capture the bottom of the pyramid
customers, while Niti Bhan from Emerging Future Labs proposes the 5 D’s, as follows:
4 A’s
Awareness: Create awareness of the product/service and ensure the customer
understands how to use it and where to find it.
Access: Make sure the customers can access this product as access in terms of
logistics and infrastructures is difficult in these markets.
Affordable: Ensure the product is affordable to the market, often selling it at low
margins.
Available: Ensure there is consistent supply of the product and as a company be
available to address the customer’s needs at any time.
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5 D’s
Development: Ensure the product/service creates value to the customer.
Design: BoP customers are not trapped in western style tastes, thus redesigning and
adapting the offer to the local market is vital.
Distribution: Employ creative innovative distribution channels to ensure the product is
accessible and available at the lowest cost.
Demand: Demand in this aspect is about human-centred analysis i.e. how should the
company design and manage its advertising and communications that will appeal and
resonate with the BoP customer.
Dignity: Ensure the product/service is designed in a manner that the customer deprives
a higher status appeal and one that does not highlight their current economic situation
ACTIVITY 3.5
To help you apply the theoretical knowledge gained, read and answer the caselets in the
various chapters of the prescribed text, Kotler and Keller (2016).
Have You Completed the ‘Essential Reading’ for this Chapter?
Now that you have been introduced to this chapter on a “Connecting with Customers”, source and work through the textbook chapters and journal articles
listed in the “Essential Reading” list at the beginning of this chapter. It is essential that you
read all of the textbook chapters and journal articles listed.
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QUESTIONS FOR REFLECTION
After completing your study of this chapter on ‘Connecting with Customers’, reflect
on the following questions. (To adequately address these questions you will need to
have completed all the ‘Essential Reading’ listed at the beginning of this chapter.)
1. Critically discuss the characteristics of the emerging market consumer, as detailed by
D’Andrea, Marcotte & Morrison (2010). To what extent do you have the same characteristics as D’Andrea’s emerging market consumer?
2. Using to appropriate examples, discuss how individual consumer marketing is different
from business to business marketing.
3. Critically discuss Japan’s reluctance to compete within the low-end and middle
consumer markets, as described in Ichii, Hattori & Michael’s (2012) article. 4. Compare and contrast the characteristics of South Africa’s low-income consumers, as
well as the country’s high-income consumers and their purchase behaviours. Provide
the resulting managerial implications.
5. Assess your organisation’s CRM strategy and database and provide suitable recommendations for the gaps identified.
6. Select any two related products or brands or your choice and compare them in terms
of their positioning concept, positioning strategy. Use a perceptual positioning map to
depict their respective positions.
7. Critically evaluate how globalisation has impacted on segmentation and targeting and
how marketers are responding to these changes.
8. Develop a strategy to cultivate customer relations at your organisation.
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CHAPTER 4: BUILDING STRONG BRANDS
SPECIFIC LEARNING OUTCOMES
The overall outcome for this chapter is that, on its completion, the student should be able to
demonstrate a holistic understanding of the building of strong brands within advanced and
emerging economies. This overall outcome will be achieved through the student’s mastery of the following specific outcomes:
1.
Explain and analyse the concept of a branding.
2.
Discuss and apply the concept of brand equity.
3.
Evaluate and discuss approaches to building, measuring and managing brand equity.
4.
Develop an impactful brand strategy.
5.
Critically discuss the achievement of brand equity within emerging markets.
6.
Explain and apply the concept of brand positioning.
7.
Analyse the factors impacting on brand positioning.
8.
Develop, establish and analyse a brand’s positioning.
9.
Analyse a brand’s competitive environment.
10.
Indicate how to achieve brand differentiation.
11.
Understand and implement effective brand positioning and brand management within
emerging markets.
12.
Identify marketing strategies which will enable market leaders to maintain and
enhance their existing position within the market.
13.
Identify marketing strategies to enable market followers, market niches and market
challengers to effectively compete within the marketplace.
14.
Implement marketing strategies appropriate to each stage of the product life cycle.
15.
Identify and critically discuss competitive marketing strategies for companies
competing in emerging markets.
16.
Develop marketing strategies appropriate for periods of economic downturn.
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ESSENTIAL READING
Students are required to read ALL of the textbook chapters and journal
articles listed below.
Textbooks:
Kotler, P. & Keller, K.L. (2016) Marketing Management. Essex: Pearson Education.
Chapter 11: Creating Brand Equity
Chapter 10: Crafting the Brand Positioning
Chapter 12: Meeting Competition and Driving Growth
Cant, M.C., Van Heerden, C.H. & Ngambi, H.C. (2014) Marketing Management. A
South Africa Perspective. Cape Town: Juta.
Chapter 7: Branding Decisions
Journal Articles:
Johnson, B. (2011) “The CEO of Heinz on Powering Growth in Emerging Markets.”
Harvard Business Review. October 2011, pp 47 – 50. (available from EBSCO).
Oyeniyi, O. (2010) “Consumer Evaluation of Brand Extension: The Nigerian Perspective.” African Journal of Business & Economic Research. 5 (1), pp 51 – 68.
(Available from Sabinet).
Priilaid, D. & Van Rensburg, P. (2012) “The Hedonic Valuation of South African Wine Brands.” South African Journal of Business Management. 43 (1), pp 11 – 31) (available
from Sabinet).
Schultz, D.E. (2008) “Branding from Emerging Markets.” Marketing Management.
September / October 2008, pp 10 – 11. (available from EBSCO).
Schultz, D.E. (2010) “Emerging Markets Offer Brand Tools.” Marketing Management.
Fall 2010, pp 8 – 9. (Available from EBSCO).
Williamson, P.J. & Zeng, M. (2009) “Value-For-Money-Strategies for Recessionary
Times.” Harvard Business Review. March 2009, pp 66 – 74. (available from EBSCO).
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4.1
INTRODUCTION
In order for organisations to build strong brands, strategic brand management is necessary.
Strategic brand management “combines the design and implementation of marketing activities
and programmes to build, measure and manage brands to maximise their value” (Kotler &
Keller, 2012: 263).
4.2
CREATING BRAND EQUITY
While a “brand” is a “name, term, design, symbol, or any other feature that identifies one marketer’s product as distinct from those of other marketers” (Hult et al, 2012: 366), “brand equity” refers to “the marketing and financial value associated with a brand’s strength in a market” (Hult et al, 2012: 369). As depicted in Figure 4.1, four important elements underpin
brand equity.
Major Elements of Brand Equity
Perceived Brand
Quality
Brand-Name
Awareness
Brand
Equity
Brand
Associations
Figure 4.1:
Brand
Loyalty
Major Elements of Brand Equity (Hult et al, 2012: 369).
Brand equity is the added value endowed to products and services. This value may be
reflected in how consumers, think, feel, and act with respect to the brand as well as the prices,
market share, and profitability that the brand commands for the firm. Brand equity is an
important intangible asset to the firm that has psychological and financial value.
Customer-based brand equity can be defined as the differential effect that brand knowledge
has on consumer response to the marketing of that brand. A brand is said to have positive
customer-based brand equity when consumers react more favourably to a product and the way
it is marketed when the brand is identified as compared to when it is not. Refer to the
prescribed text book for the various brand equity models.
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Keller (2008:60) discussed four steps to building a strong brand:
1.
Ensure identification of the brand with customers and an association of the brand in
customers’ minds with a specific product class or customer need.
2.
Firmly establish the totality of brand meaning in the minds of customers by strategically
linking a host of tangible and intangible brand associations with certain properties.
3.
Elicit the proper customer response to this brand identification and brand meaning.
4.
Convert brand response to create an intense, active loyalty relationship between
customers and the brand.
The four steps represent a set of fundamental questions that customers ask about a brand:
1. Who are you? (brand identification)
2. What are you? (brand meaning)
3. What about you? What do I think and feel about you? (brand response)
4. What about you and me? What kind of association and how much of a connection would I
like to have with you? (brand relationship)
Keller (2012:270) discusses 6 building blocks that have been developed with customers in
order to provide some structure to the building of brands. The building blocks can be best
depicted in the Figure 4.2 while the major strategic branding decisions are depicted in Figure
4.3 below:
ACTIVITY 4.1
Using the CBBE Model:
1. Create a brand strategy for a product of your choice.
2. Evaluate the branding strategy of two competing brands of your choice.
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Stages in Brand
Development
4. Relationships =
What about you
& me
Intense active
loyalty
Resonanc
e
3. Response =
What about you?
2. Meaning =
What are you?
Branding
Objective at Each
Stage
Brand Building
blocks
Judgement
s
Performanc
e
1. Identity =
Who are you?
Positive,
accessible
reactions
Feelin
gs
Points-of-parity &
difference
Imager
y
Deep, broad brand
awareness
Salience
Figure 4.2: Customer –Based Brand Equity Pyramid (CBBE)
Source (Kotler & Keller 2012:271)
Major Brand Strategic Decision
BRAND
POSITIONING
BRAND NAME
SELECTION
BRAND
SPONSORSHIP
BRAND
DEVELOPMENT
Attributes
Benefits
Beliefs &
Values
Selection
Protection
Manufacturer’s brand
Private Brand
Licencing
Co-branding
Line Extensions
Brand Extensions
Multibrands
New Brands
Figure 4.3: Strategic Branding Decisions (Kotler & Armstrong, 2012)
Developing & Establishing a Brand Positioning
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4.3 CRAFTING THE BRAND POSITIONING
In order to create a compelling and well-differentiated brand position, companies need to have
a good understanding of consumer needs and wants, company capabilities, competitive actions
as well as the ability to think creatively.
Positioning is the “act of designing a company’s offering and image to occupy a distinctive
place in the minds of the target market. “The goal is to locate the brand in the minds of the
consumers to maximise the potential benefit to the firm” (Kotler & Keller, 2012: 298). Figure 4.4
highlights the issues which marketers need to consider in deciding on a brand’s positioning. To avoid the commodity trap, marketers must start with the belief that you can differentiate
anything. Brands are often differentiated by their product/services features and benefits.
However, in the present competitive market, companies use a combination of dimensions to
differentiate their offering, namely:
Product attributes and features differentiation
Employee differentiation
Channel differentiation
Image differentiation
Services differentiation
Developing & Establishing a Brand Positioning
Determine
a
Competitiv
e Frame of
Reference
Figure 4.4:
Identify
Optimal
Points-OfDifference
& Points-ofParity
Choose
Points-ofDifference
& Points-ofParity
Develop a
Brand
Mantra
Establish
Brand
Positioning
Developing & Establishing a Brand Positioning (Kotler & Keller, 2012)
Developing & Establishing a Brand Positioning
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4.4 TYPES OF BRANDS ARCHITECTURES
Campbell (1999) differentiates the different types of branding architectures as shown in Table
4.1
Table 4.1: Types of Branding Architectures (Campbell, 1999)
BRAND TYPE
Corporate
EXAMPLES
brand
(manufacture GE
brand or national brand)
STRATEGIC RATIONAL
Strong corporate image is synonymous
BMW
with product class. Not that common in
Heinz
shelf goods, becoming more popular with
technology companies
Licenced brand
Calvin Klein
Used commonly is the fashion industry.
Guess
Manufacturers licence the name for
clothing goods and brand extend into
areas such as sunglasses and umbrellas
House brand
(family
brand,
Cadillac
range
brand, Chevrolet
distributor brand, store brand)
Buick
Includes several product classes. Used by
diversified companies allowing subsidiary
to operate as its own entity and target
specific market segments. Also used when
two product lines are incompatible (i.e.
Honda and Acura – economy vs. luxury)
Dual Brands
Ford Taurus
Combining the corporate brand with strong
(family brands, endorser brands
Ford Mustang
sub-brand. Sub-brands can help
Clairol herbal
differentiate and boost corporate brand
Essence
and drive brand preference. Sub-brands
Nestle
can become
Brand Portfolio
The brand portfolio is the set of all brands and brand lines a particular firm offers for sale to
buyers in a particular category. Different brands may be designed and marketed to appeal to
different market segments. A brand portfolio must be judged by its ability to maximise brand
equity. The optimal brand portfolio is one where each brand maximises equity in combination
with all other brands in the portfolio.
In general, the basic principle in designing a brand portfolio is to maximise market coverage, so
that no potential customers are being ignored but to minimize brand overlap, so brands are not
competing to gain customer approval.
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Each brand should be clearly differentiated and appealing to a sizable enough marketing
segment to justify its marketing and production costs. Brand portfolios need to be carefully
monitored over time to identify weak brands and kill unprofitable ones.
Besides these considerations, there are a number of specific roles that brands can play as part
of a brand portfolio: Flankers (fighter brands); Cash Cows (profitable brands; High-end Entry
Level (prestige brands) and Low-end Entry Level (Low priced brands.
ACTIVITY 4.2
1. Discuss the significance of companies creating the various brands, such as flankers, cash
cows etc. as stated above.
2. Using one of Unilever’s brands as an example or any brand of your choice, tabulate their various products that will fall under the flanker, cash cow, high-end entry level and low-end
entry level categories.
4.5 MEASURING BRAND EQUITY
Given that the power of a brand resides in the minds of consumers and how it changes their
response to marketing, Kotler and Keller (2012:277) identify two basic approaches to
measuring brand equity. An indirect approach—assesses potential sources of brand equity by
identifying and tracking consumer brand knowledge structures. A direct approach—assesses
the actual impact of brand knowledge on consumer response to different aspects of the
marketing. The two general approaches are complementary and marketers can employ both.
There are important factors that marketers should know about brand equity.
They should fully understand:
•
The sources of brand equity and how they affect outcomes of interest
•
How these sources and outcomes change over time
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Brand Audits
To better understand their brands, marketers often need to conduct brand audits. A brand audit
is a consumer-focused exercise that involves a series of procedures to assess the health of the
brand, uncover its sources of brand equity, and suggest ways to improve and leverage its
equity. The brand audit can be used to set the strategic direction for the brand.
Brand Inventory
The purpose of the brand inventory is to provide a current, comprehensive profile of how all the
products and services sold by a company are marketed and branded. Profiling each product or
service requires identifying all associated brand elements as well as the supporting marketing
programme.
As part of the brand inventory, it is also advisable to profile competitive brands in terms of their
branding and marketing efforts. The brand inventory helps to suggest what consumers’ current perceptions may be based on. Marketers can assess the consistency of all the different
products or services sharing a brand name.
Brand Exploratory
The brand exploratory is research activity conducted to understand what consumers think and
feel about the brand and its corresponding product category to identify sources of brand equity.
Several preliminary activities are useful for the brand exploratory. A number of prior research
studies may be relevant. It is useful to interview company personnel to gain an understanding
of their beliefs about consumer perceptions. The brand exploratory often employs qualitative
research techniques such as word associations, projective techniques, visualization, brand
personifications, and laddering. Many firms are now using ethnography to supplement
traditional focus groups.
Brand Tracking
Tracking studies collect information from consumers on a routine basis over time.
Tracking studies employ quantitative measures to provide marketers with current information
as to how their brands and marketing programmes are performing on the basis of a number of
key dimensions.
Brand Valuation
Tracking studies are a means of understanding where, how much, and in what ways brand
value is being created.
4.6 MANAGING BRAND EQUITY
Effective brand management requires a long-term view of marketing decisions.
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Brand Reinforcement
As the company’s major enduring asset, a brand needs to be carefully managed so that its value does not depreciate. Brand equity is reinforced by marketing actions that consistently
convey the meaning of the brand to consumers in terms of:
•
What products the brand represents?
•
What core benefits it supplies?
•
What needs it satisfies?
•
How the brand makes those products superior?
•
Which strong, favourable, and unique brand associations should exist in the minds of
consumers?
Reinforcing brand equity requires innovation and relevance throughout the marketing
programme. Marketers must introduce new products and conduct new marketing activities that
truly satisfy their target market. An important consideration in reinforcing brands is the
consistency of the marketing support the brand receives, in terms of both amount and kind. In
managing brand equity, it is important to recognise the trade-offs between those marketing
activities that fortify the brand and reinforce its meaning and those that attempt to leverage or
borrow from existing brand equity to reap some financial benefit.
Brand Revitalization
Changes in consumer tastes and preferences, the emergence of new competitors or new
technology, or any new development in the marketing environment could potentially affect the
fortunes of a brand. Reversing a fading brand’s fortunes requires either that brands “return to their roots” and lost sources of brand equity are restored or that new sources of brand equity
are established.
Often, the first place to look in turning around the fortunes of a brand is to understand what the
sources of brand equity were to begin with. To refresh old sources of brand equity or create
new sources, two main approaches are possible: Expand the depth and/or breadth of brand
awareness by improving consumer recall and recognition of the brand during purchase or
consumption settings and improve the strength, favourability, and uniqueness of brand
associations making up the brand image. This approach may involve directing at existing or
new brand associations.
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Brand Crisis
Marketing managers must assume that at some point in time, some kind of brand crisis will
arise. In general, the more that brand equity and a strong corporate image has been
established, the more likely it is that the firm can weather the storm. In terms of swiftness, the
longer it takes a firm to respond to a marketing crisis, the more likely it is that consumers can
form negative impressions as a result of unfavourable media coverage or word-of-mouth
(Kotler and Keller, 2012:338).
TALKING POINT
Capitalism rests on simple, predatory logic – weak brands must die and strong brands must kill
them. Only then will the consumer be served and the market improve or progress. Do you
agree? (http://www.brandingstrategyinsider.com/)
4.7 COMPETITIVE DYNAMICS
Competitive dynamics impact an organisation’s products and brands, requiring that companies respond by reformulating their marketing strategies and offerings. An overview of the various
strategies that companies may adopt to maintain their market share is provided in Figure 4.5,
while Figure 4.6 displays the basic market position.
Marketing Strategies addressing Competitive Dynamics
Strategies for
Market Leaders
Expanding Total
Market Demand
Protecting Market
Share
Increasing Market
Share
Figure 4.5:
Other Competitive
Marketing
Strategies
Product Life-Cycle
Marketing
Strategies
Market-Challenger
Strategies
Market-Follower
Strategies
Market-Nicher
Strategies
Introduction Stage /
Pioneer Advantage
Growth Stage
Maturity Stage
Decline Stage
Marketing Strategies to address Competitive Dynamics
Economic
Downturn
Marketing
Strategies
Explore Upside of
Increasing
Investment
Get Closer to
Customers
Review Budget
Most Compelling
Value Proposition
Fine Tune Brand
Source: (Kotler & Keller, 2012: 321 – 345)
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Expanding the total market
Offensive Tactics
Expanding market share
Leaders
Defensive Tactics
Protect the current market
share
Frontal attack
Offensive Tactics
Challengers
Flanking attack
Encirclement attack
Bypass attack
Guerrilla attack
Following closely
Following a Leader
Nichers
Following selectively
Followers
Defending against
Challenger
Get smart by specialising in
One type
of enduser
Customer-size
group
Following at a distance
Keep manufacturing cost low
Keep product quality high
Enter new markets
Few specific
customers
Figure 4.6: Competitor Positions Tactics (West et al., 2015:129)
4.7.1 Sustainable Competitive Advantage (SCA)
Competitive advantages occurs when an organisation successfully formulates and executes
business strategies that have given them leverage in the market due to it being customer
focused, and providing greater value to the customer and the organisation than the strategies
employed by the competitor. SCA implies that the organisation was able to sustain leadership
in the market whereby competitors have stopped trying or failed to imitate the organisations
value adding strategies.
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The three generic forms of global competitive advantage are:
1. Ownership-based – organisation has ownership of a valuable asset or factor or strong
market position which may have both local and global competitive advantage – e.g.
Toyota International
2. Access- based – organisation has superior access to a factor of production or product
market – e.g. KFC franchises
3. Proficiency-based – organisation has superior knowledge, competence or capabilities
in relation to its competitors – e.g. Coca Cola’s secret recipe syrup. (Venter & Jansen
van Rensburg, 2015: 172)
Ma’s model of global competitive advantage is based on the four Cs:
Competition
Creation and innovation
Co-operation
Co-option
Figure 4.7: Ma’s Model for Global Competitive Advantage Source: (Venter & Jansen van Rensburg, 2015: 173)
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4.8 PRODUCT LIFE-CYCLE MARKETING STRATEGIES
A company’s positioning and differentiation strategy must according to Kotler and Keller
(2012:332), change as the product, market, and competitors change over the product life cycle
(PLC). Products have a limited life. Product sales pass through distinct stages, each posing
different challenges, opportunities, and problems to the seller. Profits rise and fall at different
stages of the product life cycle. Products require different marketing, financial, manufacturing,
purchasing, and human resource strategies in each life-cycle stage, as per Table 4.2. In
addition, marketers must target specific consumers to adopt their new product, as shown in
Figure 4.8.
Table 4.2: Product Life Cycle Objectives and Strategies (Kotler & Armstrong, 2012)
STRATEGIES
INTRODUCTION
GROWTH
MATURITY
DECLINE
Product
Offer a basic
product
Diversify brand
and models
Phase out weak
items
Price
Use cost-plus
pricing
Offer product
extensions,
service and
warranty
Price to penetrate
the market
Distribution
Selective
distribution
Intensive
distribution
Advertising
Build product
awareness among
early adopters and
dealers
Use heavy sales
promotion to entice
trial
Build awareness
and interest in
mass market
Sales
Promotion
Marketing
Objectives
93
Create product
awareness and trial
Reduce to take
advantage of
heavy customer
demand
Maximise marketshare and
increase
competitive
strategies
Price to match or Cut price
beat the
competitors
Increase intensive Go selective –
distribution
phase out
unprofitable
outlets
Stress brand
Reduce to level
differences and
needs to retain
benefits
hard-core loyals
Increase to
encourage brand
switching
Reduce to
minimal level
Maximise profits
while defending
market-share:
modification of
the market,
product &
marketing mix
Reduce
expenditure and
maintain,
reposition,
harvest or drop
the product
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Figure 4.8: Technology/New Product Adoption Cycle (ARSC 2000)
Marketing Strategies for Growth Markets
The following strategies can be used to grow markets that are in the growth and mature stages
of the PLC as per Table 4.3
Table 4.3: Growth Strategies (Venter & Jansen van Rensburg, 2015: 184)
Market
Growth of existing product
Increase market share of the organisation
penetration
in existing markets
Increase usage of the product
Offer incentives, discounts
Product
Growth by introducing new
development
products
in
existing
markets
Packaging size variations
Adjusting the ingredients in the product
Add product feature variations
New generation innovative products
Market
Growth in new markets
Expand geographically
development
using existing product
Target new segments & target markets
Diversification
Growth in new markets by
Related diversification
new products
Unrelated diversification
Marketing Strategies for very Mature & Declining Markets
Very mature saturated markets is usually characterised by lower sales and reduced profits. A
marketer can opt for any of the strategies below to help revitalise the market segment and
reduce profit losses:
1. Revitalise the market using a product, marketing or market modification
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2. Milk or harvest the product lines and channels
3. Being a profitable survivor by capturing competitors customers as competitors exist the
market
4. Target laggards
5. Exist or liquidate
Venter and Jansen van Rensburg (2015:193) indicate that the use of multiple strategies may
cause confusion to management therefore it is important for marketers to evaluate the available
strategic options. Generic testing criteria can be employed, as per Figure 4.9.
Figure 4.9:
Generic Testing Criteria for Different Strategies
Source: (Venter & Jansen van Rensburg, 2015: 193)
ACTIVITY 4.3
1. Compare and contrast at what stages in the PLC are these brands/products: Apple watches,
Coca Cola, 8ta, CDs, newspaper, Ariel washing powder and Mxit, and the resulting marketing
strategies to sustain the brand/product.
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2. Within the corporate world, however, the name Coca-Cola an Apple keeps cropping up when
you mention innovation. Research these two brands and evaluate the various innovation ideas,
products, marketing initiatives they had employed.
4.9 BUILDING STRONG BRANDS IN EMERGING MARKETS
Schultz (2010: 9) points out that “emerging markets are where the brand action is today, and likely will be in the future. And that means new tools, new approaches and new methodologies
that may not have been tested or tried before, but are mandatory in this new global world of
brand marketing. In emerging markets, brand managers play on a different surface, with
different alternatives, using limited tools against a different set of competitors.” Schultz (2010:
9) also emphasises that “it’s an arena where textbook examples or management cases either don’t apply or don’t work, or where tools needed to develop classic brand management decisions simply don’t exist.” (Schultz, 2010: 9).
4.9.1
Different Branding Models
Schultz (2008: 10) argues that while many companies operating within emerging markets are
seeking to become the next big global brand, their efforts are often unsuccessful. While there
have been some notable successes (e.g. Haier from China, Infosys from India, Embracer from
Brazil), there have been many failures as well. The different branding models include:
Industrial Development Model: Within the advanced economies, over the past 200
years, branding has typically been driven by the industrial development model. In these
economies, brands are generally culture-driven.
Transition Branding Model: Within the last 40 years, a transition branding model has
influenced branding in countries such as Japan and Korea. As natural-resource-poor
countries, domestic companies have “imported raw materials, processed them and turned them into copies or improvements of products originally developed in traditional industrial
markets” (Schultz, 2008: 11). These brands are culture-free.
Emerging Market Model: This is a hybrid of the industrial development model and the
transition branding model, and has been implemented through three approaches:
o Countries and firms sell their natural resources, in an unbranded state, to processing
companies in advanced economies (e.g. Russia, Eastern Asia, Middle East and
Africa, with the exception of a few precious stones, metals and beer from South
Africa).
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o Chinese companies purchase raw materials and manufacture branded products, not
for their own company or country, but for advanced economies.
o Indian companies have become skilled in importing raw materials and turning them into
Indian branded products, which are sold both domestically and around the world.
Their products are modelled on existing industries, but they have added ‘service’ to differentiate their product offering. Such service ranges from customer service to
technical support to back-of-the-house operations.
Schultz (2008: 11) concludes by asserting that “at this point, it seems only India and its companies are set to profit from the activities of brands...But only time will tell whether or not
Indian companies, or their compatriots in other emerging economies, can or will optimise their
opportunities.” 4.9.2
Effectively Competing in Emerging Markets: The Case of Heinz
Johnson (2011) details how his company, Heinz, has implemented an effective marketing
strategy within emerging markets and as a result 20% of the company’s revenues will be from emerging markets in 2011, with more than 30% of the company’s revenues expected from
emerging markets in 2015. Johnson (2011) explains how effective brand management was
key to ensuring Heinz’s success in emerging markets.
4.9.3
Marketing in an Economic Downturn: Lessons from Emerging Markets
Williamson & Zeng (2009: 68) assert that the strategies that western organisations used to
employ to counter an economic downturn are likely to be ineffective today as “deregulation, lowering of trade barriers, rapid technological advances, demographic shifts, and greater
urbanisation, the strategies that worked a decade ago are unlikely to do so anymore.
Previously downturns often favoured incumbents which possessed economies of scale and
customer relationships that allowed them to prevail over upstarts. What’s different now is that
companies from several emerging markets are poised to wrest market share from, or even take
over, Western firms” (Williamson & Zeng, 2009: 68). Western firms therefore need to be aware
of the role of the emerging markets and craft strategies that are at least going to protect their
existing market share.
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4.9.4
Building Strong Brands: Examples from Specific Emerging Countries
South Africa: Brand Equity
In the prescribed journal article by Prillaid & van Rensburg (2012) an example of the application
of two brand valuations techniques is provided, as applied to South African wine brands.
Nigeria: Brand Extension
The success of brand extension is not always certain, and research has shown that in Europe
up to 80% of FMCG brand extensions failed. In the absence of research into brand extension
in Nigeria, Oyeniyi (2010) implemented a study to determine consumers’ evaluations of brand extensions using the well known FMCG brands of Lux and Cadbury Bouvita, as well as the
service brands of First Bank and Covenant University. The findings of the study confirmed that
in Nigeria brand extension enhances acceptance of a new product in the market. The higher
the similarity fit between the parent brand and the extended product category, the more
successful the brand extension (Oyeniyi, 2010: 64).
Indonesia
Schultz (2010: 9) details the brand challenges which the company TVS, an Indian-based major
multi-national manufacturer of mopeds and scooters, experienced when entering into the
developing market of Indonesia. Schultz (2010:9) details TVS’s successful approach to dealing with these brand challenges.
ACTIVITY 4.4
To help you apply the theoretical knowledge gained, read and answer the caselets in the
various chapters of the prescribed text, Kotler and Keller (2016).
Have You Completed the ‘Essential Reading’ for this Chapter?
Now that you have been introduced to this chapter on a “Building Strong Brands”,
source and work through the textbook chapters and journal articles listed in the
“Essential Reading” list at the beginning of this chapter. It is essential that you read all of the
textbook chapters and journal articles listed.
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QUESTIONS FOR REFLECTION
After completing your study of this chapter on ‘Building Strong Brands’, reflect on the following questions.
(To adequately address these questions you will need to have completed all the
‘Essential Reading’ listed at the beginning of this chapter.)
1. Assess your organisation’s branding strategy and highlight the key strengths and weaknesses. Thereafter develop a revised branding strategy.
2. Consider the information presented by Wiliamson & Zeng (2009) in their article “Valuefor-Money Strategies for Recessionary Times.”
From your perspective as a South
African student of management, to what extent have you seen companies in this
market “transform the value-for-money equation”?
3. Reflect on the article by Johnson (2011) regarding Heinz’s growth in emerging markets. Critically discuss Heinz’s brand management strategy in emerging markets.
4. Oyeniyi (2010) describes his research into brand extension in Nigeria. Evaluate the
brand extension strategy, and formulate the criteria that would be needed to satisfy in
order to be successful in South Africa’s marketplace?
5. Schultz (2008: 11) concludes by asserting that “at this point, it seems only India and its companies are set to profit from the activities of brands...But only time will tell whether
or not Indian companies, or their compatriots in other emerging economies, can or will
optimise their opportunities.” Assess the validity of this statement and indicate what marketers in other emerging markets should do to optimise their opportunities.
6. Many brands have succumbed too much negative publicity, such as KFC for meat
washing, Nestle Nan for contaminated baby formula, to name a few. Research any of
these incidents and discuss the impact the incident had on the brand and propose how
management can restore brand equity.
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CHAPTER 5: CREATING VALUE (Product, Service, Price)
SPECIFIC LEARNING OUTCOMES
The overall outcome for this chapter is that, on its completion, the student should be able to
demonstrate a holistic and practical understanding of how to shape market offerings within
organisations operating within advanced markets as well as emerging markets. This overall
outcome will be achieved through the student’s mastery of the following specific outcomes:
1.
Critically discuss the formulation of an organisation’s market offering.
2.
Identify and discuss the factors which need to be considered in the formulation of a
company’s product strategy.
3.
Explain and assess product characteristics and product classifications.
4.
Discuss and evaluate the factors impacting on product design.
5.
Critically analyse how marketers can best manage luxury brands
6.
Critically discuss how an organisation should go about building and managing its product
mix and product line.
7.
Explain the use of packaging, labelling, warranties and guarantees as key marketing tools.
8.
Analyse how services differ from products.
9.
Critically discuss the nature and characteristics of services.
10. Critically discuss the factors impacting on an organisation’s delivery of services.
11. Explain how to achieve excellence and quality in services marketing.
12. Explain pricing and the factors that affect pricing.
13. Critically discuss consumers’ processing and evaluation of prices.
14. Determine how a company should set prices for products and services.
15. Critically discuss how a company should respond to a competitor’s pricing strategy.
16. Critically discuss the shaping of the market offering within the emerging market context.
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ESSENTIAL READING
Students are required to read ALL of the textbook chapters and journal
articles listed below.
Textbooks:
Kotler, P. & Keller, K.L. (2016) Marketing Management. Essex: Pearson Education.
Chapter 13: Setting Product Strategy
Chapter 14: Designing & Managing Services
Chapter 16: Developing Pricing Strategies & Programmes)
Cant, M.C., Van Heerden, C.H. & Ngambi, H.C. (2014) Marketing Management. A
South Africa Perspective. Cape Town: Juta.
Chapter 6: Product Decisions
Chapter 8: Pricing Decisions
Journal Articles:
Court, D. & Narasimhan, L. (2010) “Capturing the World’s Emerging Middle Class.” McKinsey Quarterly. Issue 3, pp 12 – 17. (available from EBSCO).
Govindarajan, V. (2012) “A Reverse-Innovation Playbook.” Harvard Business Review.
90 (4), pp 120 – 124. (Available from EBSCO).
Koschate-Fischer, N., Diamantopoulus, A. & Oldenkotte, K. (2012) “Are Consumers Really Willing to Pay More for a Favourable Country Image? A Study of Country-ofOrigin Effects on Willingness to Pay. Journal of International Marketing. 20 (1), pp 19 –
41. (available from EBSCO).
Immelt, J.R., Govindarajan, V. & Trimble, C. (2009) “How GE is disrupting itself.” Harvard Business Review. 87 (10), 56 – 65. (Available from EBSCO).
Singh, R., Ang, R.P. & Sy-Changco, J.A. (2009) “Buying Less, More Often: An Evaluation of Sachet Marketing Strategy in an Emerging Market.” Marketing Review. 9
(1), pp 3 – 17. (Available from EBSCO).
Simanis, E. (2012) “Reality Check at the Bottom of the Pyramid.” Harvard Business
Review. 90 (6), pp 120 – 125. (available from EBSCO).
Van Agtmael, A. (2007) “Industrial Revolution 2.0” Foreign Policy. Jan/Feb, Issue 58,
pp 40 – 46. (available from EBSCO).
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5.1
INTRODUCTION
Marketing planning begins with formulating a competitively attractive marketing offering which
meets the consumers’ key needs and wants. This market offering comprises the product, service and price.
5.2
OVERVIEW: SHAPING THE MARKET OFFERING
5.2.1
Product & Service Strategies
A product may be defined as “a good, a service or an idea that, through the exchange process, satisfies customer’s needs” (Du Plessis et al, 2012: 196). A product can be classified according
to 5 levels, as per Table 5.1. To develop a new product, marketers follow a 7 step process as
per Figure 5.1 below.
Product Levels: The Customer-Value Hierarchy
Table 5.1: Product Levels (Adapted from Kotler and Keller: 2012).
Level
Product Levels
Customer-Value
1
Core benefit
The service or benefit the customer is really buying. Marketers
must see themselves as benefit providers.
2
Basic product
At this the second level, the marketer must turn the core benefit
into a basic product.
3
Expected
At the third level, the marketer prepares an, a set of attributes
product
and conditions buyers normally expect when they purchase this
product
4
Augmented
At this level, the marketer prepares an augmented product that
product
exceeds customer expectations. In developed countries, brand
positioning and competition take place at this level.
5
Potential
At this level, the potential product, which encompasses all the
product
possible augmentations and transformations the product or
offering might undergo in the future. Differentiation arises and
competition increasingly occurs on the basis of product
augmentation. (Kotler and Keller: 2016).
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THINK POINT
Think of products you are familiar with and identify the core product, basic product, expected
product and augmented product.
5.2.2 Product Development
Product development forms a crucial part of the marketing process. The process of product
development involves seven distinct steps. The process followed in developing new products is
shown in Figure 5.1
New Product Development Process
Product Development
Step
Purpose of Step in Product
Development Process
Requirements to Advance to
Next Step
Idea
Generation
Formulate ideas for new
products
Sufficient number of ideas
that could survive screening
Idea
Screening
Review ideas to identify
those with greatest
potential
Ideas have market potential
& meet set requirements
Concept
Testing
Develop concept of idea to
be tested in potential
market
Willingness to buy product
concept by potential market
Business
Analysis
Determine if concept is
financially viable
Product
Development
Test
Marketing
Commercialisation
Develop a prototype and
conduct customer and
functionality tests
Product and marketing mix
elements tested on limited
scale in market
Projected sales, profit &
costs meeting financial
requirements
Prototype successful in both
functional and consumer
tests
Marketing mix elements
successfully tested. Product
accepted by consumers
Product launched onto
market
Beginning of product life
cycle
Figure 5.1: The New Product Development Process (Du Plessis et al, 2012: 222)
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Product Characteristics, Classifications & Differentiation
Product
Levels
Core Benefit
Basic Product
Expected
Product
Augmented
Product
Potential
Product
Figure 5.2:
Product
Classifications
Durability &
Tangibility
Consumer Goods
Classification
Industrial Goods
Classification
Product
Differentiation
Services
Differentiation
Form
Features
Customisation
Performance
Quality
Conformance
Quality
Durability
Reliability
Repairability
Style
Ordering Ease
Delivery
Installation
Customer
Training
Customer
Consulting
Maintenance &
Repair
Returns
Product Characteristics, Classifications & Differentiation
Source: (Kotler & Keller, 2012: 348 - 354).
Product Classifications
Products fall into three groups according to durability and tangibility. Non-durable goods are
tangible goods normally consumed in one or a few uses, such as beer and shampoo. Because
these goods are purchased frequently, the appropriate strategy is to make them available in
many locations, charge only a small markup, and advertise heavily to induce trial and build
preference. According to Kotler and Keller (2016), durable goods are tangible goods that
normally survive many uses. They normally require more personal selling and service,
command a higher margin, and require more seller guarantees. Services are intangible,
inseparable, variable, and perishable products that normally require more quality control,
supplier credibility, and adaptability (Venter and Van Rensburg: 2014). Table 5.2 reflects the
differences between consumer-goods classification and industrial-goods classification.
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Table 5.2 Classificatopn of Goods. Adapted: (Kotler and Keller: 2012).
Consumer-Goods Classification
Industrial-Goods Classification
Convenience goods are purchased frequently, Materials and parts are goods that enter the
immediately,
and
with
minimal
effort. manufacturer’s product completely. Raw Shopping goods are those the consumer materials fall into two major groups: farm
characteristically compares on such bases as products
and
natural
products.
suitability, quality, price, and style. Specialty Manufactured materials and parts fall into two
goods have unique characteristics or brand further categories: component materials and
identification for which enough buyers are component parts. Capital items are longwilling to make a special purchasing effort. lasting goods that facilitate developing or
Unsought goods are those the consumer does managing the finished product. They fall into
not know about or normally think of buying. two groups: installations and equipment.
Unsought goods require advertising and Installations consist of buildings and heavy
personal-selling support.
equipment. Equipment includes portable
factory equipment and tools and office
equipment. Supplies and business services
are short-term goods and services that
facilitate developing or managing the finished
product.
Supplies
maintenance
and
are
of
repair
two
items
kinds:
and
operating supplies.
Differentiation
To be branded, products must be differentiated. Differentiated products can create significant
competitive advantages. Means for differentiation include form, features, performance quality,
conformance quality, durability, reliability, reparability and style. According to Kotler and Keller
(2012), design has become an increasingly important differentiator.
Product Differentiation
According to Kotler and Keller (2012), products are differentiated in Table 5.3
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Table 5.3: Product Differentiation Factors (Kotler and Keller: 2012)
Differentiation factor
Comments
Form
The size, shape, or physical structure of a product.
Features
A company can identify and select appropriate new features by
surveying recent buyers and then calculating customer value versus
company cost for each potential feature and should avoid feature
fatigue.
Performance quality
Performance level is the level at which the product’s primary characteristics operate: low, average, high, or superior.
Conformance quality
The degree to which all produced units are identical and meet
promised specifications.
Durability
A measure of the product’s expected operating life under natural or stressful conditions is a valued attribute for vehicles, kitchen
appliances, and other durable goods.
Reliability
A measure of the probability that a product will not malfunction or fail
within a specified time period, and high reliability can garner a price
premium.
Reparability
Ease of fixing a product when it malfunctions or fails. Style: the
product’s look and feel to the buyer and creates distinctiveness that
is hard to copy.
Customization
Customized products and marketing allow firms to be highly relevant
and differentiating by finding out exactly what a person wants—and
doesn’t want—and delivering on that.
Services
Main service differentiators are ordering ease, delivery, installation,
differentiation
customer training, customer consulting, maintenance and repair, and
returns.
Ordering ease
Describes how easy it is for the customer to place an order with the
company.
Delivery
Refers to how well the product or service is brought to the customer,
including speed, accuracy, and care throughout the process.
Installation
Refers to the work done to make a product operational in its planned
location.
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Customer training
Helps the customer’s employees use the vendor’s equipment properly and efficiently.
Customer consulting Includes data, information systems, and advice services the seller
offers to buyers.
Maintenance and
Programs help customers keep purchased products in good working
repair
order; critical in business-to-business settings
Returns
Inconvenient, embarrassing, or difficult for the consumer to
complete; bad for providers when returned merchandise is not in resellable condition, lacks proper proof of purchase, or is returned to
the wrong store.
Design leaders
The emotional power of design and the importance to consumers of
look and feel as well as function, so design is exerting a stronger
influence in categories where it once played a small role.
Power of design:
In a visually oriented culture, transmitting brand meaning and
positioning through design is critical.
Approaches to
A well-designed product is easy to manufacture and distribute. To
design
the customer, it is pleasant to look at and easy to open, install, use,
repair, and dispose of. The designer must take all these goals into
account.
Characterising Luxury Brands
Higher priced; often about social status and who a customer was—or perhaps wanted to be.
Luxury for many has become more about style and substance, combining personal pleasure
and self-expression. Common denominators of luxury brands are quality and uniqueness.
Winning formula for many is craftsmanship, heritage, authenticity, and history, often critical to
justifying a sometimes extravagant price (Kotler and Keller: 2012).Growing luxury brands that
successfully extended their brands vertically across a range of price points are usually the most
immune to economic downturns. Clear differentiation must exist between these brands,
minimizing the potential for consumer confusion and brand cannibalization. Each also must live
up to the core promise of the parent brand, reducing chances of hurting the parent’s image. Horizontal extensions into new categories can also be tricky for luxury brands. Much of the
growth in luxury brands in recent years has been geographical.
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Marketing Luxury Brands
According to Kotler and Keller (2012), globalization, new technologies, financial crises, shifting
consumer cultures, and other forces require luxury brand marketers to be skillful and adept at
their brand stewardship to succeed.
Luxury brand marketers have been issued the following guidelines:
Maintain a premium image for luxury brands; control the image.
Create many intangible brand associations and an aspirational image.
Align all aspects of the marketing program for luxury brands must to ensure highquality products and services and pleasurable purchase and consumption experiences.
Besides brand names, other brand elements—logos, symbols, packaging, signage—
can be important drivers of brand equity for luxury products
Secondary associations from linked personalities, events, countries, and other entities can
boost luxury-brand equity as well. Luxury brands must carefully control distribution via a
selective channel strategy. Luxury brands must employ a premium pricing strategy, with strong
quality cues and few discounts and markdowns.
Brand architecture for luxury brands must be managed carefully (Venter and Van Rensburg:
2014).
Competition for luxury brands must be defined broadly because it often comes from other
categories. Luxury brands must legally protect all trademarks and aggressively combat
counterfeits.
The trend for luxury brands is to wrap personal experiences around the products. Some luxury
marketers have struggled to find the appropriate online selling and communication strategies
for their brand. Success depends on getting the right balance of classic and contemporary
imagery and continuity and change in marketing programs and activities. Many firms are also
considering ways to reduce the negative environmental consequences of conducting business,
and some are changing the manufacture of their products or the ingredients that go into them.
Finally each product can be related to other products to ensure that a firm is offering and
marketing the optimal set of products (Kotler and Keller: 2012).
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The Product Hierarchy: Six Levels
Table 5.4 outlines the six levels of product hierarchy
Table 5.4: The Product Hierarchy: Six Levels (Kotler and Keller: 2016).
Level
Product Hierarchy
1
Need family-the core need that underlies the existence of a product family.
2
Product family-all the product classes that can satisfy a core need with reasonable
effectiveness.
3
Product class-a group of products within the product family recognised as having a
certain functional coherence, also known as a product category.
4
Product line-a group of products within a product class that are closely related
because they perform a similar function, are sold to the same customer groups, are
marketed through the same outlets or channels, or fall within given price ranges. A
product line may consist of different brands, a single family brand, or an individual
brand that has been line extended.
5
Product type-a group of items within a product line that share one of several
possible forms of the product.
6
Item (also called stock-keeping unit or product variant)-a distinct unit within a brand
or product line distinguishable by size, price or appearance.
Product Systems and Mixes
Product system according to Kotler and Keller (2012), is a group of diverse but related items
that function in a compatible manner. Product mix (aka product assortment) is the set of all
products and items a particular seller offers for sale. The width of a product mix refers to how
many different product lines the company carries. The length of a product mix refers to the total
number of items in the mix. The depth of a product mix refers to how many variants are offered
of each product in the line (Kotler and Keller: 2012).
The consistency of the product mix describes how closely related the various product lines are
in end use, production requirements, distribution channels, or some other way. These four
product mix dimensions permit the company to expand its business in four ways:
1. It can add new product lines, thus widening its product mix.
2. It can lengthen each product line.
3. It can add more product variants to each product and deepen its product mix.
4. It can pursue more product line consistency (Kotler and Keller: 2012).
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Product Line Analysis
Product line managers need to know the sales and profits of each item in their line to determine
which items to build, maintain, harvest, or divest and they need to understand each product
line’s market profile and image. Sales and Profits: Every company’s product portfolio contains products with different margins. Companies should recognize that different items will allow for
different margins and respond differently to changes in level of advertising (Venter and Van
Rensburg: 2014).
Market Profile and Image: The product line manager must review how the line is positioned
against competitors’ lines. A product map shows which competitors’ items are competing against company X’s items. The map also reveals possible locations for new items. Another
benefit of product mapping is that it identifies market segments. Product line analysis provides
information for two key decision areas: product line length and product mix pricing (Kotler and
Keller: 2012).
Product Line Length
One objective is to create a product line to induce up-selling. A different objective is to create a
product line that facilitates cross-selling. Companies seeking high market share and market
growth will generally carry longer product lines. Those emphasizing high profitability will carry
shorter lines consisting of carefully chosen items. Product lines tend to lengthen over time. A
company lengthens its product line in two ways: line stretching and line filling. Line Stretching
occurs when a company lengthens its product line beyond its current range, whether downmarket, up-market, or both ways. Down-Market Stretch: A company positioned in the middle
market may want to introduce a lower-priced line for any of three reasons:
1. The company may notice strong growth opportunities.
2. The company may wish to tie up lower-end competitors who might otherwise try to
move up-market.
3. The company may find the middle market stagnating or declining.
Marketers face a number of naming choices in deciding to move a brand down-market. Use the
parent brand name on all its offerings.
Introduce lower-priced offerings using a sub-brand name. Introduce the lower-priced offerings
under a different name (expensive to implement and means brand equity will have to be built
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from scratch, but the equity of the parent brand name is protected). Risks associated with
down-market stretching: not pricing low enough, cannibalizing sales, and consumers not
understanding how different offerings are compartmentalized/ differences between them (Kotler
and Keller: 2012).
Up-Market Stretch: enter the high end of the market to achieve more growth, realize higher
margins, or simply position themselves as full-line manufacturers.
Some companies use their own names
Some companies create new names
Some brands have used modifiers to signal a quality improvement
Two-Way Stretch: companies serving the middle market might stretch their line in both
directions. Line filling: lengthening the product line by adding more items within the present
range; overdone if it results in cannibalization and confusion. Line Modernization, Featuring,
and Pruning: product lines regularly need to be modernized. A piecemeal approach allows the
company to see how customers and dealers take to the new style and is less draining on the
company’s cash flow. The downside is it lets competitors see changes and start redesigning their own lines.
Sometimes a company finds one end of its line selling well and the other end selling poorly.
Using sales and cost analysis, product line managers must periodically review the line for
deadwood that depresses profits (Kotler and Keller: 2012).
Multi-brand companies all over the world try to optimise their brand portfolios.
Product Mix Pricing: the firm searches for a set of prices that maximizes profits on the total
mix. These include product line pricing, optional-feature pricing, captive-product pricing. Twopart pricing (fixed fee plus a variable usage fee), by-product pricing and product-bundling
pricing (pure bundling and mixed bundling)
Co-Branding and Ingredient Branding
Co-Branding: also called dual branding or brand bundling—two or more well-known brands are
combined into a joint product or marketed together in some fashion.
Co-Branding advantages are as follows:
Product can be convincingly positioned by virtue of the multiple brands.
Co-branding can generate greater sales from the existing market and open
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opportunities for new consumers and channels.
It can also reduce the cost of product introduction because it combines two well-known
images and speeds adoption.
Co-branding may be a valuable means to learn about consumers and how other
companies approach them (Kotler and Keller: 2012).
Co-Branding disadvantages are as follows:
Risks and lack of control in becoming aligned with another brand in consumers’ minds
Consumer expectations of co-brands are likely to be high, so unsatisfactory
performance could have negative repercussions for both brands.
If the other brand enters a number of co-branding arrangements, overexposure may
dilute the transfer of any association. It may also result in a lack of focus on existing
brands.
Consumers may feel less sure of what they know about the brand (Kotler and Keller:
2016).
For co-branding to succeed, the two brands must separately have brand equity—adequate
brand awareness and a sufficiently positive brand image. The most important requirement is a
logical fit between the two brands, to maximize the advantages of each while minimizing
disadvantages. Consumers are more apt to perceive co-brands favorably if they are
complementary and offer unique quality, rather than being overly similar and redundant.
Managers must enter co-branding ventures carefully, looking for the right fit in values,
capabilities, and goals and an appropriate balance of brand equity. There must be detailed
plans to legalize contracts, make financial arrangements, and coordinate marketing programs
(Kotler and Keller: 2016).
Ingredient Branding: special case of co-branding that creates brand equity for materials,
components, or parts that are necessarily contained within other branded products. For host
products whose brands are not that strong, ingredient brands can provide differentiation and
important signals of quality.
An interesting take on ingredient branding is self-branded ingredients that companies advertise
and even trademark. Ingredient brands try to create enough awareness and preference for their
product so consumers will not buy a host product that doesn’t contain it (Venter and Van Rensburg: 2014).
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Packaging, Labeling, Warranties, and Guarantees
According to Kotler and Keller (2016), packaging: a fifth P; part of product strategy, it includes
all the activities of designing and producing the container for a product. Packaging is important
because it is the buyer’s first encounter with the product. Draws the consumer in and encourages product choice. It acts as a “five-second commercial” for the product and affects consumers’ later product experiences when they open it and use what’s inside. Packaging may
be an important part of a brand’s equity. Several factors contribute to the growing use of packaging as a marketing tool: Self-service
(more choices; less explanation), consumer affluence (increases willingness to pay for the
convenience, appearance, dependability, and prestige of better packages), company and brand
image (recognition of the company or brand) and innovation opportunity (make products more
convenient and easier to use)
Packaging colour is important because colour carries different meanings in different cultures
and market segments. Packaging updates and redesigns can occur frequently to keep the
brand contemporary, relevant, or practical. After the company designs its packaging, it must
test it (Venter and Van Rensburg: 2014).
Labeling
A label performs several functions. It identifies the product or brand. The label might describe
the product: who made it, where and when, what it contains, how it is to be used, and how to
use it safely. The label might promote the product through attractive graphics. (Kotler and
Keller: 2012).
Warranties and Guarantees
According to Kotler and Keller (2012), warranties are formal statements of expected product
performance by the manufacturer. Products under warranty can be returned to the
manufacturer or designated repair centre for repair, replacement, or refund. Whether
expressed or implied, warranties are legally enforceable. Extended warranties and service
contracts can be extremely lucrative for manufacturers and retailers.
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5.2.2
Price Strategies
Price is the “value that one puts on the benefit one receives from products and services” (Du
Plessis et al, 2012: 271). Decisions around price are complex and difficult, and should
consider the company, the customers, the competition and the marketing environment (Kotler &
Keller, 2012: 405).
Pricing in a Digital World
Price has operated as a major determinant of buyer choice. Consumers and purchasing agents
who have access to price information and price discounters put pressure on retailers to lower
their prices. Retailers put pressure on manufacturers to lower their prices. The result can be a
marketplace characterised by heavy discounting and sales promotion. Downward price
pressure from a changing economic environment coincided with some longer-term trends in the
technological environment. Buyers can:
Get instant price comparisons from thousands of vendors.
Check prices at the point of purchase
Name their price and have it met
Get products free (Kotler and Keller: 2012).
Sellers can:
Monitor customer behaviour and tailor offers to individuals.
Give certain customers access to special prices.
Both buyers and sellers can negotiate prices in online auctions and exchanges or even in
person (Kotler and Keller: 2012).
How Companies Price
Bosses or top management sets general pricing objectives and policies and often approves
lower management’s proposals. Many companies do not handle pricing well and fall back on
“strategies” such as: “We calculate our costs and add our industry’s traditional margins.” Other common mistakes are not revising price often enough to capitalise on market changes;
setting price independently of the rest of the marketing program rather than as an intrinsic
element of market-positioning strategy; and not varying price enough for different product
items, market segments, distribution channels, and purchase occasions.
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For any organisation, effectively designing and implementing pricing strategies requires a
thorough understanding of consumer pricing psychology and a systematic approach to setting,
adapting, and changing prices (West, Ford and Ibrahim: 2010).
Consumer Psychology and Pricing
Consumers often actively process price information, interpreting it from the context of prior
purchasing experience, formal communications (advertising, sales calls, and brochures),
informal communications (friends, colleagues, or family members), point-of-purchase or online
resources, and other factors.
Purchase decisions are based on how consumers perceive prices and what they consider the
current actual price to be—not on the marketer’s stated price. Understanding how consumers arrive at their perceptions of price is an important marketing priority (West et.al: 2010).
Reference Prices
According to Kotler and Keller (2012) few consumers can accurately recall specific prices.
Consumers often employ reference prices, comparing an observed price to an internal
reference price they remember or an external frame of reference such as a posted “regular retail price.”
“Fair Price” (what consumers feel the product should cost)
Typical Price
Last Price Paid
Upper-Bound Price (reservation price or the maximum most consumers would pay)
Lower-Bound Price (lower threshold price or the minimum most consumers would pay)
Historical Competitor Prices.
Expected Future Price.
Usual Discounted Price.
Price-Quality Inferences
Many consumers use price as an indicator of quality. Image pricing is especially effective with
ego-sensitive products such as perfumes, expensive cars, and designer clothing. When
information about true quality is available, price becomes a less significant indicator of quality
(Venter and Van Rensburg: 2014).
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Price Endings
Consumers tend to process prices “left to right” rather than by rounding. Another explanation for the popularity of “9” endings is that they suggest a discount or bargain, so if a company
wants a high-price image, it should probably avoid the odd-ending tactic. Prices that end with
“0” and “5” are also popular and are thought to be easier for consumers to process and retrieve
from memory. Total category sales are highest when some, but not all, items in a category
have sale signs; past a certain point, sale signs may cause total category sales to fall (Kotler
and Keller: 2012).
The Pricing Process
Factors
Influencing
Pricing
Establishing
Pricing Objectives
Determining the
Basic Price
Price
Level
Customers
Competition
Cost Constraints
Company Objectives Channel Members
Other Constraints
Profit Objectives
Other Pricing Objectives
Sales Volume Objectives
Cost Oriented Methods
Customer (value) Oriented Methods
Competition Oriented Methods
Price Adjustments (e.g. discounts, product mix, according to location)
Negotiating the Final Price
The Final Price of
the Product
Figure 5.3: The Pricing Process (Du Plessis et al, 2012: 285)
Adapting the Price
Companies develop a pricing structure that reflects variations in geographical demand and
costs, market-segment requirements, purchase timing, order levels, delivery frequency,
guarantees, service contracts, and other factors.
As a result of discounts, allowances, and promotional support, a company rarely realizes the
same profit from each unit of a product that it sells. Price-adaptation strategies include:
geographical pricing, price discounts and allowances, promotional pricing, and differentiated
pricing. Price discrimination occurs when a company sells a product or service at two or more
prices that do not reflect a proportional difference in costs. In first-degree price discrimination,
the seller charges a separate price to each customer depending on the intensity of his or her
demand. In second-degree price discrimination, the seller charges less to buyers of larger
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volumes. In third-degree price discrimination, the seller charges different amounts to different
classes of buyers as follows: Customer-segment pricing, product-form pricing, image pricing,
channel pricing, location pricing and time pricing (Kotler and Keller: 2016).
Yield pricing offers discounted but limited early purchases, higher-priced late purchases, and
the lowest rates on unsold inventory just before it expires. Constant price variation can be
tricky, however, where consumer relationships are concerned.
Initiating and Responding to Price Changes
Initiating Price Cuts
One is excess plant capacity: The firm needs additional business and cannot generate it
through increased sales effort, product improvement, or other measures. Companies
sometimes initiate price cuts in a drive to dominate the market through lower costs. Either the
company starts with lower costs than its competitors, or it initiates price cuts in the hope of
gaining market share and lower costs (Kotler and Keller: 2012).
A price-cutting strategy can lead to other possible traps. Table 5.5 below lists the price-cutting
strategy that leads to possible traps.
Table 5.5: Price-cutting traps. (Kotler and Keller: 2012)
Trap
Consequence
Low-quality trap
Consumers assume quality is low
Fragile-market-share
A low price buys market share but not market loyalty. The same
trap
customers will shift to any lower-priced firm that comes along
Shallow-pockets trap
Higher-priced competitors match the lower prices but have longer
staying power because of deeper cash reserves
Price-war trap
Competitors respond by lowering their prices even more, triggering a
price war
Initiating Price Increases
A successful price increase can raise profits considerably. Cost inflation and over demand can
provoke price increases.
Delayed quotation pricing:. The company does not set a final price until the product is finished
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or delivered.
Escalator clauses: The company requires the customer to pay today’s price plus all or part of any inflation increase that takes place before delivery.
Unbundling:. The company maintains its price but removes or prices separately one or more
elements that were formerly part of the offer, such as delivery or installation. Reduction of
discounts: The company instructs its sales force not to offer its normal cash and quantity
discounts.
Anticipating Competitive Responses
Introduction or change of any price can provoke a response from customers, competitors,
distributors, suppliers, and even government. Competitors are most likely to react when the
number of firms is few, the product is homogeneous, and buyers are highly informed (Kotler
and Keller: 2012).
Responding to Competitors’ Price Changes
Why did the competitor change the price? To steal the market, to utilize excess
capacity, to meet changing cost conditions, or to lead an industry-wide price change?
Does the competitor plan to make the price change temporary or permanent?
What will happen to the company’s market share and profits if it does not respond? Are other companies going to respond?
What are the competitors’ and other firms’ likely responses to each possible reaction?
(Kotler and Keller: 2012).
Three possible responses to low-cost competitors are:
1. Further differentiate the product or service
2. Introduce a low-cost nature
3. Reinvent as a low-cost player
An extended analysis of alternatives may not always be feasible when the attack occurs.
5.2.3 Service Industries
The government sector, with its courts, employment services, hospitals, loan agencies, military
services, police and fire departments, postal service, regulatory agencies, and schools, is in the
service business. The private nonprofit sector—museums, charities, churches, colleges,
foundations, and hospitals—is in the service business.
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A good part of the business sector, with airlines, banks, hotels, insurance companies, law
firms, management consulting firms, medical practices, motion picture companies, plumbing
repair companies, and real estate firms, are in the service business. Many workers in the
manufacturing sector, such as computer operators, accountants, and legal staff, are really
service providers (Kotler and Keller: 2016).
Categories of Service Mix
According to Kotler and Keller (2012), service mix falls into the following categories:
A pure tangible good such as soap, toothpaste, or salt with no accompanying services.
A tangible good with accompanying services (typically, the more technologically
advanced the product, the greater the need for high-quality supporting services).
A hybrid offering of equal parts goods and services.
A major service with accompanying minor goods and services
A pure service, primarily an intangible service
Additional distinctions
Services are equipment-based (automated car washes, vending machines) or people-based
(window washing, accounting services). People-based services vary by whether unskilled,
skilled, or professional workers provide them.
Service companies can choose among different processes to deliver their service. Some
services need the client’s presence. Services may meet a personal need (personal services) or a business need (business services).
Service providers typically develop different marketing programs for these markets. Service
providers differ in their objectives (profit or nonprofit) and ownership (private or public) (Kotler
and Keller: 2012).
Customers typically cannot judge the technical quality of some services even after they have
received them. Goods high in search qualities—characteristics the buyer can evaluate before
purchase are on one end of the continuum. In the middle are goods and services high in
experience qualities—characteristics the buyer can evaluate after purchase. Goods and
services high in credence qualities—characteristics the buyer normally finds hard to evaluate
even after consumption, are on the other end of the continuum.
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Because services are generally high in experience and credence qualities, there is more risk in
their purchase, with several consequences.
Service consumers generally rely on word of mouth rather than advertising.
They rely heavily on price, provider, and physical cues to judge quality
They are highly loyal to service providers who satisfy them
Because switching costs are high, consumer inertia can make it challenging to entice
business away from a competitor (Kotler and Keller: 2012).
Distinctive Characteristics of Services
Dimensions of brand experience can be sensory, affective, behavioral, and intellectual. All
aspects of the service delivery process can be branded. Service providers often choose brand
elements—logos, symbols, characters, and slogans—to make the service and its key benefits
more tangible.
Table 5.6: Characteristics of Services
Characteristics
Description
Place
The layout of the checkout area and the traffic flow should be planned
carefully. Waiting lines should not get overly long.
People
Checkout staff should be busy, but there should be a sufficient number
to manage the workload.
Equipment
UPC scanners, credit card readers, and electronic registers should all
be state of the art
Communication
signage and brochures—text and photos—should suggest efficiency
material
and speed
Symbols
The supermarket’s name and symbol could suggest fast service, for instance, “Speedy Shop.”
Price
The supermarket could advertise a R10 rebate if customers have to wait
in line more than five minutes
Source: (Kotler and Keller: 2012)
Intangibility: unlike physical products, services cannot be seen, tasted, felt, heard, or
smelled before they are bought. To reduce uncertainty, buyers will look for evidence of
quality by drawing inferences from the place, people, equipment, communication
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material, symbols, and price. The service provider’s task is to “manage the evidence,” to “tangibilize the intangible” through any number of marketing tools: Inseparability: services are typically produced and consumed simultaneously.
Variability: quality of services depends on who provides them, when and where, and to
whom; services are highly variable. Here are three steps service firms can take to
increase quality control:
1.
Invest in good hiring and training procedures.
2.
Standardize the service-performance process throughout the organization.
3.
Monitor customer satisfaction.
Perishability: services cannot be stored, so their perishability can be a problem when
demand fluctuates. The right services must be available to the right customers at the
right places at the right times and right prices to maximize profitability (Kotler and
Keller: 2012).
On the demand (customer) side:
Differential pricing will shift some demand from peak to off-peak periods
Nonpeak demand can be cultivated.
Complementary services can provide alternatives to waiting customers
Reservation systems are a way to manage the demand level.
On the supply side:
Part-time employees can serve peak demand.
Peak-time efficiency routines can allow employees to perform only essential tasks
during peak periods.
Increased consumer participation frees service providers’ time. Shared services can improve offerings
Facilities for future expansion can be a good investment.
The New Services Realities - A Shifting Customer Relationship
Customers complain about inaccurate information; unresponsive, rude, or poorly trained
workers; and long waits. Many consumers find their complaints never reach a human ear
because of slow or faulty phone or online reporting systems. They say companies mishandle
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running,” appearing insincere, or attempting to just “bribe” the consumer (Kotler and Keller: 2016).Savvy services marketers are recognizing the new services realities, such as the
importance of the newly empowered customer, customer coproduction, and the need to
engage employees as well as customers (Venter and Van Rensburg: 2014).
Customer Empowerment: Customers are becoming more sophisticated about buying productsupport services, are pressing for “unbundled services” and the right to select the elements they want, and can give feedback with a mouse click. Customer Coproduction: Customers
do not merely purchase and use a service; they play an active role in its delivery.
Their words and actions affect the quality of their service experiences and those of
others as well as the productivity of frontline employees.
Customers often feel they derive more value, and feel a stronger connection to the
service provider, if they are actively engaged in the service process.
This coproduction can put stress on employees, however, and reduce their satisfaction,
especially if they differ from customers culturally or in other ways
To avoid service failures, the following can be undertaken:
Redesign processes and redefine customer roles to simplify service encounters.
Incorporate the right technology to aid employees and customers.
Create high-performance customers by enhancing their role clarity, motivation, and
ability.
Encourage “customer citizenship” so customers help each other. At golf courses,
players can not only follow the rules by playing and behaving appropriately, they can
encourage others to do so (Kotler and Keller: 2016).
Satisfying Employees as Well as Customers
Excellent service companies know that positive employee attitudes will strengthen customer
loyalty. Employees thrive in customer-contact positions when they have an internal drive to (1)
pamper customers, (2) accurately read their needs, (3) develop a personal relationship with
them, and (4) deliver high-quality service to solve customers’ problems (Kotler and Keller: 2012).
Achieving Excellence in Services Marketing
Marketing excellence in services requires excellence in three broad areas: external, internal,
and interactive marketing. External marketing describes the normal work of preparing, pricing,
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distributing, and promoting the service to customers. Internal marketing describes training and
motivating employees to serve customers well. Interactive marketing describes the employees’ skill in serving the client.
Technology and Service Delivery
Technology occasionally has unanticipated benefits. Companies must avoid pushing
technological efficiency so hard, that they reduce perceived quality. Companies must
incorporate the proper safeguards and reassure customers about their efforts.
Best Practices of Top Service Companies
Strategic Concept: Top service companies have a clear sense of their target customers and
their needs and have developed a distinctive strategy for satisfying them. Top-Management
Commitment: Managers look monthly not only at financial performance, but also at service
performance. High Standards: The best service providers set high quality standards. Profit
Monitoring Systems: Top firms audit service performance, both their own and competitors’, on a regular basis.
Tiers: Firms have decided to coddle big spenders to retain their patronage as long as possible.
Customers in high-profit tiers get special discounts, promotional offers, and lots of special
service; those in lower-profit tiers who barely pay their way may get more fees, stripped-down
service, and voice messages to process their inquiries (Kotler and Keller: 2012).
Differentiating Services
Marketing excellence requires service marketers to continually differentiate their brands so they
are not seen as a commodity. People and processes add value. Many companies are using the
Internet to offer primary or secondary service features that were never possible before.
Innovation is as vital in services as in any industry. Examples of innovative services include:
Online travel
Retail health clinics
Private aviation
Managing Service Quality
Service outcomes and customer loyalty are influenced by a variety of outcomes. Factors
leading to customer switching behaviour include:
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1.
Pricing
2.
Inconvenience
3.
Core Service Failure
4.
Service Encounter Failures
5.
Response to Service Failure
6.
Competition
7.
Ethical Problems
8.
Involuntary Switching (Kotler and Keller: 2012).
Recommendations for improving service quality
LISTENING
RELIABILITY
SERVICE
DESIGN
BASIC
SERVICES
Improving
RECOVERY
SURPRISING
CUSTOMERS
Service
Quality
TEAM-WORK
FAIR
PLAY
EMPLOYEE
RESEARCH
SERVANT
LEADER-SHIP
Figure 5.4: Factors to improve Service Quality (Kotler and Keller: 2012).
Managing Customer Expectations
Customers form service expectations from many sources, such as past experiences, word of
mouth, and advertising. In general, they compare perceived and expected service. If the
perceived service falls below the expected service, customers are disappointed. Successful
companies add benefits to their offering that not only satisfy customers but surprise and delight
them by exceeding expectations.
Five gaps that prevent successful delivery:
Gap between consumer expectation and management perception
Gap between management perception and service-quality specification
Gap between service-quality specifications and service delivery
Gap between service delivery and external communications
Gap between perceived and expected service
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Five determinants of service quality, in descending order of importance
1. Reliability: The ability to perform the promised service dependably and accurately.
2. Responsiveness: The willingness to help customers and provide prompt service.
3. Assurance: The knowledge and courtesy of employees and their ability to convey trust
and confidence.
4. Empathy: The provision of caring, individualized attention to customers.
5. Tangibles: The appearance of physical facilities, equipment, staff, and communication
materials (Kotler and Keller: 2012).
Tests of the dynamic process model reveal that the two different types of expectations have
opposite effects on perceptions of service quality. Increasing customer expectations of what the
firm will deliver can lead to improved perceptions of overall service quality. Decreasing
customer expectations of what the firm should deliver can also lead to improved perceptions of
overall service quality. Customers worry about:
Reliability and failure frequency
Downtime. The longer the downtime, the higher the cost.
Out-of-pocket costs. How much does the customer have to spend on regular
maintenance and repair costs?
Post-sale Service Strategy
Customer-Service Evolution: Manufacturers usually start by running their own parts-andservice departments. They want to stay close to the equipment and know its problems. They
also find it expensive and time consuming to train others and discover they can make good
money from parts and service if they are the only supplier and can charge a premium price.
Over time, manufacturers switch more maintenance and repair service to authorised
distributors and dealers. These intermediaries are closer to customers, operate in more
locations, and can offer quicker service. Later, independent service firms emerge and offer a
lower price or faster service.
The Customer-Service Imperative: Customer-service choices are increasing rapidly, however,
and equipment manufacturers increasingly must figure out how to make money on their
equipment, independent of service contracts (Kotler and Keller: 2012).
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5.3
SHAPING MARKET OFFERINGS WITHIN EMERGING MARKETS
5.3.1
Products & Services
Product Development: Glocalisation & Reverse Innovation
Van Agtmael (2007: 42) points out that “the era of emerging market companies being nothing more than unsophisticated markets of low-cost, low-tech products has ended.” Govindarajan
(2012) and Immelt, Govindarajan & Trimble (2009) support this and indicate that while
glocalisation influenced product developments and strategies for the emerging markets for
many decades, more recently there has been a shift towards reverse innovation.
Glocalisation involves modifying a product, which was originally developed for sale within
advanced economies, for emerging markets so that they may be sold at a lower price point.
On the other hand, reverse innovation involves the development of a product within and
specifically for an emerging market, and then extending them to the developed world. This
requires that companies “adopt a reverse-innovation mind-set which means valuing the
products that come out of emerging markets and being willing to rethink the underlying
assumptions in its developed-world businesses” (Govindarajan, 2012: 122).
While glocalisation, for most multinationals, “is to continue to deliver the bulk of the profits for a
long time to come....ideally it will be intertwined with and supportive of reverse innovation,
leading companies into new ways of doing business and new areas of growth.” (Govindarajan,
2012: 122).
Packaging
Sachet marketing refers to the practice of serving products and services in small, affordable
sizes. It is widely and successfully used in India, as well as other South-East Asian nations
(e.g. Phillipines & Indonesia). It is a very popular approach, as evidenced by the fact that
single serve shampoo sachets comprise 95% of industry sales in units, which amounts to 60%
of sales value
(Sing, Ang & SyChangco, 2009:3).
Research conducted by Sing et al (2009: 14) showed that the success of the sachet marketing
approach is dependent on many different factors, including historical, cultural and economic
factors. Interestingly, within India, people from all economic brackets are enthusiastic about
sachet marketing.
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5.3.2
Price
Pricing at the Bottom of the Pyramid
In Chapter 2 of this Study Guide you were introduced to Prahalad’s bottom of the pyramid theory. Prahalad argued that very low income markets are best reached through a high
volume, low margin and low price model.
However, Simanis (2012: 121) has found this model to fail when the products sold to the
bottom-of-the-pyramid consumers are new and unfamiliar, and where there is limited or no
opportunity to leverage off an existing infrastructure.
As an alternative to Prahalad’s approach, Simanis (2012: 121) asserts that companies “need to elevate gross margins far above the company average by pushing down variable costs and
boosting the price consumers are willing to pay for a unit of product...they also need to raise
the price point for a single transaction.” This approach results in a combination of higher margins and higher price points, thereby
increasing the contribution. Higher margins in low-income markets may be achieved through
“localising and bundling products, offering an enabling service, and cultivating customer peer groups” (Simanis, 2012: 124).
Country of Origin: Impact on Pricing Strategy
Research conducted by Koschate-Fischer, Diamantopoulus & Oldenkotte (2012) found that the
image of a product’s country of origin could have a significant impact on the price which consumers would be willing to pay for the product. Koschate-Fischer et al (2012: 32) assert
that “if a brand originates and is produced in a country with a good reputation and image, the
implementation of a premium pricing strategy should be easier because consumers’ willingness to pay is likely to be higher.” Furthermore, if the company is to enter into a foreign partnership,
due consideration should be given to the extent to which the partnership may have positive or
negative repercussions on the customer’s willingness to pay (Koschate-Fischer et al, 2012: 35).
Have You Completed the ‘Essential Reading’ for this Chapter?
Now that you have been introduced to this chapter on a “Shaping the Market Offering”, source and work through the textbook chapters and journal articles
listed in the “Essential Reading” list at the beginning of this chapter. It is essential that you
read all of the textbook chapters and journal articles listed. Please work through the case
studies in the prescribed texts.
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QUESTIONS FOR REFLECTION
After completing your study of this chapter on ‘”Shaping the Market Offering”, reflect on the following questions. (To adequately address these questions you will
need to have completed all the ‘Essential Reading’ listed at the beginning of this chapter.)
1. Consider your organisation’s market offerings. 1.1
What are the products that form part of the market offerings? How are these
products differentiated from competitor’s products?
1.2
Are the products that your organisation offers supported by a service? If so, to
what extent is this service effective in satisfying customer needs?
1.3
To what extent is the pricing of your organisation’s market offering consistent with the marketing strategy, and the offering’s target market and brand positioning?
2. What is globalisation and reverse innovation? How do these two practices impact
product development within emerging markets and advanced markets.
3. A USA based FMCG Retail Company has decided to expand into the emerging
markets of Africa, India and China. The company’s Marketing Director has asked you to advise him about how to go about developing pricing strategies for the “bottom of the pyramid”. What advice would you give to him?
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CHAPTER: 6: DELIVERING VALUE (MARKETING
CHANNELS)
SPECIFIC LEARNING OUTCOMES
The overall outcome for this chapter is that, on its completion, the student should be able to
demonstrate a comprehensive understanding of the delivery of value through marketing
channels within both advanced markets and emerging markets. This overall outcome will be
achieved through the student’s mastery of the following specific outcomes:
1.
Critically assess a marketing channel system and value network.
2.
Critically discuss the role of marketing channels.
3.
Identify and discuss the key decisions which marketers need to make regarding channel
design.
4.
Critically discuss how organisations should integrate channels and manage channel
conflict.
5.
Analyse the role of e-commerce and m-commerce in marketing channel management.
6.
Critically discuss the characteristics and role of retailers and wholesalers within the
marketing channel.
7.
Identify and analyse the major trends impacting marketing intermediaries.
8.
Critically discuss the key factors influencing market logistics decisions.
9.
Identify and critically discuss the key factors impacting marketing channels within
emerging markets.
10.
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Elucidate how companies should manage channel conflict.
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ESSENTIAL READING
Students are required to read ALL of the textbook chapters and journal articles
listed below.
Textbooks:
Kotler, P. & Keller, K.L. (2016) Marketing Management. Essex: Pearson Education.
Chapter 17: Designing & Managing Integrated Marketing Channels
Chapter 18: Managing Retailing, Wholesaling & Logistics
Cant, M.C., Van Heerden, C.H. & Ngambi, H.C. (2014) Marketing Management. A South
Africa Perspective. Cape Town: Juta.
Chapter 9: Distribution Management (Placement) & Retailing
Journal Articles:
Abbad, M., Abbad, R. & Saleh, M. (2011) “Limitations of E-Commerce in Developing
Countries: Jordan.” Education, Business & Society: Contemporary Middle Eastern Issues.
4 (4), pp 280 – 291. (available from Emerald)
Biederman, D. (2012) “Thinking Globally / Acting Locally.” Journal of Commerce. 13-22013, 13 (6), pp 4A – 9A. (available from EBSCO)
Dong, M.C., Tse, D.K., Hung, K. “Effective Distributor Governance in Emerging Markets: The Salience of Distributor Role, Relationship Stages and Market Uncertainty.” Journal of
International Marketing. 18 (3), pp 1 – 17. (available from EBSCO).
Niezen, C. & Rodriguez, J. (2008) “Distribution Lessons from Mom and Pop.” Harvard
Business Review. 86 (4), pp 23 – 24. (available from EBSCO).
Seymour, R. (2010) “E-Commerce: Tailor Made for Africa?” African Business. November
2010, Issue 369, pp 40 – 41. (available from EBSCO).
Yupal, S. & Dharmesh, G. (2012) “Retailing and Innovation: A Study in Today’s Global Retail Market.” Advances in Management. 5 (5), pp 9 – 20. (available from EBSCO).
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6.1
INTRODUCTION
“Successful value creation requires successful value delivery.” (Kotler & Keller, 2012: 437).
Organisations achieve such value delivery through a complex and integrated marketing
channel system and value network.
6.2
OVERVIEW OF ‘DELIVERING VALUE’
Marketing channels enable millions of customers from countries across the world to access a
vast array of products and services. Rosenbloom (2013: xviii) points out that “as we move into the second decade of the twenty-first century, new technologies coupled with globalisation
have dramatically transformed marketing channels as well as the expectations of customers
served by marketing channels. Conventional ‘bricks and mortar’ channels have not only been
dramatically augmented by online channels, but customers can also shop while literally being
on the move from locations all over the globe with a laptop, iPhone, iPad or other device.”
Figure 6.1 provides an overview of the basic functions of the marketing channel.
Marketing Channel Functions
Basic Marketing Channel Functions
Transactional
Functions
Buying of products
Selling of products
Risk taking in
acquiring products
Figure 6.1:
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Logistical
Functions
Concentration /
rearrangement of
products
Storing / keeping
sufficient stock
Sorting /
accumulation of
products
Physical distribution
of products
Facilitating
Functions
Financing /
providing credit
Grading /
classification of
product
Marketing research
/ gathering data on
product
Basic Marketing Channel Functions (Du Plessis et al, 2012: 459).
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Figure 6.2 provides an overview of the factors which influence the selection of a marketing
channel.
Factors Determining the Selection of a Marketing Channel
Environmental
Factors
Product
Factors
Competitive
Socio-Cultural
Political
Legal
Economic
Technological
Marketing
Channel
Selection
Perishability
Fashion
Size
Standardisation
Value
Complexity
Intermediaries
Manufacturer
Market Factors
Resources
Capabilities
Objectives
Resources
Capabilities
Type of Customer
Needs of Customer
Buying Patterns
Figure 6.2: Factors Determining the Selection of a Marketing Channel
Source: (Du Plessis et al, 2012: 467)
THINK POINT
Reflect on all the factors determining the selection of a marketing channel in our organisation
or one that you are familiar with.
In an attempt to achieve efficient coordination of efforts and thereby achieve economies of
scale and large profits, large intermediaries such as wholesalers and retail chains engage in
vertical and horizontal integration.
Selection
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These forms of integration are depicted in Figure 6.3
Horizontal & Vertical Integration
Vertical Integration
Manufacturer
Manufacturer
Manufacturer
Wholesaler
Wholesaler
Wholesaler
Retailer
Retailer
Retailer
Consumer
Consumer
Consumer
Figure 6.3:
6.3
Horizontal
Integration
Horizontal & Vertical Integration. (Du Plessis et al, 2012: 467)
DELIVERING VALUE WITHIN EMERGING MARKETS
Marketing channels and distribution are critically important to ensuring success within emerging
markets. Indeed, Tappin & Cave (2009: 35) assert that “the best Western companies operating in emerging markets have learned to understand what their customers want and know how to
develop reliable distribution channels that respond to the unique structural and geographical
challenges of each market.” 6.3.1
Rethinking Distribution Strategies
Conditions within emerging markets often require that distribution strategies be conceptualised
differently to the way that they are within advanced markets (Niezen & Rodriguez, 2008: 23 –
24). For example, Coca-Cola is now applying distribution techniques which it learnt in the
emerging market of Latin America to emerging markets elsewhere in the world. In Peru, CocaCola was challenged by a local discount competitor who was undermining prices of soft drinks
sold through “mom-and-pop” stores (similar to South Africa’s “spaza” shops). This required
that Coca-Cola cut costs dramatically which it achieved through:
Turning its wholesalers into distributors;
Using IT to link and control distribution; and
Using simple technology.
This change in distribution strategy has resulted in the Peruvian “mom-and-pop” channel growing by an average of 10% per year since 2005, and has reduced distribution costs by more
than two-thirds.
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6.3.2
Governance of Distributors
A key challenge for a company seeking to capitalise on their market potential in a host country
is the effective management of their distributors. Dong, Tse & Hung (2010:1) point out that
“this challenge is particularly salient in an emerging market such as China with its scattered
and evolving distribution system driven by continuous reforms in its social and economic
institutions”.
Dong et al’s (2010: 12) multi-industry and multi-firm research in China shows that “the strategic
fitness of a firm’s governance strategies helps motivate its distributors.” In particular, distributor
governance strategies should be tailored to the different types of distributors (e.g. new vs
mature). Overall, Dong et al’s (2012: 13) research highlights “the need for finer, phase-oriented
and dynamic governance strategies to build trusting and effective market channels.” 6.3.3
Third Party Logistics Providers
Biederman (2012: 4A) asserts that third party logistics providers are key to assisting shippers in
the management of trade complexities in emerging markets. A recent survey showed that over
50% of shipper respondents felt that the ideal model for operating in emerging markets is a
“third party logistics provider with global scale working in tandem with local partners who have
detailed knowledge of national, regional and local trade rules and regulations” (Biederman,
2012: 5A).
Emerging market challenges experienced by third party logistics providers
include
“infrastructure problems, complex laws, customs regulations, tax regimes, cultural differences,
and the possible inability to deliver against promises or agreed-to service levels” (Biederman,
2012:4A). In Africa such challenges extend to the delivery of goods across multiple borders (as
many countries are landlocked), where roads are often in very poor condition.
6.3.4
E-Commerce in Africa & the Middle East
Seymour (2010) asserts that “Africa’s e-commerce culture is still in its early stages and there
exists the opportunity to learn from other regions’ mistakes and build a new, electronic economy on firmer foundations.”
Thus far Tunisia has been the most successful country in implementing e-commerce, with the
sector’s share of Tunisia’s GDP projected to be 13.5% in 2011 (up from 2.6% in 1997).
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Viral marketing, through social networking sites, is also proving to be impactful, and African
businesses are increasingly learning to make “the most of social networking’s potential power by creating Facebook groups and Twitter accounts...all for very little cost” (Seymour, 2010).
Seymour (2010) concludes that “e-commerce has yet to penetrate Africa’s economies to a significant degree, but where it has been embraced the economy has benefited.”
While Seymour (2010) highlights the progress of e-commerce in Africa thus far, Abbad, Abbad
& Saleh (2011: 280) detailed their findings on the limitations of e-commerce in developing
countries. The six main limitations were all non-technical in nature and included security and
trust; internet experience; enjoyment; language; legal issues; and technology acceptance (ease
of use and usefulness). While this research was conducted in Jordan, it is relevant to the
context of other developing countries as well.
THINK POINT
Explain the value South African organisations can achieve from an effective e-commerce
culture.
6.3.5
Retailing in Emerging Markets
Yupal & Dharmesh (2012: 9) point out retailers operating within a global market deal with
different growth rates depending on the countries in which they are operating. “While in most western markets, retailers face challenges typical for mature markets, in emerging markets
such as BRIC nations and other country markets with similar characteristics growing at and/or
projected to grow at significantly higher rates, they face a different set of challenges. Likewise,
less developed markets such as many countries in Africa exhibit their own distinctive dynamic
from the standpoint of retailing” (Yupa & Dharmsh, 2012: 9). Successfully dealing with such heterogeneity across the retail market requires innovative practices from retailers.
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Have You Completed the ‘Essential Reading’ for this Chapter?
Now that you have been introduced to this chapter on a “Delivering Value”,
source and work through the textbook chapters and journal articles listed in the
“Essential Reading” list at the beginning of this chapter. It is essential that you read all of
the textbook chapters and journal articles listed. Please work through the case studies in
the prescribed texts.
QUESTIONS FOR REFLECTION
After completing your study of this chapter on ‘Delivering Value’, reflect on the following question.
1. Evaluate the effectiveness and efficiency of the marketing channel utilised by the
organisation for which you work. To what extent does it support successful value creation
for the consumer? Make recommendations as to how the marketing channel could be
improved.
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CHAPTER 7: COMMUNICATING VALUE
(Integrated Marketing Communication)
SPECIFIC LEARNING OUTCOMES
The overall outcome for this chapter is that, on its completion, the student should be able to
demonstrate a comprehensive understanding of integrated marketing communication within
both advanced markets and emerging markets. This overall outcome will be achieved through
the student’s mastery of the following specific outcomes:
1. Explain and evaluate the role of marketing communication.
2. Critically discuss the concept and practice of integrated marketing communication (IMC).
3. Identify and discuss the components of the marketing communication mix.
4. Develop an integrated marketing communication plan.
5. Critically discuss the development of an advertising programme.
6. Explain the role of sales promotion in communicating value.
7. Explain the implementation of events and experiences.
8. Critically discuss the role of public relations and publicity in integrated marketing
communication.
9. Explain the role and implementation of direct and interactive marketing.
10. Analyse the function of word-of-mouth promotion in integrated marketing communication.
11. Critically discuss personal selling as part of the integrated marketing communication mix.
12. Identify and critically discuss the key factors impacting integrated marketing
communication within emerging markets.
13. Critically assess how the internet and social media influenced/changed marketing
communication strategies.
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ESSENTIAL READING
Students are required to read ALL of the textbook chapters and journal
articles listed below.
Textbooks:
Kotler, P. & Keller, K.L. (2016) Marketing Management. Essex: Pearson Education.
Chapter 19: Designing & Managing Integrated Marketing Communications Chapter 20:
Managing Mass Communications: Advertising, Sales Promotions, Events &
Experiences, and Public Relations
Chapter 21 Managing Digital Communications: Online, Social Media, and Mobile
Chapter 22: Managing Personal Communications: Direct & Interactive Marketing, Word
of Mouth, and Personal Selling
Cant, M.C., Van Heerden, C.H. & Ngambi, H.C. (2014) Marketing Management. A South
Africa Perspective. Cape Town: Juta.
Chapter 10: Marketing Communication Management
Chapter 11: Cyber Marketing & Digital Marketing
Journal Articles:
Chan, F.S. (2011) “Advertising Management: Media Challenges & Lesson Learnt.”
Advances in Management. 4 (12), pp 38 – 45. (available from EBSCO)
Gbadamosi, A., Hinson, R.E., Tukamushaba, E.K. & Ingunjiri, I. (2012) “Children’s Attitudinal Reactions to TV Advertisements. The African Experience.” International Journal
of Market Research. 54 (4), pp 543 – 566. (from EBSCO)
Huang, M. & Tsang, A.S.L. (2010) “Development & Current Issues Related to Internet Marketing Communications in China.” Journal of Interactive Advertising. 11 (1), pp 1 – 10.
(available from EBSCO)
Jain, V.;; Pant, S. & Daswani, A. “Mobile Marketing: The Emerging Indian Perspective.” International Journal of Mobile Marketing. 6 (2), pp 17 – 27. (available from EBSCO)
Nooruddin, Z. & Zhang, L. (2012) “7 Steps to Weibo Success.” China Business Review. 39
(3), pp 42 - 45. (available from EBSCO)
Oyedel, A. & Minor, M. (2012) “Consumer Plots in Television Advertising from Nigeria & South Africa.” Journal of Advertising. 41 (1), pp 91 – 108. (available from EBSCO)
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7.1
INTRODUCTION
Organisations communicate and promote the value of their products and services to
consumers through ‘integrated marketing communication’ (IMC) which is “a concept of marketing communication planning that recognises the added value of a comprehensive plan
that evaluates the strategic roles of the marketing communication techniques – that is,
advertising, direct marketing, sales, promotions, personal selling, sponsorships and public
relations – and combines these disciplines to provide clarity, consistency and maximum
communication impact” (American Association of Advertising Agencies cited in Du Plessis et al,
2012: 314).
7.2
OVERVIEW OF COMMUNICATING VALUE
Organisations communicate the value of their products and services through the marketing
communications mix. This comprises eight modes of communication, as shown in Figure 7.1
below.
Marketing Communications Mix
Advertising
Personal
Selling
(print & broadcast
ads, packaging,
cinema, billboards,
etc.
(sales
presentations,
sales meetings,
trade shows, etc.)
Word of Mouth
Marketing
(person-to-person,
chat rooms, blogs)
Sales
Promotion
(demonstrations,
contests & games,
gifts, etc.)
Events &
Experiences
Brand
Equity
(sports, causes,
entertainment,
etc.)
Public
Relations &
Publicity
Interactive
Marketing
(press kits,
speeches,
seminars, etc.)
(online activities
including blogs)
Direct
Marketing
(mailings, fax,
email, texting,
catalogues, etc.)
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Modern marketing calls for more than developing a good product, pricing it attractively, and
making it accessible. Companies must also communicate with present and potential
stakeholders and the general public. For most marketers, therefore, the question is not whether
to communicate but rather what to say, how and when to say it, to whom, and how often. Oreo
has used various comunications in different markets to establish a strong global positioning. So
as to ensure that the various components of the marketing communication mix are strategically
integrated, it is important that sound marketing communication planning takes place. The
process of marketing communication planning is detailed in Figure 7.2.
Marketing Communication Planning Process
Phase 1:
Situation Analysis
(environment &
SWOT)
Phase 2:
Select Appropriate
Opportunities
Phase 3:
Identify Target
Markets
Phase 4:
Develop Marketing
Comm Objectives
Phase 5:
Determine
Preliminary Budget
Phase 6:
Develop Strategies
and Adapt Budget
Phase 7:
Develop an Action
Plan for Each Strategy
Phase 8:
Measurement of
Effectiveness
Phase 9:
Continual Feedback
on Effectiveness
Figure 7.2: Marketing Communication Planning Process (Du Plessis et al, 2012: 316)
Marketing communications are the means by which firms attempt to inform, persuade, and
remind consumers—directly or indirectly—about the products and brands they sell. They
represent the voice of the company and its brands; they are a means by which the firm can
establish a dialogue and build relationships with consumers. By strengthening customer loyalty,
they can contribute to customer equity.Marketing communications also work by showing
consumers how and why a product is used, by whom, where, and when. Consumers can learn
who makes the product and what the company and brand stand for, and they can become
motivated to try or use it. Marketing communications allow companies to link their brands to
other people, places, events, brands, experiences, feelings, and things.They can contribute to
brand equity—by establishing the brand in memory and creating a brand image—as well as
drive sales and even affect shareholder value.
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Characteristics of the Marketing Communications Mix
Advertising reaches geographically dispersed buyers. It can build up a long-term image for a
product (Coca-Cola ads) or trigger quick sales (a Macy’s ad for a weekend sale). Certain forms of advertising such as TV can require a large budget, whereas other forms such as newspaper
do not. The mere presence of advertising might have an effect on sales:
Pervasiveness—Advertising permits the seller to repeat a message many times.
Amplified expressiveness—Advertising provides opportunities for dramatizing the
company and its brands and products through the artful use of print, sound, and color.
Control—the advertiser can choose the aspects of the brand and product on which to
focus communications.
Companies use sales promotion tools—coupons, contests, premiums, and the like—to draw a
stronger and quicker buyer response, including short-run effects such as highlighting product
offers and boosting sagging sales. Ability to be attention-getting—they draw attention and may
lead the consumer to the product.
Incentive—they incorporate some concession, inducement, or contribution that gives
value to the consumer.
Invitation—they include a distinct invitation to engage in the transaction now.
Events and experiences offer many advantages as long as they have the following
characteristics:
Relevant—a well-chosen event or experience can be seen as highly relevant because
the consumer is often personally invested in the outcome.
Engaging—given their live, real-time quality, events and experiences are more actively
engaging for consumers.
Implicit—events are typically an indirect soft sell
Public Relations and Publicity are underused, yet a well-thought-out program coordinated with
the other communications-mix elements can be extremely effective, especially if a company
needs to challenge consumers’ misconceptions. High credibility—News stories and features are more authentic and credible to readers
than ads.
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Ability to reach hard-to-find buyers—Public relations can reach prospects who prefer to
avoid mass media and targeted promotions.
Dramatization—Public relations can tell the story behind a company, brand, or product.
Online marketing and messages can take many forms to interact with consumers when they
are in active search mode or just browsing and surfing online for something to do.
Rich—much information or entertainment can be provided—as much or as little as a
consumer might want.
Interactive—Information can be changed or updated depending on the person’s response.
Up to date—a message can be prepared very quickly and diffused through social
media channels.
Mobile marketing has three distinguishing characteristics:
Timely—Mobile communications can be very time-sensitive and reflect when and
where a consumer is.
Influential—Information received or obtained via a smart phone can reach and
influence consumers as they are making a purchase decision.
Pervasive—Consumers typically carry their smart phones everywhere, so mobile
communications are at their fingertips.
Direct and database marketing have three noteworthy characteristics:
Personal—Personal facts, opinions, and experiences can be stored in massive
databases and incorporated into personal messages.
Proactive—A direct marketing piece can create attention, inform consumers, and
include a call to action.
Complementary—Product information can be provided that helps other marketing
communications, especially in terms of e-commerce.
Personal selling is the most effective tool at later stages of the buying process, particularly in
building up buyer preference, conviction, and action.
Customized—The message can be designed to appeal to any individual.
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Relationship-oriented—Personal selling relationships can range from a matter-of-fact
selling relationship to a deep personal friendship.
Response-oriented—The buyer is often given personal choices and encouraged to
directly respond.
Factors in Setting the Marketing Communications Mix
Type of Product Market
An effectively trained company sales force can make four important contributions:
o
Increase stock position
o
Build enthusiasm
o
Conduct missionary selling
o
Manage key accounts
Buyer-Readiness Stage
Product Life-Cycle Stage
THINK POINT
To determine whether communications is truly integrated, the Six C’s are used. These are
coverage, contribution, commonality, complimentary, conformity and
cost. Outline how each
of the criteria determines ehther communications is truly integrated?
Online Marketing Communication Options
Web Sites
Companies must design Web sites that embody or express their purpose, history, products,
and vision and that are attractive on first viewing and interesting enough to encourage repeat
visits. To encourage repeat visits, companies must pay special attention to context and content
factors and constant change. A site’s performance will be judged on ease of use and physical
attractiveness.
1. Ease of use means:
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a.
The site downloads quickly
b.
The first page is easy to understand
c.
It is easy to navigate to other pages that open quickly
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2. Physical attractiveness is ensured when:
a.
Individual pages are clean and not crammed with content
b.
Typefaces and font sizes are very readable
c.
The site makes good use of colour (and sound).
Companies can transform various “touch points” related to privacy on the Web site into a positive customer experience by:
Developing user-centric privacy controls to give customer control
Avoiding multiple intrusions
Preventing human intrusion by using automation whenever possible
Companies may employ microsites, individual Web pages or clusters of pages that function as
supplements to a primary site. Search Ads: An important component of online marketing is paid
search or pay-per-click ads. In paid search, marketers bid in a continuous auction on search
terms that serve as a proxy for the consumer’s product or consumption interests. Advertisers
pay only if people click on the links, but marketers believe consumers who have already
expressed interest by engaging in search are prime prospects (Kotler and Keller: 2016).
Average click-through in terms of the percentage of consumers who click on a link is about 2
percent, much more than for comparable online display ads. The cost per click depends on
how highly the link is ranked on the page and the popularity of the keyword. Search engine
optimization (SEO) describes activities designed to improve the likelihood that a link for a brand
is as high as possible in the rank order of all nonpaid links when consumers search for relevant
terms. Broader search terms are useful for general brand building; more specific ones
identifying a particular product model or service are useful for generating and converting sales
leads. Search terms need to be spotlighted on the appropriate pages of the marketer’s Web site so search engines can easily identify them. Any one product can usually be identified by
means of multiple keywords, but marketers must bid on each keyword according to its likely
return on revenue. It also helps to have popular sites link back to the marketer’s Web site (Kotler and Keller: 2016).
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Display Ads or banner ads are small, rectangular boxes containing text and perhaps a picture
that companies pay to place on relevant Web sites.
The larger the audience, the higher the cost.
Internet users spend only 5 percent of their time online actually searching for
information, so display ads still hold great promise compared to popular search ads
Interstitials are advertisements, often with video or animation that pop up between
page changes within a Web site or across Web sites.
E-mail allows marketers to inform and communicate with customers at a fraction of the cost of
a d-mail (direct mail) campaign.
E-mails can be very productive selling tools.
The rate at which they prompt purchase has been estimated to be at least three times
that of social media ads, and the average order value is thought to be 17 percent
higher
Consumers are besieged by e-mails, though, and many employ spam filters to halt the
flow
Privacy concerns are also growing
E-mails must be timely, targeted, and relevant.
o
Give the customer a reason to respond.
o
Personalize the content of your e-mails.
o
Offer something the customer can’t get via direct mail.
o
Make it easy for customers to opt in as well as unsubscribe.
o
Combine e-mail with other communications such as social media.
Some researchers are employing “heat mapping,” which tracks eye movements with cameras to measure what people read on a computer screen, to improve the effectiveness of their
emails.
Social Media
Social media are a means for consumers to share text, images, audio, and video information
with each other and with companies, and vice versa. Social media allow marketers to establish
a public voice and presence online.
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They can cost-effectively reinforce other communication activities. Because of their day-to-day
immediacy, they can also encourage companies to stay innovative and relevant. Marketers can
build or tap into online communities, inviting participation from consumers and creating a longterm marketing asset in the process (Venter and Van Rensburg: 2014).
Social Media Platforms include (1) online communities and forums, (2) blogs (individual blogs
and blog networks such as Sugar and Gawker), and (3) social networks (like Facebook,
Twitter, and YouTube) (Kotler and Keller: 2012).
Online Communities and Forums
These are often created by consumers or groups of consumers with no commercial interests or
company affiliations. Others are sponsored by companies whose members communicate with
the company and with each other through postings, text messaging, and chat discussions
about special interests related to the company’s products and brands (Kotler and Keller: 2016).
Online communities and forums can be a valuable resource for companies and fill multiple
functions by both collecting and conveying key information. A key for success in online
communities is to create individual and group activities that help form bonds among community
members. Information flow in online communities and forums is two-way and can provide
companies with useful, hard-to-get customer information and insights.
Firms should avoid too much democratization of innovation or ground breaking ideas can be
replaced by lowest-common-denominator solutions
Blogs, regularly updated online journals or diaries, have become an important outlet for word of
mouth.
Blogs bring together people with common interests.
Corporations are creating their own blogs and carefully monitoring those of others.
Popular blogs are creating influential opinion leaders.
Because many consumers examine product information and reviews contained in
blogs, the Federal Trade Commission has also taken steps to require bloggers to
disclose their relationship with marketers whose products they endorse.
At the other extreme, some consumers use blogs and videos as a means of getting
retribution for a company’s bad service or faulty products (Kotler and Keller: 2012).
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Social networks have become an important force in both business-to-consumer and businessto-business marketing
Different networks offer different benefits to firms.
Twitter can be an early warning system that permits rapid response
Facebook allows deeper dives to engage consumers in more meaningful ways
Marketers are still learning how to best tap into social networks and their huge, welldefined audiences
Users are generally there looking to connect with others—attracting attention and
persuading are more challenging.
Given that users generate their own content, ads may find themselves appearing
beside inappropriate or even offensive material.
Using Social Media: only some consumers want to engage with some brands, and, even then,
only some of the time
Social media may not be as effective in attracting new users and driving brand
penetration.
Consumers are most likely to engage with media, charities, and fashion and least likely
to engage with consumer goods.
Although consumers may use social media to get useful information or deals and
promotions or to enjoy interesting or entertaining brand-created content, a much
smaller percentage want use social media to engage in two-way “conversations” with
brands (Kotler and Keller: 2016).
Word of Mouth
Word of mouth (WOM) is a powerful marketing tool, one of the most effective drivers of its
sales in some cases, along with unaided advertising awareness. Viral marketing is a form of
online word of mouth, or “word of mouse,” that encourages consumers to pass along companydeveloped products and services or audio, video, or written information to others online.
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Creating Word-of-Mouth Buzz
Brands discussed offline are often those that are salient and visible and come easily to mind.
Research has shown that consumers tend to generate positive WOM themselves and share
information about their own positive consumption experiences. They tend to only transmit
negative WOM and pass on information they heard about others’ negative consumption experiences. In deciding whether to contribute to social media, consumers can be motivated by
intrinsic factors such as whether they are having fun or learning, but more often they are
swayed by extrinsic factors such as social and self-image considerations.
Advice, according to Kotler and Keller (2012) for getting a viral ad shared are as follows:
Utilize brand pulsing so the brand is not too intrusive within the video;
Open with joy or surprise to hook those fickle viewers who are easily bored;
Build an emotional roller coaster within the ad to keep viewers engaged throughout;
Surprise but don’t shock—if an ad makes viewers too uncomfortable, they are unlikely
to share it.
Companies can help create buzz for their products or services, and media and advertising are
not always necessary for it to occur. Viral marketing tries to create a splash in the marketplace
to showcase a brand and its noteworthy features. Some believe viral marketing efforts are
driven more by the rules of entertainment than by the rules of selling. The success of any viral
or word-of-mouth buzz campaign depends on the willingness of consumers to talk to other
consumers.
Customer reviews can be especially influential, but can be biased or fake. Research has shown
that social influence can lead to disproportionally positive online ratings, and subsequent
‘raters’ are more likely to be influenced by previous positive ratings than negative ones.
Consumers posting reviews are susceptible to conformity pressures and adopting norms of
others. Positive online reviews or ratings are often not as influential or valued as much as
negative ones.
Companies can try to stimulate personal influence channels to work on their behalf (Kotler and
Keller: 2016).
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Certain steps can improve the likelihood of starting positive buzz:
Identify influential individuals and companies and devote extra effort to them
Supply key people with product samples
Work through community influential
Develop word-of-mouth referral channels to build business
Provide compelling information that customers want to pass along
A customer’s value to a company depends in part on his or her ability and likelihood of making referrals and engaging in positive word of mouth. Rungs on the customer loyalty
ladder (in ascending order):
Satisfaction—Sticks with your organization as long as expectations are met.
Repeat purchase—Returns to your company to buy again.
Word of mouth/buzz—puts his or her reputation on the line to tell others about you.
Evangelism—convinces others to purchase/join.
Ownership—feels responsible for the continued success of your organization.
Measuring the Effects of “Word of Mouse”
Many marketers concentrate on the online effects of word of mouth, given the ease of tracking
them through advertising, PR, and digital agencies.
Through demographic information or proxies for that information and cookies, firms can monitor
when customers blog, comment, post, share, link, upload, friend, stream, write on a wall, or
update a profile. Other researchers focus more on characterizing the source of word of mouth.
More firms are setting up technologically advanced central locations to direct their online
tracking efforts. Teams might monitor blog conversations, track sentiment, and, based on
feedback, make appropriate changes to the company’s marketing on its Web page and elsewhere. The team also has to decide when it is appropriate to intervene in an online
conversation and when it is not. Any post that includes a query directly about the brand or that
reflects a misunderstanding is usually an opportunity for the team to weigh in, but as one team
member notes, “If they want to talk about working out, we let them have that conversation.”
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Mobile Marketing
The Scope of Mobile Marketing
Mobile device is uniquely tied to one user. It is virtually always “on” given it is typically carried everywhere. It allows for immediate consumption because it is in effect a channel of distribution
with a payment system. It is highly interactive given it allows for geo-tracking and picture and
video taking.
Major opportunity for advertisers to reach consumers on the “third screen” (TV and the computer are the first and second. Mobile apps can perform useful functions—adding
convenience, social value, incentives, and entertainment and making consumers’ lives a little or a lot better. Mobile coupons are getting more popular and offset redemption declines in
traditional coupons. Although the cookies that allow firms to track online activity don’t typically work in wireless applications, technological advances are making it easier to track users across
their smart phones and tablets too. With user privacy safeguards in place, marketers’ greater knowledge of cross-screen identities (online and mobile) can permit more relevant, targeted
ads. New measurement techniques are also aiding the adoption of mobile marketing (Kotler
and Keller: 2012).
Developing Effective Mobile Marketing Programs: the Web experience can be very different for
users given smaller screen sizes, longer download times, and the lack of some software
capabilities. Marketers are wise to design simple, clear, and clean sites, paying even greater
attention than usual to user experience and navigation. Being concise is critical with mobile
messaging.
Mobile ad copy should occupy only 50 percent of the screen, avoiding complex viewing
experiences that may take a toll on consumers’ battery and data availability as well as on their time.
Brands should limit their ads to a pair of phrases—the offer and the tagline.
Brands should place their logo in the corner of the mobile ad frame.
Mobile Marketing across Markets: U.S. marketers can learn much about mobile marketing by
looking overseas. In developed Asian markets such as Hong Kong, Japan, Singapore, and
South Korea, mobile marketing is fast becoming a central component of customer experiences.
In developing markets, high smart-phone penetration also makes mobile marketing attractive.
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As marketers learn more about effective mobile campaigns from all over the world, they are
figuring out how to adapt these programs to work in their markets (Kotler and Keller: 2016).
Managing Personal Communications: Direct and Database Marketing and Personal
Selling
Although mass and digital communications provide many benefits, there are times personal
communications are needed to be relevant and close a sale. Personalizing communications
and saying and doing the right thing for the right person at the right time are critical for
marketing effectiveness.
Direct Marketing: the use of consumer-direct (CD) channels to reach and deliver goods and
services to customers without using marketing middlemen. Channels used to reach individual
prospects and customers: direct mail, catalogue marketing, telemarketing, interactive TV,
kiosks, Web sites, and mobile devices. Often seek a measurable response, typically a
customer order, through direct-order marketing. Sales produced through traditional direct
marketing channels (catalogues, direct mail, and telemarketing) have been growing rapidly,
along with direct-mail sales, which include sales to the consumer market, B-to-B, and fundraising by charitable institutions (Kotler and Keller: 2012).
The Benefits of Direct Marketing
Consumers short of time and tired of traffic and parking headaches appreciate toll-free phone
numbers, always-open Web sites, next-day delivery, and direct marketers’ commitment to customer service. Chain stores have dropped slower-moving specialty items, creating an
opportunity for direct marketers to promote these to interested buyers instead.
Direct marketers can buy a list containing the names of almost any group: left-handed people,
overweight people, or millionaires and can customize and personalize messages and build a
continuous relationship with each customer.
Direct marketing can reach prospects at the moment they want a solicitation and therefore be
noticed by more highly interested prospects. It lets marketers test alternate media and
messages to find the most cost-effective approach. Direct marketing also makes the company’s offer and strategy less visible to competitors. Finally, direct marketers can measure responses
to their campaigns to decide which have been the most profitable (Kotler and Keller: 2016).
Direct marketing must be integrated with other communications and channel activities.
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Customer interaction is an opportunity to up-sell, cross-sell, or just deepen a relationship. They
make sure they know enough about each customer to customize and personalize offers and
messages and develop a plan for lifetime marketing to each valuable customer, based on their
knowledge of life events and transitions. They carefully orchestrate each element of their
campaigns (Venter and Van Rensburg: 2014).
Public and Ethical Issues in Direct Marketing
Irritation. Many people do not like hard-sell direct marketing solicitations.
Unfairness. Some direct marketers take advantage of impulsive or less sophisticated
buyers or prey on the vulnerable, especially the elderly. Deception and fraud. Some
direct marketers design mailers and write copy intended to mislead or exaggerate
product size, performance claims, or the “retail price.” Invasion of privacy. It seems that almost every time consumers order products by mail
or telephone, apply for a credit card, or take out a magazine subscription, their names,
addresses, and purchasing behaviour may be added to several company databases.
People in the direct marketing industry know that, left unattended, such problems will
lead to increasingly negative consumer attitudes and lower response rates. Most direct
marketers want the same thing consumers want: honest and well-designed marketing
offers targeted only to those who appreciate hearing about them.
Customer Databases and Database Marketing
A customer database is an organized collection of comprehensive information about individual
customers or prospects that is current, accessible, and actionable for lead generation, lead
qualification, sale of a product or service, or maintenance of customer relationships.
A customer mailing list is not a database; it is simply a set of names, addresses, and telephone
numbers. A customer database, however, contains much more information, accumulated
through customer transactions, registration information, telephone queries, cookies, and every
customer contact. Ideally, a customer database also contains the consumer’s past purchases, demographics (age, income, family members, and birthdays), psychographics (activities,
interests, and opinions), media graphics (preferred media), and other useful information (Kotler
and Keller: 2012).
Data Warehouses and Data Mining
Savvy companies capture information every time a customer contacts any of their departments,
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whether via purchase, a service call, an online query, or a mail-in rebate card. These data are
collected by the company’s contact centre and organized into a data warehouse where
marketers can capture, query, and analyse them to draw inferences about an individual
customer’s needs and responses. Customer service reps inside the company can respond to customer inquiries based on a
complete picture of the customer relationship, and customized marketing activities can be
directed to individual. Through data mining, marketing statisticians can extract from the mass of
data useful information about individuals, trends, and segments. Companies can use their
databases in five ways:
1.
To identify prospects
2.
To decide which customers should receive a particular offer
3.
To deepen customer loyalty
4.
To reactivate customer purchases
5.
To avoid serious customer mistakes
The Downside of Database Marketing
Some situations are just not conducive to database marketing. The product is an once-in-alifetime purchase (a grand piano). Customers show little loyalty to a brand (there is a lot of
customer churn). The unit sale is very small (a candy bar) so customer lifetime value is low.
The cost of gathering information is too high. There is no direct contact between the seller and
ultimate buyer. Building and maintaining a customer database require a large investment.
Employees may resist becoming customer-oriented and using the available information
because they find it easier to carry on traditional transaction marketing than to practice CRM.
Not all customers want a relationship with the company. The assumptions behind CRM may
not always hold true (Kotler and Keller: 2016).
Designing the Sales Force
The original and oldest form of direct marketing is the field sales call. Bottom-line success in
any entrepreneurial endeavour may depend on sales execution. Companies are sensitive to
the high and rising costs of maintaining a sales force, including salaries, commissions,
bonuses, travel expenses, and benefits.
Companies are trying to increase sales force productivity through better selection, training,
supervision, motivation, and compensation.
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Managing the Sales Force
It’s a great waste to hire the wrong people. Sales force turnover leads to lost sales, the expense of finding and training replacements, and often pressure on existing salespeople to
pick up the slack. Effective predictors of high performance in sales are composite tests and
assessment centres that simulate the working environment and assess applicants in an
environment similar to the one in which they would work
Today’s customers expect salespeople to have deep product knowledge, add ideas to improve
operations, and be efficient and reliable, so companies are investing more in sales training.
Training time varies with the complexity of the selling task and the type of recruit. Reps paid
mostly on commission generally receive less supervision. Those who are salaried and must
cover definite accounts are likely to receive substantial supervision.
Sales Rep Productivity
Companies often specify how much time reps should spend prospecting for new accounts.
Some companies rely on a missionary sales force to create new interest and open new
accounts. In the course of a day, reps plan, travel, wait, sell, and perform administrative tasks
(writing reports and billing, attending sales meetings, and talking to others in the company
about production, delivery, billing, and sales performance). The best sales reps manage their
time efficiently. Time-and-duty analysis and hour-by-hour breakdowns of activities help them
understand how they spend their time and how they might increase their productivity. To cut
costs, reduce time demands on their outside sales force, and leverage technological
innovations, many have increased the size and responsibilities of their inside sales force. Inside
selling is less expensive and growing faster than in-person selling (Kotler and Keller: 2016).
Virtual meeting software such as WebEx, communication tools such as Skype, and social
media sites such as LinkedIn, Facebook, and Twitter make it easier to sell with few if any faceto-face meetings. Inside sellers don’t need to be in the office—a growing percentage work at
home. The inside sales force frees outside reps to spend more time selling to major accounts,
identifying and converting new major prospects, and obtaining more blanket orders and
systems contracts.
Inside salespeople spend more time checking inventory, following up orders, and phoning
smaller accounts. They typically earn a salary or salary-plus-bonus pay. Sales Technology:
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sales and inventory information transferred much more quickly, but specific computer-based
decision support systems have been created for sales managers and sales representatives.
Going online with a tablet or laptop, salespeople can prime themselves on backgrounds of
clients, call up prewritten sales letters, transmit orders and resolve customer-service issues on
the spot, and send samples, pamphlets, brochures, and other materials to clients.
One of the most valuable digital tools for the sales rep is the company Web site. This defines
the firm’s relationships with individual accounts and identifies those whose business warrants a
personal sales call. It also provides an introduction to self-identified potential customers and a
way to contact the seller. Might receive the initial order (Kotler and Keller: 2016). Social media
is a valuable digital selling tool. Social networking is useful in “front end” prospecting and lead qualification as well as in “back end” relationship building and management. Companies can listen to social media to identify needs
Motivating Sales Representatives: the majority of sales representatives require encouragement
and special incentives, especially those in the field who encounter daily challenges. Most
marketers believe that the higher the salesperson’s motivation, the greater the effort and the
resulting performance, rewards, and satisfaction—all of which in turn further increase
motivation. Marketers reinforce intrinsic and extrinsic rewards of all types. One research study
found the employee reward with the highest value was pay, followed by promotion, personal
growth, and sense of accomplishment. Least valued were liking and respect, security, and
recognition. In other words, salespeople are highly motivated by pay and the chance to get
ahead and satisfy their intrinsic needs, and they may be less motivated by compliments and
security.
Compensation plans may even need to vary depending on the type of salespersons: stars, core
or solid performers, and laggards. Stars benefit from no ceiling or caps on commissions,
overachievement commissions for exceeding quotas, and prize structures that allow multiple
winners. Core performers benefit from multi-tier targets that serve as stepping stones for
achievement and sales contests with prizes that vary in nature and value.
Laggards respond to consistent quarterly bonuses and social pressure. Sales Quotas:
companies set annual sales quotas, developed from the annual marketing plan, for dollar sales,
unit volume, margin, selling effort or activity, or product type. Compensation is often tied to
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degree of quota fulfilment. The company first prepares a sales forecast that becomes the basis
for planning production, workforce size, and financial requirements. Management then
establishes quotas for regions and territories, which typically add up to more than the sales
forecast to encourage managers and salespeople to perform at their best.
Even if they fail to make their quotas, the company nevertheless may reach its sales forecast.
Setting sales quotas can create problems. If the company underestimates and the sales reps
easily achieve their quotas, it has overpaid them. If it overestimates sales potential, the
salespeople will find it very hard to reach their quotas and be frustrated or quit. Quotas can
drive reps to get as much business as possible—often ignoring the service side of the
business, so the company gains short-term results at the cost of long-term customer
satisfaction.
Evaluating Sales Representatives: Good feed-forward requires good feedback; this means
getting regular information about representatives on which to evaluate their performance. The
most important source of information about reps is sales reports. Additional information comes
through personal observation, salesperson self-reports, customer letters and complaints,
customer surveys, and conversations with other reps. Many companies require representatives
to develop an annual territory-marketing plan in which they outline their program for developing
new accounts and increasing business from existing accounts.
Reports according to Kotler and Keller (2012) provide raw data from which sales managers can
extract key indicators of sales performance:
Average number of sales calls per salesperson per day
Average sales call time per contact
Average revenue per sales call
Average cost per sales call
Entertainment cost per sales call
Percentage of orders per hundred sales calls
Number of new customers per period
Number of lost customers per period
Sales force cost as a percentage of total sales.
Principles of Personal Selling
SPIN method to build long-term relationships by asking prospects several types of questions:
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Problem questions—these deal with problems, difficulties, and dissatisfactions the
buyer is experiencing.
3.
Implication questions—these ask about the consequences or effects of a buyer’s problems, difficulties, or dissatisfactions.
4.
Need-payoff questions—these ask about the value or usefulness of a proposed
solution.
Most sales training programs agree on the major steps in any effective sales process.
Prospecting and Qualifying
Pre-approach
Presentation and Demonstration (features, advantages, benefits, and value (FABV)
approach)
Overcoming Objections
Closing
Follow-up and Maintenance
Relationship Marketing: In many cases the company seeks not an immediate sale but rather a
long-term supplier–customer relationship. Salespeople working with key customers should call
or visit at other times and make useful suggestions about the business to create value.
Relationship marketing is not effective in all situations.
7.3
COMMUNICATING VALUE WITHIN EMERGING MARKETS
7.3.1
Marketing Communications in Asia
India
Chan (2011: 38) examines the implications which research findings from Hong Kong regarding
marketing communications have for the Asia Pacific Region in general, and India in particular.
3G networks and smart phones have significantly transformed marketing communications in
India and “in order to stay attuned, advertising managers must now factor in technological
advances and often incorporate new media to maximize marketing effectiveness”
(Chan, 2011: 38).
While India continues to establish its 3G infrastructure, marketing managers need to consider
how to integrate social networking and mobile internet into their companies’ marketing communications mix.
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Marketing managers also need to find ways of minimising the high-tech media marketing
communications risks associated with mobile internet and social media networking (Chan,
2011: 43).
Jain, Pant & Daswani (2011: 24) point out that the emerging online gaming industry amongst
the Indian youth (Generation Y) has “immense opportunity for the marketers who may merchandise their brands online.”
In implementing a mobile marketing strategy, research has found that Indian consumers prefer
“incentive-based, entertaining, informative and helpful messages”;; that they “want to control the frequency of the messages while maintaining the privacy and security aspect”; and that they
prefer “customised messages according to their location and timing” (Jain et al, 2011: 24). This
profile of the Indian consumer provides marketers with insight into how they may use mobile
marketing in a manner that deepens the involvement of the customers, and that is effective in
communicating value.
China
Internet usage in China has developed rapidly, although it is unevenly spread across cities and
counties (Huang & Tsang, 2010: 1). While there are 420 million Chinese ‘netizens’ (the highest of any other country in the world), China has an internet penetration rate of only 31.8% which is
significantly lower than the almost 100% rates in Europe. Huang & Tsang (2010:1) point out
that “as the impact of internet communications increases, online advertising thus has become a
new favourite of Chinese advertisers....the proportion of internet advertising in China’s overall advertising industry continues to expand, accounting for about 12.5% in 2009 and likely to
reach 20% by 2011.” The primary types of advertisements that are featured in China’s internet based advertising are: search engine advertisements (36%), online community advertisements
(25%) and vertical site advertisements (20%).
Weibo is China’s version of Twitter and is an impactful digital communications and marketing
channel. Nooruddin & Zhang (2012: 42) point out that “use of this real-time microblogging
social technology in China has been unprecedented, and companies have a unique opportunity
to use Weibo to reach and engage new audience in China.” However, as Weibo has different
features to Twitter, international companies cannot simply apply their Twitter strategy to Weibo.
While traditional marketing and communications strategies should be the foundation of a
company’s Weibo programme, strategic use should also be made of Weibo’s unique features to reach a greater audience and facilitate engagement.
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7.3.2
Marketing Communications in Africa
Advertising to Children in Africa
While there is a body of research into the impact of television advertising on children within
developed societies, there has been limited research conducted in this area within the African
context. To address this area of lack, Gbadamosi, Hinson, Tukamushaba & Ingunjiri (2012:
556) conducted research to establish how African children perceive television advertising.
Their research findings showed that:
Television advertising is very popular amongst African children, who have a “keen interest in its entertainment features, such as music and humour, irrespective of whether the
message is specifically targeted at them or other audiences” (Gbadamosi, 2012: 556).
African children like food-related advertising messages, which in turn influence their food
consumption choices. This could undermine the children’s decisions relating to health food
choices, and so it is important that marketers are cautious and responsible in the manner in
which they communicate food related messages.
African children enjoy advertisements that feature celebrities and children, and “like most children in the world, use advertising to fulfil their needs for love, belongingness and
aspiration” (Gbadamosi, 2012: 557). Using children and celebrities in African television
advertisements would therefore increase purchase intent amongst the children.
“The need to still adapt messages, to conform to local values and customs, cannot be
ignored – especially in terms of the language of communication in the commercials.” (Gbadamosi et al, 2012: 557)
The children were also interested in group oriented and/or family-oriented advertisements,
and this is indicated to be in keeping with the cultural African values of togetherness,
collectiveness and extended family settings (Gbadamosi et al, 2012: 558).
Advertising messages result in children pestering their parents for the advertised products
and/or service, thereby highlighting the “potent role of advertising in influencing their
consumption behaviour” (Gbadamosi et al, 2012: 558).
Consumer Culture Plots in Advertisements in Nigeria & South Africa
Oyedele & Minor (2012: 98) conducted research into the degree to which television
advertisements within the major economic powers of sub-Saharan Africa, Nigeria and South
Africa, promote global consumer culture and traditional local culture.
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In Nigerian television advertisements it was found that advertisers emphasise “the global through the overwhelming display of Western aesthetic attributes (e.g. Western music,
Western-style design, furnishing, images of Western cities, architecture”) and that the
“presentation of the global is not modified or resignified to fit the local” (Oyedele & Minor, 2012:
99). In contrast to Nigeria, South African television advertisements showed greater local and
global contention. A key conclusion drawn from the research findings is that “advertisements
reflect a romanticised view of middle-ground politics, promoted by political establishments at
the national and international levels” (Oyedele & Minor: 2012: 99). A country’s changing political and ideological positions are therefore important factors which companies need to give
attention to when conceptualising advertisement campaigns for emerging markets within subSaharan Africa.
Have You Completed the ‘Essential Reading’ for this Chapter?
Now that you have been introduced to this chapter on a “Communicating Value”,
source and work through the textbook chapters and journal articles listed in the “Essential Reading” list at the beginning of this chapter. It is essential that you read all of the
textbook chapters and journal articles listed. Work through the case studies in your
prescribed text as well.
QUESTIONS FOR REFLECTION
After completing your study of this chapter on ‘Communicating Value’, reflect on the following questions.
1. To what extent has the organisation for which you work adopted an integrated approach to
marketing communications? Provide reasons for your answer.
2. Consider the advertisements that are currently being broadcasted on television. To what
extent does the content and intent of these advertisements align with the Oyedele &
Minor’s (2012) research findings?
3. Identify three products that you consider to have high awareness but are performing
relatively poorly in the marketplace. What would you recommend as a marketer?
4. Critically evaluate the use of technology and social networks in marketing strategies.
5. You have a local supermarket as a client. Examine the case for spending their budget in a
concentrated burst versus a drip campaign.
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CHAPTER 8: CREATING SUCCESSFUL LONG TERM
GROWTH
SPECIFIC LEARNING OUTCOMES
The overall outcome for this chapter is that, on its completion, the student should be able to
demonstrate a comprehensive understanding of the application of marketing strategies and
practices to create successful long term growth within both advanced markets and emerging
markets. This overall outcome will be achieved through the student’s mastery of the following
specific outcomes:
1. Explain and evaluate the process and key stages of new product and services
development.
2. Critically discuss the introduction of new marketing offerings as a marketing mechanism to
create successful long term growth.
3. Identify and discuss the factors which impact on the consumer adoption of newly launched
products and services.
4. Critically discuss the development of new products and services within emerging markets.
5. Critically discuss the potential of developed and developing markets to promote successful
long term growth within organisations.
6. Explain the differences between marketing to developed countries and marketing to
developing countries and create suitable marketing strategies for these countries.
7. Identify and explain the various foreign market entry strategies.
8. Critically discuss the implementation of socially responsible marketing strategies and
practices within both emerging and advanced markets.
9. Explain how socially responsible marketing promotes successful long term growth within
organisations.
10. Identify and explain the tools that organisations may use to monitor and control the
implementation of their marketing plan.
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ESSENTIAL READING
Students are required to read ALL of the textbook chapters and journal
articles listed below.
Textbooks:
Kotler, P. & Keller, K.L. (2016) Marketing Management. Essex: Pearson Education.
Chapter 15: Introducing New Market Offerings
Chapter 8: Tapping into Global Markets
Chapter 23: Managing a Holistic Marketing Organisation for the Long Run
Cant, M.C., Van Heerden, C.H. & Ngambi, H.C. (2014) Marketing Management. A South
Africa Perspective. Cape Town: Juta.
Chapter 15: Marketing Metrics
Chapter 16: International Marketing
Chapter 17: Marketing in Developing Countries
Journal Articles:
Atsmon Y., Child, P., Dobbs, R. & Narasimhan, L. (2012) “Winning the $30 Trillion Decathlon: Going for Gold in Emerging Markets.” McKinsey Quarterly. Issue 4, pp 20 - 35.
(available from EBSCO)
Ayyagari, M., Demirguc-Kunt, A. & Maksimovic, V. (2011) “Firm Innovation in Emerging Markets: The Role of Finance, Governance and Competition.” Journal of Financial &
Quantitative Analysis. 46 (6), pp 1545 – 1580. (available from EBSCO)
Bajpai, G.N. & Euchner, J. (2011) “Innovation in Emerging Markets: An Interview with GN Bajpai.” Research Technology Management. 54 (4), pp 12 – 16. (available from EBSCO).
Douglas, S.P. & Craig, C.S. (2011) “Convergence & Divergence: Developing a Semiglobal
Marketing Strategy.” Journal of International Marketing. 19 (1), pp 82 - 101. (available from
EBSCO)
Govindarajan, V. (2012) “A Reverse-Innovation Playbook.” Harvard Business Review. 90
(4), pp 120 – 124. (available from EBSCO).
Nkamnebe, A.D. (2011) “Sustainability Marketing in the Emerging Markets: Imperatives, Challenges & Agenda Setting.” International Journal of Emerging Markets. 6 (3), pp 217 –
232. (available from Emerald)
Santos, N.J.C. & Laczniak, G.R. (2009) “Marketing to the Poor: An Integrative Justice
Model for Engaging Impoverished Market Segments.” Journal of Public Policy & Marketing.
28 (1), pp 3 – 15.
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8.1
INTRODUCTION
It is important that organisations implement Marketing Management strategies and practices in
a manner that not only focuses on the present, but also promotes successful long term growth.
Important marketing strategies and practices that facilitate an organisation’s long term growth and sustainability include:
o Developing innovative new products;
o Becoming a competitive player within the global market, particularly emerging
economies;
o Engaging in socially responsible marketing; and
o Controlling marketing practices and strategies.
8.2
OVERVIEW OF CREATING SUCCESSFUL LONG TERM GROWTH
The key factors and dynamics impacting on the marketing initiatives that contribute to the
creation of successful long term growth are summarised in Figure 8.1 below.
Creating Successful Long Term Growth through Marketing
Developing
Innovative
Products
Challenges
Organisational
Structures &
Processes
Stages of New
Product
Development
Managing the
New Product
Development
Process
Consumer
Adoption
Competing in
Global Markets
Factors
Influencing
Global Market
Entry Decision
Evaluation and
Selection of
Foreign Markets
Differences
Between
Marketing in
Developed and
Developing
Markets
Foreign Market
Entry Strategies
Socially
Responsible
Marketing
Controlling
Marketing
Practices &
Strategies
Legal Behaviour
Ethical Behaviour
Social
Responsibility
Behaviour
Sustainability
Socially
Responsible
Business Models
Annual
Marketing Plan
Control
Profitability
Control
Efficiency
Control
Strategic Control
Cause Related
Marketing
Social Marketing
Product &
Marketing
Programme
Adaptation
Country of Origin
Effects
Figure 8.1: Creating Successful Long Term Growth Through Marketing
Source: (Kotler & Keller, 2012: 589 – 673)
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Competing on a Global Basis
Global competition is intensifying in many product categories. Competition from developingmarket firms is growing. Firms should continuously improve products and expand into foreign
markets. Global firms operate in more than one country and capture R&D, production,
logistical, marketing and financial advantages not available to domestic competitors. Global
firms plan, operate and coordinate activities worldwide. To sell overseas, successful global
U.S. brands have tapped into universal consumer values and needs (Kotler and Keller: 2012).
THINK POINT
Think of all the decisions companies make before going abroad?
Risks associated with going abroad
Risk of not understanding foreign preferences;
Failure to offer a competitively attractive product.
Lack of business culture understanding.
Underestimating foreign regulations;
Incurring unexpected costs.
Lack of managers with international experience.
Commercial laws can change, currency can be devalued, a political revolution could
occur.
Deciding Which Markets to Enter
How Many Markets to Enter
Waterfall: gradually entering countries in sequence. This allows firms to carefully plan
expansion. Less strain on human and financial resources;
Sprinkler: entering many countries simultaneously. Good approach when first-mover advantage
is crucial or high degree of competitive intensity prevails. Main risk is substantial resources and
difficulty planning entry strategies for diverse markets;
Born global: technology-intensive firms or online ventures marketed to the world from the
outset. Country selections may be based on product and geography, income, population,
political climate, competition, and market growth.
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Evaluating Potential Markets
A market’s demographic, economic, sociocultural, natural, technological, and political-legal
environments affect its attractiveness and readiness for a product. Neighbouring countries are
popular because entry costs are lower and control and understanding are higher. Psychic
proximity, or more familiar language, laws and culture, can determine choices but may cause
companies to overlook better markets and fail to realize real differences. High market
attractiveness, low market risk and a competitive advantage are important (Kotler and Keller:
2016).
Succeeding in Developing Markets
Emerging markets, such as Brazil, Russia, India, China, and South Africa, or BRICS, and
Indonesia, are different from developed markets. These markets offer many opportunities but
also many challenges. Unmet needs mean huge potential markets for food, clothing, shelter,
consumer electronics, appliances, etc. Much less purchasing power and many live in conditions
ranging from mild deprivation to severe deficiency. Brazil is the biggest economy in Latin
America and the sixth largest in the world and is expected to be economically larger than
Germany, Japan, and the United Kingdom in 2050. Domestic concerns include education and
infrastructure. Fifth-largest country globally in terms of digital users, with about 91 million
people online, makes digital strategies attractive. Social media are especially popular. Firms
are increasingly using mobile marketing, with a strong local flavour in their marketing
communications. Common themes that resonate well with Brazilians: family life, happiness,
optimism, and pride at being from Brazil.
Russia is the largest exporter of natural gas, the second-largest exporter of oil, and the thirdlargest exporter of steel and primary aluminium. Reliance on commodities makes them
sensitive to recessions. Its citizens are heavy users of social media. However, they have a
dwindling workforce and poor infrastructure. Economic reforms have stagnated; Russia is one
of the most corrupt countries in the world. Logistical problems with roads and infrastructure only
compound the problems.
India lowered trade barriers and liberalized capital markets in the 1990s, bringing booming
investment and consumption. One-quarter of the entire world’s under-25 population lives in
India.
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Progress in literacy and access to financial services and modern technology has made inroads
in this country largely dominated by culture and religious aspects. Mobile phone density is
approximately 75 percent of the population, of whom around 15 percent use their mobile
devices to go online.
Its 28 separate states each have their own policies and tax rules, 23 official languages, 1,500
dialects, and a multitude of faiths. Areas around Mumbai and Bangalore are richer and more
highly literate, while poorer, less educated states lie in the east. Cool winters in the north create
dry skin conditions, in stark contrast to the humid climates of Mumbai and Chennai. Poor
infrastructure and public services—education, health, and water supply—and restrictive labour
laws all add to the country’s issues as well. Corruption remains a huge problem at virtually all
levels of government. A complicated retail network has been slow to modernize, leading to
distribution problems.
China has 1.34 billion people that marketers want to reach, which has resulted in greater
competition in pricing, products, and channels since its entry into WTO. Some industries
remain fiercely protected or off-limits to foreigner’s altogether.
Subsidized competition, restricted access, conflicting regulations, opaque and seemingly
arbitrary bureaucracy, and lack of protection for intellectual property
Chinese government encourages partnerships with foreign companies, in part so that its firms
can learn enough to become global powerhouses themselves.
Selling in China means going beyond the big cities, to the second- and third-tier cities, as well
as to the 700 million potential consumers in small communities in the rural interior. Rural
consumers have lower incomes, are less sophisticated, and often cling to local habits. China is
also ethnically diverse—the banknote features eight languages, including Arabic, Mongolian,
and Tibetan.
Chinese consumers spend a fraction of what U.S. consumers do. China is now the world’s top consumer of luxury consumer goods, with many Chinese consumers viewing these as trophies
of success. Western companies benefit from their reputation of quality, safety, and
dependability with Chinese consumers, who have seen numerous scandals from their domestic
companiesSouth Africa is a developed market, but has an important role as an access point to
the African region/launch pad for African expansion.
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Political turmoil in Egypt, Tunisia, and Libya during the “Arab Spring” is a reminder of the instability that has plagued the continent. Logistical and infrastructure problems prevail.
Improvements have been made in health, education, and social services and economic
forecasts are good. African consumers seek high-quality products and are brand conscious.
Agriculture is the largest economic sector; telecommunications, energy, consumer products,
and health care are experiencing the fastest growth. Mobile phones are used not just for talking
but also as a platform to support daily living, playing a crucial role in health care and banking,
for example, where extensive infrastructure does not exist.
THINK POINT
Think of role and value of South Africa as an access point to the African region?
Indonesia’s reputation as a country historically struggling with natural disasters, terrorism, and
economic uncertainty is quickly being replaced by a profile of political stability and economic
growth. The fourth-largest country in the world and the largest Muslim country, it is the thirdfastest-growing economy in the region—behind India and China—largely based on its 240
million consumers. By 2030, forecasts expect the number of middle-class Indonesians—those
making between $2 and $20 per day—to increase from 131 million to 244 million and those in
the “consumer class”—who make more than $3,600 per year—to increase from 45 million to
135 million.
Very brand conscious, an important preference given their rising incomes. Efficient distribution
is critical (Kotler and Keller: 2016).
Marketing Strategies for Developing Markets
Economic and cultural differences abound, a marketing infrastructure may barely exist, and
local competition can be a challenge. Typically much easier to tap into the middle class in
developing markets than to reach the 4 billion people at the “bottom of the pyramid” because marketing practices are similar to developed markets. Although they may collectively be worth
$3 trillion, each individual low-income consumer may have very little to spend.
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Satisfying the bottom of the pyramid also requires careful planning and execution;; a “low price, low margin, high volume” business model is supposed to be the key to successfully appealing to lower-income markets in developing markets, but it does not always work. Cost reductions
are difficult to realize because of the firm’s established supply chain and when production
methods and distribution strategy and price premiums are hard to command because of
consumer price sensitivity. Smaller packaging and lower prices are critical when income and
space are limited.
Vast majority of consumers in emerging markets buy their products from tiny bodegas, stalls,
kiosks, and mom-and-pop stores not much bigger than a closet, or “high-frequency stores”.
Strategies will be crucial in developing markets given the rapid penetration of smart phones as
more than a means of communication.
Developing and Developed Markets
Developing markets have yielded some strong multinationals selling in many countries. They
identify neglected niches in larger markets. Another strategy for going global is to acquire one
or more firms in developed markets. Firms from developed markets are using lessons gleaned
from developing markets to better compete in their home or existing markets.
Economic integration (trade agreements) has intensified in recent years, which means
companies are more likely to enter entire regions at the same time.
Deciding How to Enter the Market
Indirect exporters work through independent intermediaries. Domestic-based export merchants
buy the manufacturer’s products and then sell them abroad. Domestic-based export agents
including trading companies, seek and negotiate foreign purchases for a commission
Cooperative organizationsconduct exporting activities for several producers—often of primary
products such as fruits or nuts—and are partly under their administrative control. Exportmanagement companiesagree to manage a company’s export activities for a fee. export has two advantages: Less investment and less risk.
Direct exporting has relatively higher risk and return, and happens in several ways. Domesticbased export department or division: where a service function may evolve into an export
department. Overseas sales branch or subsidiary might handle sales, distribution,
warehousing, promotion, displays and customer service. Traveling export sales representatives
travel to find businesses.
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Foreign-based distributors or agents can hold limited or exclusive rights to represent the
company. Successful companies adapt their Web sites to provide country-specific content and
services to their highest-potential international markets in the local language.
Licensing is a simple way to engage in international marketing. A foreign company gets a
license to use a manufacturing process, trademark, patent, trade secret, or other item of value
for a fee or royalty. Licensor gets market entry at little risk; licensee gets production expertise
or well-known product or brand name. Licensor has less control than if it had its own production
and sales facilities, gives up profits, and may create a competitor when the contract ends. Best
strategy is to lead in innovation so licensee will continue to depend on the licensor. Licensing
arrangements include management contracts, contract manufacturing, and franchising.
Joint ventures involve foreign investors and local investors.May be necessary or desirable for
economic or political reasons (Kotler and Keller: 2012).
Foreign firm might lack the financial, physical, or managerial resources to undertake the
venture alone, or the foreign government might require joint ownership as a condition for entry.
Partners might disagree over investment, marketing, and investments. Good partners share
“brand values” that help maintain brand consistency across markets (Douglas, Ford and Ibrahim: 2010).
THINK POINT
Think and substantiate the most appropriate market entry strategies for markets in Africa
Deciding on the Marketing Program
Standardized Marketing Program (lowest costs)
Advantages: economies of scale in production and distribution, lower marketing costs, power
and scope, consistency in brand image, ability to leverage good ideas quickly and efficiently,
uniformity of marketing practices. Disadvantages: ignores differences in consumer needs,
wants, usage patterns, response to marketing programs and activities, brand and product
development,
competitive
environment,
legal
environment,
marketing
institutions,
administrative procedures. Adapted marketing programs (believes consumer needs vary and
tailors marketing to each target group) (Kotler and Keller: 2016).
Global Similarities and Differences
Technology led convergence of lifestyles
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Shared needs and wants have created global markets for more standardized products
Hofstede identifies four cultural dimensions that differentiate countries
Consumer behaviour differences as well as historical market factors have led marketers to
position brands differently in different markets. Marketers adapt if elements add more revenue
than cost (features, labels, colours, materials, promotions, prices, media, brand name,
packaging, ad themes/execution). Best global brands are consistent in theme but reflect
significant differences in consumer behaviour, brand development, competitive forces, and the
legal or political environment. Companies must make sure their brands are relevant to
consumers in every market they enter (Douglas, Ford and Ibrahim: 2010).
High-end products benefit from standardization because quality and prestige often can
be marketed similarly across countries
Culture and wealth factors influence how quickly a new product takes off in a country,
though adoption and diffusion rates are becoming more alike across countries over
time
Food and beverage marketers find it more challenging to standardize
Product Adaptation Strategies
Product adaptation alters the product to meet local conditions or preferences
Regional, country, city, and retailer versions can also be used
Product invention can be backward or forward
Global Pricing Strategies
Price escalation adds transportation costs, tariffs, importer margins, wholesaler margins,
retailer margins. Three choices for setting prices:
1. Set uniform price everywhere
2. Set market-based price in each country
3. Set cost-based price in each country
Countries with overcapacity, cheap currencies, and the need to export aggressively have
pushed their prices down and devalued their currencies. A high transfer price could result in
higher tariff duties but lower income taxes, but a low one could be charged with dumping to
enter or win a market (arms-length price may be forced). Gray markets divert branded products
from authorized distribution channels either in country or across international borders. Create a
free-rider problem, making legitimate distributors’ investments in supporting a manufacturer’s product less productive and selective distribution systems more intensive to reduce the number
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of gray market possibilities. Harm distributor relationships, tarnish the manufacturer’s brand equity, and undermine the integrity of the distribution channel. Pose risks to consumers if the
product is damaged, relabeled, and obsolete, without warranty or support, or just counterfeit.
Multinationals try to prevent gray markets by policing distributors, raising their prices to lowercost distributors, or altering product characteristics or service warranties for different countries.
As companies develop global supply chain networks and move production farther from home,
the chance for corruption, fraud, and quality-control problems rises – as well as a huge market
for counterfeit goods (which can be deadly) (Kotler and Keller: 2012).
Country-of-Origin Effects
Mental associations and beliefs triggered by a country. Governments now recognize that the
images of their cities and countries affect more than tourism and have important value in
commerce. Foreign business can boost the local economy, provide jobs, and improve
infrastructure. Country image can also help sell products. Global marketers know that buyers
hold distinct attitudes and beliefs about brands or products from different countries. The impact
of country of origin varies with the type of product (Douglas, Ford and Ibrahim: 2010).
Introducing New Market Offerings
New-product development shapes the company’s future. Improved or replacement products and services can maintain or build sales; new-to-the-world products and services can transform
industries and companies and change lives.
However, the low success rate of new products and services points to the many challenges
they face. Marketers play a key role in new-product development by identifying and evaluating
ideas and working with R&D and other areas in every stage of development.
New Product Options
Make or Buy: a company can add new products through acquisition or development. When
acquiring, the company can buy other companies, buy patents from other companies, or buy a
license or franchise from another company. Organic growth is the development of new
products from within.
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Types of New Products
Range from new-to-the-world items that create an entirely new market to minor improvements
or revisions of existing products. Fewer than 10 percent of all new products are truly innovative
and new to the world (radical innovations). Companies typically must create a strong R&D and
marketing partnership to pull off a radical innovation. The right corporate culture is another
crucial determinant; the firm must prepare to cannibalize existing products, tolerate risk, and
maintain a future market orientation. A keen understanding of customers is also paramount.
Few reliable techniques exist for estimating demand for radical innovations. Focus groups can
provide perspective on customer interest and need. Marketers may need a probe-and-learn
approach based on observation and feedback of early users’ experiences and other means such as online chats or product-focused blogs (Kotler and Keller: 2012).
Challenges in New Product Development
Continuous innovation is a necessity. Companies that fail to develop new products leave
themselves vulnerable to changing customer needs and tastes, shortened product life cycles,
increased domestic and foreign competition, and especially new technologies. Highly
innovative firms are able to repeatedly identify and quickly seize new market opportunities.
New-Product Success
Most established companies focus on incremental innovation, entering new markets by
tweaking products for new customers, using variations on a core product to stay one-step.
Newer companies create disruptive technologies that are cheaper and more likely to alter the
competitive space. The number-one success factor is a unique, superior product.
Technological and marketing synergy, quality of execution in all stages, market attractiveness,
and products designed with other countries and a global perspective in mind fared better
(Kotler and Keller: 2016).
New-Product Failure
New products continue to fail at rates estimated as high as 50 percent or even 95 percent in
the United States and 90 percent in Europe. Reasons for failure:
Ignored or misinterpreted market research
Overestimates of market size
High development costs
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Poor design or ineffectual performance
Incorrect positioning, advertising, or price
Insufficient distribution support
Competitors who fight back hard
Inadequate ROI or payback.
Some additional drawbacks new-product launches face are:
Fragmented markets
Social, economic, and governmental constraints
Cost of development
Capital shortages
Shorter required development time
Poor launch timing
Shorter product life cycles
Lack of organizational support
Organizing New-Product Development
Many companies assign responsibility to product managers. Cross-functional groups can be
charged with developing a specific product or business. Skunkworks are informal workplaces,
sometimes garages, where intrapreneurial teams work to develop new products. Communities
of practice are often housed on internal Web sites where employees from different departments
are encouraged to share knowledge and skills with other Crowdsourcing can provide ideas or
feedback from consumers on a task or project that might otherwise be overlooked. Many top
companies use the stage-gate system to divide the innovation process into stages, with a gate
or checkpoint at the end of each before moving forward.
The Consumer-Adoption Process
Adoption individual’s decision to become a regular user of a product and is followed by the
consumer-loyalty process. New-product marketers typically aim at early adopters and use the
theory of innovation diffusion and consumer adoption to identify them. An innovation is any
good, service, or idea that someone perceives as new, no matter how long its history. The
innovation diffusion process is “the spread of a new idea from its source of invention or creation to its ultimate users or adopters.
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The consumer-adoption process is the mental steps through which an individual passes from
first hearing about an innovation to final adoption
Awareness—the consumer becomes aware of the innovation but lacks information
about it.
Interest—the consumer is stimulated to seek information about the innovation.
Evaluation—the consumer considers whether to try the innovation.
Trial—the consumer tries the innovation to improve his or her estimate of its value.
Adoption—the consumer decides to make full and regular use of the innovation. The
new-product marketer should facilitate movement through these stages.
Factors Influencing the Adoption Process:
differences in individual readiness to try new products,
the effect of personal influence, differing rates of adoption, and
differences in organizations’ readiness to try new products.
Some researchers are focusing on use-diffusion processes as a complement to adoption
process models to see how consumers actually use new products (Kotler and Keller: 2012).
Readiness to Try New Products and Personal Influence
Innovators are technology enthusiasts
Early adopters are opinion leaders who carefully search for new technologies
Early majority are deliberate pragmatists who adopt the new technology when its
benefits have been proven and a lot of adoption has already taken place.
Late majority are skeptical conservatives who are risk averse, technology shy, and
price sensitive.
Laggards are tradition-bound and resist the innovation until the status quo is no longer
defensible.
Holistic marketers must engage in a host of carefully planned, interconnected marketing
activities and satisfy an increasingly broader set of constituents as they pursue success as
measured by short-term and long-term metrics (Kotler and Keller: 2012).
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Trends in Marketing Practices
Important Shifts in Marketing and Business Practices are presented in Table 8.1
Table 8.1 – Shifts in Marketing and Business Practices (Kotler and Keller: 2012)
Reengineering
Supplier partnering
Globalizing
Justifying
Outsourcing
Customer partnering
Focusing
Uncovering
Benchmarking
Merging
Flattening
Monitoring
Empowering
Accelerating
Broadening
Innovating
Shifts in marketing and business practices, firms also face ethical dilemmas and perplexing
trade-offs (e.g., convenience of disposable products vs. desire to minimize waste).
Firms must develop fully integrated marketing programs and meaningful relationships with a
range of constituents. Internal Marketing requires that everyone in the organization accept the
concepts and goals of marketing and engage in identifying, providing, and communicating
customer value. In a networked enterprise, every functional area can interact directly with
customers.
Building a Creative Marketing Organization
Many companies are product and sales driven (not market and customer driven) . Transforming
into a true market-driven company requires:
Developing a company-wide passion for customers
Organizing around customer segments instead of products
Understanding customers through qualitative and quantitative research
Although it’s necessary to be customer oriented, it’s not enough. The organization must also be creative: build a capability in strategic innovation and imagination. Assemble tools, processes,
skills, and measures that let the firm generate more and better new ideas than its competitors.
Put together inspiring work spaces that help to stimulate new ideas and foster imagination.
Watch trends and be ready to capitalize on them. Market leaders can miss trends when they
are risk averse, obsessed about protecting their existing markets and physical resources, and
more interested in efficiency than innovation (Douglas, Ford and Ibrahim: 2010).
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Characteristics of Company Departments That Are Truly Customer Driven
R&D listens to consumers and solicits their reactions and suggestions, involves other
departments, seeks best of class solutions, and continuously improves and refines products.
Purchasing searches for the best suppliers, builds long-term relationship with a few, more
reliable high-quality suppliers, they do not compromise quality for price savings (Kotler and
Keller: 2016).
Manufacturing invites customers on tours, visits customers’ factories, work overtime to keep promised delivery schedules, search for ways to produce goods faster, at lower costs, with
fewer adverse environmental consequences, aim for zero defects, and meet customer
requirements for customization where this can be done profitably.
Marketing studies customer needs and wants in well-defined market segments, allocates
efforts where the most long-run profit potential lies, develops winning offerings for each target
segment, measures company image and customer satisfaction and loyalty on a continuous
basis, continuously gathers and evaluates ideas for new products/improvements and influences
other departments to be customer-centred (Douglas, Ford and Ibrahim: 2010).
Sales acquires specialize knowledge of the customer’s industry, gives solutions and makes promises it can keep, informs product development about customer needs, serves the same
customers for a long period of time. Logistics sets high standards for service delivery and
meets them, provides knowledgeable and friendly customer service.
Accounting prepares reports and invoices that relate to customer needs and segments.
Finance understands and supports marketing investments and tailors financial packages to
customers’ financial requirements. Public relations disseminate favourable news about the
company and handles damage control for unfavourable news, advocates for better company
policies and practices. Customer contact employees are competent, courteous, cheerful,
credible, reliable and responsive (Kotler and Keller: 2016).
An alternative in a product-management organisation is product teams. There are three types:
vertical, triangular, and horizontal. Triangular and horizontal product-team approaches let each
major brand be run by a brand-asset management team. An alternative eliminates product
manager positions for minor products and assign two or more products to each remaining
manager (Kotler and Keller: 2012).
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This is feasible when two or more products appeal to a similar set of needs. Another
alternative, category management, a company focuses on product categories to manage its
brands. Means to better manage the development of premium brands.
Helps firms address the plight of under-performing brands Fosters internal competition among
brand manager’s results in strong incentives to excel but also competition for resources and lack of coordination. Retailers think in terms of categories (Douglas, Ford and Ibrahim: 2010).
Marketing-Management organisation is desirable when customers fall into different user groups
with distinct buying preferences and practices. Market managers supervise several marketdevelopment managers, market specialists, or industry specialists and draw on functional
services as needed. Market managers are staff (not line) people, who develop long-range and
annual plans for their markets and are judged by their market’s growth and profitability. Many companies are reorganizing along market lines and becoming market-centred organizations
(Douglas, Ford and Ibrahim: 2010).
Customer-management organisations deal with individual customers rather than the mass
market or even market segments, and report much higher accountability for the overall quality
of relationships and greater employee freedom to take actions to satisfy individual customers.
Matrix-Management Organisation is appropriate for companies that produce many products for
many markets
Costly and often creates conflicts
Some corporate marketing groups assist top management with overall opportunity
evaluation, provide divisions with consulting assistance on request, help divisions that
have little or no marketing, and promote the marketing concept throughout the
company (Kotler and Keller: 2012).
8.3
CREATING SUCCESSFUL LONG TERM GROWTH IN EMERGING MARKETS
8.3.1
New Product Development and Innovation in Emerging Markets
As identified in Chapter 5: Shaping the Market Offerings, Govindarajan (2012) asserts that in
recent years there has been a shift from glocalisation to reverse innovation, involving the
development of a product within and specifically for an emerging market.
Reverse innovation is in line with Bajpai & Euchner’s (2011:12) view that “innovation in emerging markets is driven by a different mindset than is traditional in developed markets.” 177
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Within the Indian market, innovation is reported to be “driven by a singular focus on hitting price points that will drive the creation of markets” (Bajpai & Euchner, 2011:12).
Such innovation is regarded to be both an opportunity and a threat for multi-national
organisations, in that while it provides an opportunity to tap into large, growing markets, the
“potential disruption by innovation driven by the needs of the emerging markets” (Bajpai &
Euchner, 2011:12) is a threat.
Research conducted within 19,000 firms across 47 developing economies found that innovation
(new products and technologies) was greater when the firm had access to external financing;
the firm’s managers were highly educated; the firms were owned by families, individuals or
managers; and the firm was exposed to foreign competition (Ayyagari, Demirguc-Kunt, &
Maksimovic, 2011: 1545)
8.3.2
Tapping into the Market Potential of Emerging Markets
“Britain and the United States began industrialisation with populations of about ten million,
whereas China and India began their economic take-offs with populations of roughly one billion.
Thus the two leading emerging economies are experiencing roughly ten times the economic
acceleration of the Industrial Revolution, on 100 times the scale – resulting in an economic
force that is over 1,000 as big.” (Atsmon, Child, Dobbs & Narasimhan, 2012: 20). While CEO’s of multinational firms are very well aware that competing within emerging markets is critical to
long term success, they are challenged by the complexity of seizing this opportunity.
THINK POINT
Why are emerging markets suddenly being targeted by European and American
multinationals?
Atsmon et al (2012: 24) assert that for developed-market companies to win consumers in
emerging markets, ten crucial capabilities are necessary.
Douglas & Craig (2011: 82) emphasise the need for organisations to enter into and establish
market share within developing markets: “the plateauing of growth in the developed world has
resulted in a costly battle for market share. Driven by a growth imperative and faced with
slackening demand in traditional markets, firms have been compelled to increase promotional
expenses and innovate (e.g. developing new products or product variants) to maintain market
position.
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As a result, many firms are looking for new growth opportunities outside the developed world”
(Douglas & Craig, 2011: 82). However, global expansion presents companies with a complex
range of scenarios (e.g. rate of growth, market potential, degree of market interconnectedness,
etc.), making it difficult to develop an integrated strategy for global and developing markets.
Organisations therefore need to manage a diversity of strategies while striving to achieve
synergies and efficiencies (Douglas & Craig, 2011: 97).
Research conducted in China showed that “early foreign market entry enhances a young venture’s marketing capabilities, which in turn leads to international growth” (Zhou, Wu &
Barnes, 2012: 25). However, the impact of the firm’s marketing capabilities on the performance of the venture during early internationalisation was shown to be more evident amongst
ventures that targeted developed, rather than emerging markets.
8.3.3
Socially Responsible Marketing within Emerging Markets
Marketing to Poor Consumers
With expansion into emerging markets comes engagement with impoverished market
segments, and the potential for exploitation and unfair practices. Santos & Laczniak (2009:12)
argue that multinational corporations need to avoid unethical marketing practices through
adopting the integrative justice model (IJM) which provides a process for ethically marketing to
disadvantaged consumers in a way that is both socially just and strategically enabling.
Sustainability Marketing
Sustainability marketing “extends the theory of marketing into ensuring ecological, social (equity and equality), and economical balance...it strives to deliver and increase customer
value, social value, and ecological value” (Nkamnebe, 2011: 220).
With regards to sustainability marketing in emerging markets, Nkamnebe (2011: 229) asserts
the following:
Sustainability marketing is critical to effectively competing within the global market.
India, Brazil and South Africa are some of the emerging markets where it is evident
that sustainability is recognised as a strategic choice for growth.
High poverty within emerging markets is considered to be antithetical to sustainability.
There are considerable institutional challenges such as poor governance, social
relations and economic structure that impede sustainability
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Have You Completed the ‘Essential Reading’ for this Chapter?
Now that you have been introduced to this chapter on a “Creating Successful Long Term Growth”, source and work through the textbook chapters and journal
articles listed in the “Essential Reading” list at the beginning of this chapter. It is
essential that you read all of the textbook chapters and journal articles listed.
QUESTIONS FOR REFLECTION
After completing your study of this chapter on ‘Creating Successful Long Term Growth’, reflect on the following questions. 1. According to Douglas & Craig (2011) there is a trend of both convergence and divergence
occurring within the global marketplace which has implications for the marketing practices
of organisations.
1.1 What is meant by the term ‘semi-global marketing strategy’?
1.2 Discuss the key strategic imperatives and challenges which an organisation will
encounter in developing strategies for the five geographic spheres which Douglas
& Craig (2011) identify?
1.3 Is the organisation for which you work implementing an effective semi-global marketing
strategy? Why / Why not?
2. Consider the “ten crucial capabilities” identified by Atsmon et al (2012). To what extent
does the company for which you work have and apply these capabilities in competing
within South Africa and/or within other developing markets?
3. To what extent does your company engage in socially responsible marketing? How could
you company improve in this regard?
4. Set up a meeting with your organisation’s Marketing Manager / Marketing Director for the purposes of finding out the marketing control processes that have been recently
implemented. To what extent do these processes facilitate successful long term growth?
What improvements do you recommend?
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BIBLIOGRAPHY
In addition to the texts referenced under “Essential Reading” at the beginning of each chapter
of this Study Guide, the following additional texts were utilised in the preparation of this Study
Guide:
Bennett, R. & Blythe, J. (2010) International Marketing: Strategy Planning, Market Entry &
Implementation. New Delhi: Kogan Page.
Berry. L and Parasuraman.V. (1991) Marketing Services : Computing through Quality.
New York: The Free Press.
Cant, M.C., Van Heerden, C.H. & Ngambi, H.C. (2010) Marketing Management. A South
Africa Perspective. Cape Town: Juta & Company Ltd.
Czinkota, M.R. & Ronkainen, I.A. (2010) International Marketing. 9th Edition. Australia:
South Western Cengage Learning.
Du Plessis, P.J., Strydom, J.W. & Jooste, C.J. (2012) Marketing Management. 6th Edition.
Cape Town: Juta & Company Ltd.
Gillespie, K. & Hennessy, H.D. (2011) Global Marketing (International Edition). Australia:
South Western Cengage Learning.
Hofmeyr, J. & Rice, B. (2000) Commitment-led Marketing. Chichester: John Wiley &
Sons.
Keegan, W.J. & Green, M.C. (2011) Global Marketing (Global Edition). Boston: Pearson
Education.
Kotler, P. & Armstrong, G. (2014) Principles of Marketing: Global and Southern African
Perspectives. 7th Edition. Cape Town. Pearson Education.
Kotler, P. & Keller, K.L. (2012) Marketing Management. 14th Edition. Essex: Pearson
Education.
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Lancaster, G. & Massingham, L. (2011) Essentials of Marketing Management. Oxon:
Routledge.
Mullins. JW Walker. OC, Boyd. HW and Larrèchè (2006). Marketing Management. 5th
Edition. New York: McGraw-Hill.
Rosenbloom, B. (2012) Marketing Channels:
A Management View. Mason: South
Western Cengage Learning.
Van der Walt. A, Strydom. WJ, Marx. S and Jooste. JC (1996). Marketing Management.
3rd Edition. Cape Town: Juta & Company, Ltd.
Venter, P. & Jansen van Rensburg, M. (2015) Strategic Marketing: Theory and Application
for Competitive Advantage. 2nd Edition. Cape Town: Oxford University Press.
West, D., Ford, J and Ibrahim, E (2015). Strategic Marketing: Creating Competitive
Advantage. 3rd Edition. Cape Town: Oxford University Press.
Wiid, J, (2014) Strategic Marketing. Cape Town: Juta & Company Ltd.
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APPENDIX A: SUPPLEMENTARY ELECTRONIC
RESOURCES
This document comprises a collection of resources for the Marketing Management student to
use to supplement the learning addressed in the Marketing Management Study Guide. The
resources include activities in the form of audio podcasts, videos, as well as individual
exercises. Recommended reading is also included, and a range of journal articles addressing
emerging market Marketing Management issues are listed.
How Are the Supplementary Resources Structured?
The electronic resources are organised as follows:
Introduction to Marketing Management
1.1 Audio Podcast: Philip Kotler – Beyond the Four P’s
1.2 Video: How We See It: Senior Executives on the Future of Marketing
Chapter 1:
1.3 Video: Owning the Customer: An Imperative for Marketing Change
1.4 Video: Winning the $30 Trillion Decathlon – How to Succeed in
Emerging Markets
1.5 Audio Podcast: 7 Predictions for China 2013
1.6 Video: From Mad Man to Superwoman – the Inevitable Rise of the CMO
in the Era of the Empowered Customer
Capturing Marketing Insights
Chapter 2:
2.1 Individual Activity: What is the Best Type of Marketing Research?
2.2 Individual Activity: How Does Your Organisation Conduct Marketing
Research?
Connecting with Customers
Chapter 3:
3.1 Audio Podcast: Luring China’s Little Emperors
3.2 Audio Podcast: How Chinese will the Chinese Consumer Remain?
3.3 Video: Stephen Roach on Consumer Opportunity in China
Building Strong Brands
Chapter 4:
4.1 Video: Keeping Your Brand Resilient
4.2 Video: Building a Global Brand
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4.3 Audio Podcast: Where are China’s Global Brands?
Creating Value
Chapter 5:
5.1 Audio Podcast: A Brave New World for Multi-Nationals in China
5.2 Audio Podcast: Pricing – Fast Track to Creating Sustainable Value
Delivering Value
Chapter 6:
6.1 Video: Wining the Retail War – How to Compete with Retail ECommerce Players
6.2 Audio Podcast – Emerging Retail Markets Beyond China
Communicating Value
Chapter 7:
7.1 Audio Podcast - Why We’re All in Sales
7.2 Audio Podcast – How Can Companies Tame China’s Social Media Dragon?
Creating Successful Long-Term Growth
Chapter 8:
8.1 Audio Podcast: China & India are an Opportunity Not a Threat
8.2 Audio Podcast: How Innovative are Chinese Companies?
8.3 Audio Podcast: Chinese Companies on the Prowl
All Chapters
Recommended
Reading
(This component contains lists of additional journal articles to those that are
prescribed as ‘Essential Reading’ in the Marketing Management Study Guide)
How Do I Use These Resources?
The resources build on, and expand, the learning that is facilitated through the Marketing
Management Study Guide. It is recommended that once you have completed a segment of
learning (e.g. Chapter 1) in your Marketing Management Study Guide that you attempt the
corresponding activities detailed in this document.
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CHAPTER 1: INTRODUCTION TO MARKETING
MANAGEMENT
The following learning activities are designed to further your introductory understanding of
Marketing Management. These activities support the development of the specific learning
outcomes detailed in the Marketing Management Study Guide for Chapter 1: Introduction to
Marketing Management.
Audio Podcast:
Philip Kotler: Beyond the Four P’s
(available from: http://www.energize.nl/rss/rss_sparc_itunes.php)
This audio podcast features an interview with Philip Kotler, the esteemed Professor
of International Marketing at Northwestern University.
After listening to the podcast, reflect on and answer the following questions:
According to Kotler, is the Four P framework still relevant today?
Activity 1.1
According to Kotler, how has digital media impacted the practice of marketing?
What are Kotler’s views on the product-service mix?
What are the characteristics of today’s media consumption profiles?
According to Kotler what does Marketing 4.0 look like? How does Marketing 4.0
differ from Marketing 1.0, Marketing 2.0 and Marketing 3.0?
In future years, what is the number one topic that marketing science should
devote its attention to?
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Video:
How We See It: Senior Executives on the Future of Marketing
(Availablefrom:
https://www.mckinseyquarterly.com/Video/How_we_see_it_Three_senior_executives
_on_the_future_of_marketing_2835)
Watch the video by John Hayes (CMO of American Express) as well as the video by
Activity 1.2
Duncan Watts (Principal Research Scientist at Yahoo!).
After watching the podcast, reflect on and answer the following questions:
What are the key points which John Hayes, CMO of American Express, makes about
the future of marketing?
What are the key observations which Duncan Watts, Principal Research Scientist at
Yahoo!, makes about the future of marketing?
To what extent are Hayes’ and Watts’ observations applicable to the marketing practice of your organisation?
Video:
Owning the Customer: An Imperative for Marketing Change (Deloitte)
(Available from: http://www.deloitte.com/view/en_US/us/Insights/Browse-by-ContentType/podcasts/a66ad027a4aa2310VgnVCM1000001a56f00aRCRD.htm)
In this video, Deloitte consultants discuss the rapidly changing marketplace and what
Activity 1.3
this implies for Chief Marketing Officers (CMOs). After watching the podcast, reflect
on and answer the following questions:
What are the key issues that are impacting on the decision making of CMOs?
Describe the Marketing Fusion Model.
What is a ‘listening post’ and how is it best used in marketing practice?
To what extent are the insights, which have been discussed in this video relevant to
the marketing practice of your organisation?
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Video:
Winning the $30 Trillion Decathlon: How to Succeed in Emerging Markets
(available from:
http://www.mckinseyquarterly.com/Winning_the_30_trillion_decathlon_How_to_succ
eed_in_emerging_markets_3022?pagenum=1#video)
Watch the four “Winning the $30 trillion decathlon” video snippets. After watching the Activity 1.4
videos, reflect on and answer the following questions:
What are the key characteristics of emerging markets?
What do these key characteristics imply for an organisation’s marketing strategy and practices?
To what extent are the issues highlighted in the videos evident in the
organisation for which you work?
Audio Podcast:
7 Predictions for China in 2013
(McKinsey on China)
(available from: http://www.mckinseychina.com/podcasts/7-predictions-for-china-in2013/)
Activity 1.5
This audio podcast features Nick Leung’s, Yougang Chen and Gordon Orr’s from the consulting firm McKinsey. They discuss the 2013 predictions for China.
After listening to the podcast, reflect on and answer the following questions:
Summarise the seven predictions for China 2013.
What implications do these predictions have for the marketing strategies and
practices of multi-national companies’, as well as domestic Chinese companies’?
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Video:
From Mad Man to Superwoman: The Inevitable Rise of the CMO in the Era of
the Empowered Customer
(Deloitte)
(available from: http://www.deloitte.com/view/en_US/us/Services/FinancialAdvisory-Services/3bd82e98356b9310VgnVCM1000001a56f00aRCRD.htm)
In this video, Deloitte consultants discuss how the role and relevance of the chief
marketing officer (CMO) has changed in the post-digital era.
Activity 1.6
After watching the video, reflect on and answer the following questions:
How has the customer become so powerful?
What has lead to the ‘ascent’ of the CEO?
What is meant by the “network marketing era”?
What is the “intention-based” model of marketing?
To what extent are the insights highlighted in this video relevant to the
marketing practices of the organisation for which you work?
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CHAPTER 2: CAPTURING MARKETING INSIGHTS
The following learning activities are designed to further develop your understanding of, and
competence in, capturing marketing insights. These activities support the development of the
specific learning outcomes detailed in the Marketing Management Study Guide for Chapter 2:
Capturing Marketing Insights.
Individual Activity
What is the Best Type of Marketing Research?
While some marketing managers prefer working with quantitative marketing
Activity 2.1
research, there are others who prefer qualitative marketing research.
Which research approach do you prefer, quantitative or qualitative? Why?
What are the advantages and disadvantages:
Quantitative research
Qualitative research
Individual Activity
How Does Your Organisation Conduct Marketing Research?
Investigate and evaluate your organisations marketing research practices.
Interview with your organisation’s Marketing Director / Marketing
Manager, regarding your organisation’s approach to conducting marketing research.
Activity 2.2
Peruse reports on the marketing research that your organisation has
conducted.
What are the strengths and weaknesses of your organisation’s marketing research approach?
What recommendations would you make to your organisation to
improve its marketing research initiatives?
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CHAPTER 3: CONNECTING WITH CUSTOMERS
The following learning activities are designed to further develop your understanding of, and
competence in, connecting with customers. These activities support the development of the
specific learning outcomes detailed in the Marketing Management Study Guide for Chapter 3:
Connecting with Customers.
Audio Podcast:
Luring China’s Little Emperors
(McKinsey on China)
(available from: http://www.mckinseychina.com/podcasts/luring-chinas-littleemperors-2/)
In this audio interview Nick Leung, Max Magni and Yougang Chen from the
consulting firm McKinsey discuss the Chinese consumer.
After listening to the podcast, reflect on and answer the following questions:
Activity 3.1
How is the mass Chinese consumer different from the mainstream
Chinese consumer?
What implications do these two different kinds of consumers have for the
marketing practices of companies operating in China?
What factors led to the emergence of the mainstream Chinese
consumer?
What types of companies and marketing practices have been most
successful in engaging:
The mass Chinese consumer?
The mainstream Chinese consumer?
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Audio Podcast:
How Chinese will the Chinese Consumer Remain?
(McKinsey on China)
(available from: http://www.mckinseychina.com/podcasts/how-chinese-willthe-chinese-consumer-remain/)
In this audio interview Nick Leung, Max Magni and Ming Zhang from the
consulting firm McKinsey discuss how Chinese consumers are changing.
Activity 3.2
After listening to the podcast, reflect on and answer the following questions:
What are the unique characteristics of the typical Chinese
consumer?
What characteristics of the typical Chinese consumer are changing?
What do these behavioural shifts in the Chinese consumer imply for
the marketing practices of companies operating within the Chinese
market?
Activity 3.3
Video:
Stephen Roach on the Consumer Opportunity in China
(McKinsey Quarterly)
(available from
https://www.mckinseyquarterly.com/Video/Stephen_Roach_on_the_consume
r_opportunity_in_China_2940)
In this video, Stephen Roach explores consumer opportunity in China.
After watching the video, reflect on and answer the following questions:
What is the purpose of China’s twelve five-year plan?
According to Roach, China is to “create a consumption dynamic that will outstrip the growth of any consumer market in the world.” How is
this so?
Discuss the challenges inherent in the China-USA bilateral
relationship?
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CHAPTER 4: BUILDING STRONG BRANDS
The following learning activities are designed to further develop your understanding, and
competence in, brand management. These activities support the development of the specific
learning outcomes detailed in the Marketing Management Study Guide for Chapter 4: Building
Strong Brands.
Video:
Keeping Your Brand Resilient
(Deloitte)
(available from: http://www.deloitte.com/view/en_US/us/Insights/Browse-byContentType/podcasts/176023ef6e6b0310VgnVCM3000001c56f00aRCRD.htm)
In this video, Deloitte addresses brand resilience.
After watching the podcast, reflect on and answer the following questions:
Activity 4.1
What is Brand Resilience?
What is meant by Copulsky’s statement “marketing is no longer about building a brand...there is a need for brand defense”?
What are the outside and inside threats to a brand?
What are the seven steps of brand resilience?
To what extent are the insights about brand resilience relevant to the
organisation for which you work?
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Video
Building a Global Brand
(HBR Blog Network)
(available from: http://blogs.hbr.org/video/2013/02/building-a-global-brand.html)
In this video John McDonnell, COO of Patrón Spirits International, discusses
Activity 4.2
how to build a global brand. After watching the video, reflect on and answer the
following question:
What tips does McDonnell provide for building global brands?
How applicable are McDonnell’s brand building tips to the company at
which you are currently employed?
Audio Podcast:
Where are China’s Global Brands?
(McKinsey on China)
(available from: http://www.mckinseychina.com/podcasts/where-are-chinasglobal-brands-2/)
In this audio interview Nick Leung, Daniel Zipser and Hai Ye of McKinsey’s Greater China Practice, discuss the dynamics impacting on China’s global Activity 4.3
brands. After listening to the podcast, reflect on and answer the following
questions:
Why are there so few Chinese global brands?
How does the Chinese government plan to stimulate the development of
Chinese global brands?
What have Chinese companies been doing to develop global brands?
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CHAPTER 5: CREATING VALUE
The following learning activities are designed to further develop your understanding of, and
competence in shaping market offerings. These activities support the development of the
specific learning outcomes detailed in the Marketing Management Study Guide for Chapter 5:
Shaping the Market Offerings.
Audio Podcast:
A Brave New World for Multi-Nationals in China
(McKinsey on China)
(available from: http://www.mckinseychina.com/podcasts/a-brave-new-worldfor-multinationals-in-china/)
In this podcast Nick Leung, Bill Wiseman, Davis Lin and Changqing Zheng,
from the consultancy McKinsey, discuss how domestic firms in China are
capturing market share and profits by designing products that appeal to the
Chinese consumer tastes and that are priced considerably lower than the
comparable offerings from multinational firms.
Activity 5.1
After listening to the podcast, reflect on and answer the following questions:
What are the challenges which multi-national companies are
experiencing in China?
Why and how do the domestic Chinese companies’ market offerings better meet the needs and wants of the Chinese consumers than the
multinationals?
What are the Chinese consumers’ requirements in terms of product / service quality?
What do multi-national organisations need to do to better compete
with the domestic Chinese organisations?
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Audio Podcast:
Pricing: A Fast Track to Creating Sustainable Value
(Deloitte)
(available from:
http://www.deloitte.com/view/en_GX/global/insights/podcasts/deloitte-globalinsights/fba4354955476310VgnVCM1000001956f00aRCRD.htm)
In this podcast Deloitte explores the important role of pricing in a global and
complex business environment.
After listening to the podcast, reflect on and answer the following questions:
Activity 5.2
Identify the big changes in the consumer business industry that are
making pricing decisions more critical than ever.
What are the key pricing challenges confronting consumer products
companies?
Are there any ‘diagnostic’ questions a company can ask to assess whether it is missing certain pricing opportunities?
To what extent are these insights about pricing relevant to your
organisation’s marketing practices?
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CHAPTER 6: DELIVERING VALUE
The following learning activities are designed to further develop your understanding of, and
competence in, delivering value to consumers through integrated marketing channels. These
activities support the development of the specific learning outcomes detailed in the Marketing
Management Study Guide for Chapter 6: Delivering Value.
Video:
Winning the Retail War: How to Compete with Retail E-Commerce Players
(Accenture)
(available from: http://www.accenture.com/us-en/Pages/insight-winning-theretail-war-video.aspx)
In this video Accenture addresses how traditional retailers can compete with eActivity 6.1
commerce retailers.
After listening to the podcast, reflect on and answer the following question:
What are the 10 steps that traditional retailers can take to effectively
compete with online retailers?
How applicable are these 10 steps within the context of an emerging
market, such as South Africa?
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Audio Podcast:
Emerging Retail Markets Beyond China
(Deloitte)
(available from:
http://www.deloitte.com/view/en_GX/global/insights/podcasts/deloitte-globalinsights/332c94e77a108210VgnVCM100000ba42f00aRCRD.htm)
In this podcast Deloitte explores retailing within eight emerging markets, other
than China.
Activity 6.2
After listening to the podcast, reflect on and answer the following questions:
What makes the 8 emerging markets in the podcast such attractive
markets?
A few major retailers from developed economies have successful
operations in these new markets. What do their successes have in
common?
What are some of the key pitfalls for retailers in emerging markets?
How can these pitfalls be avoided?
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CHAPTER 7: COMMUNICATING VALUE
The following learning activities are designed to further develop your understanding of, and
competence in, communicating the value of an organisation’s products and services. These activities support the development of the specific learning outcomes detailed in the Marketing
Management Study Guide for Chapter 7: Communicating Value.
Activity 7.1
Audio Podcast:
Why We’re All in Sales
(HBR Ideacast)
(available from: http://blogs.hbr.org/ideacast/2013/02/why-were-all-insales.html)
In this audio interview Daniel Pink, an expert in sales, provides insight into the
latest research findings regarding sales.
After listening to the podcast, reflect on and answer the following questions:
In your experience, is the stereotype of sales being “slimy, smarmy [and] disreputable” accurate? Why / Why not?
What are Pink’s views on sales commissions? Do you agree with him? Why / Why not?
According to Pink, success in sales requires the characteristic of
“buoyancy”. What is buoyancy? Have you observed this characteristic amongst the sales people within your organisation
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Activity 7.2
Audio Podcast:
How Can Companies Tame China’s Social Media Dragon?
(McKinsey on China)
(available from: http://www.mckinseychina.com/podcasts/how-cancompanies-tame-chinas-social-media-dragon/)
In this podcast, Nick Leung, Chris Ip and Ari Silverman from the consulting
firm McKinsey discuss how companies in China can leverage social media to
build their businesses and protect their brands.
After listening to the podcast, reflect on and answer the following questions:
Why is social media so important for companies in China?
What are the most important social media sites in China?
How does content posted on social media impact on a company’s reputation, consumer brand perception and sales?
What can companies do to protect themselves from negative
comments and/or myths posted about their brands on social media?
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CHAPTER 8: CREATING SUCCESSFUL LONG-TERM
GROWTH
The following learning activities are designed to further develop your understanding of, and
competence in, creating successful long-term organisational growth through your marketing
practices. These activities support the development of the specific learning outcomes detailed
in the Marketing Management Study Guide for Chapter 8: Creating Successful Long Term
Growth.
Audio Podcast:
China & India are an Opportunity not a Threat
(HBR Ideacast)
(available from: http://blogs.hbr.org/ideacast/2012/09/china-and-india-are-anopportu.html)
In this audio interview Michael Silverstein, an expert in global consumer
practice, provides insights into consumer trends within the USA, China and
India.
After listening to the podcast, reflect on and answer the following questions:
What is Silverstein referring to when he speaks of the ‘$10 Trillion Prize’?
Activity 8.1
What are the similarities and differences between China and India as
consumer markets?
What does the rapid growth of the Chinese and Indian markets imply for
the USA?
What impact do you think the rapid growth of the Chinese and Indian
markets implies for South Africa?
What guidelines would you give to a South African company that is
seeking to establish itself within the Chinese and Indian markets?
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Audio Podcast:
How Innovative are Chinese Companies?
(McKinsey on China)
(available from: http://www.mckinseychina.com/podcasts/how-innovative-arechinese-companies/)
In this audio podcast Nick Leung, Erik Roth and Alan Huang, from the
consulting firm McKinsey explore how innovative Chinese companies are
today.
After listening to the podcast, reflect on and answer the following questions:
What are the driving forces of innovation in China?
Activity 8.2
What are the outputs from Chinese businesses which indicate an
increase in innovation?
How are Chinese innovation practices different from innovation
practices in the West?
In the future, what are the challenges Chinese companies are to face
with respect to innovation?
Looking forward, what opportunities and enablers will facilitate
innovation within Chinese companies?
Which Chinese companies are ‘winning’ in terms of innovation?
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Activity 8.3
Audio Podcast:
Chinese Companies on the Prowl?
(McKinsey on China)
(available from: http://www.mckinseychina.com/podcasts/chinesecompanies-on-the-prowl/)
In this audio podcast Nick Leung, Thomas Luedi and Kevin Wei Wang Huang,
from the consulting firm McKinsey explore the extent to which Chinese
companies are tapping into global markets through acquisitions.
After listening to the podcast, reflect on and answer the following questions:
Why has the acquisition activity of Chinese companies received so
much attention from the West?
What are the archetype acquisitions that Chinese companies have
engaged in?
What are the strategic assets / capabilities that Chinese companies
are seeking through their acquisitions?
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RECOMMENDED READING
The following journal articles constitute additional reading. The majority of the journal articles focus on
implementing Marketing Management within emerging markets. Although this additional reading does
not form a compulsory part of the Marketing Management curriculum, it is recommended that a least a
number of the journal articles are read. This will contribute to a deeper and broader understanding of
the practice of Marketing Management within emerging markets.
CHAPTER 1:
OVERVIEW OF MARKETING MANAGEMENT
Cliffe, S. (2011) “When Your Business Model is in Trouble.” Harvard Business Review. 89 (1/2). pp
96 – 98.
Deloitte (2011) Fortresses and Footholds. Emerging Market Growth Strategies, Practices and
Outlook. Deloitte Development LLC. (available from
http://www.deloitte.com/view/en_US/us/Services/consulting/StrategyOperations/b2b6eb7eec523310VgnVCM3000001c56f00aRCRD.htm).
Deloitte (2012) CM Confidential. What CMOs Talk About Behind Closed Doors. Deloitte
Development LLC. (available from
http://www.deloitte.com/view/en_US/us/Services/consulting/feature-offerings/cmoconfidential/index.htm).
Eyring, M.J., Johnson, M.W. & Nair, H. (2011) “New Business Models in Emerging Markets.” Harvard Business Review. 89 (1/2), pp 88 – 95. (available from EBSCO).
Melaia, S., Abratt, R. & Bick, G. (2008) “Competencies of Marketing Managers in South Africa.” Journal of Marketing Theory & Practice. 16 (3), pp 233 – 246. (available from EBSCO).
Shaw, E.H. (2012) “Marketing Strategy: From Origin of the Concept to the Development of a Conceptual Framework.” Journal of Historical Research in Marketing. 4 (1), pp 30 – 55.
CHAPTER 2:
CAPTURING MARKETING INSIGHTS
Ozimec, A., Natter, M. & Reutterer, T. (2010) “Geographical Information Systems-Based Marketing
Decisions: Effects of Alternative Visualisations on Decision Quality.” Journal of Marketing. 74 (6),
pp 94 – 110. (available from EBSCO).
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Boddy, C.R. (2011) “Hanging Around with People. Ethnography in Marketing Research & Intelligence Gathering.” Marketing Review. 11 (2), pp 151 – 163.
CHAPTER 3:
CONNECTING WITH CUSTOMERS
Beyda, T.T. (2010) “Who Teaches Them To Consume: A Study of Brazilian Youngsters.” International Journal of Consumer Studies. 34 (3), pp 298 – 305. (available from EBSCO).
Moolman, H.J. (2011) “Restaurant Customer Satisfaction and Return Patronage in a Bloemfontein
Shopping Mall.” Acta Commercii. 11, pp 129 – 146. (available from Sabinet).
Mostert, P. & De Meyer, C. (2010) “Building Customer Relationships as Retention Strategy in the South African Domestic Passenger Airline Industry.” Acta Commercii. 10, pp 27 – 42. (available
from Sabinet).
Paas, L.J. (2009) “Database Marketing Practices & Opportunities in a Newly Emerging African Market.” Journal of Database Marketing & Customer Strategy Management. 16 (2), pp 92 – 100.
(available from EBSCO).
CHAPTER 4:
BUILDING STRONG BRANDS
Bauer, M. & Auer-Smka, K.J. (2012) “The Life Cycle Concept in Marketing Research.” Journal
Historical Research in Marketing. 4 (1), pp 68 – 96. (available from Emerald).
Brand Strategy (2007) “Brands Coming out of Africa.” Brand Strategy. Pp 44 – 47. (available from
EBSCO).
Magnusson, P., Westjohn, S.A., & Boggs, D.J. (2009) “Order-of-Entry Effects for Service Firms in
Developing Markets: An Examination of Multinational Advertising Agencies.” Journal of
International Marketing. 17 (2), pp 23 – 41). (available from EBSCO).
Osei, C. & Gbadamosi, A. (2011) “Re-Branding Africa.” Marketing Intelligence & Planning. 29 (3),
pp 284 – 304. (available from Emerald).
Oyeniyi, O. (2010) “Consumer Evaluation of Brand Extension: the Nigerian Perspective.” African
Journal of Business & Economic Research. 5 (1), pp 51 – 68. (available from Sabinet).
Reyneke, M. (2011) “In the Lap of Luxury: Consumer Conversation Concerning Online Advertisements of Luxury Brands.” South African Journal of Business Management. 42 (2), pp 27 –
34. (available from Sabinet).
CHAPTER 5:
CREATING VALUE
Atsmon, Y., Kloss, M. Smit,S. & Matson, E. (2012) “Parsing the Growth Advantage of EmergingMarket Companies.” McKinsey Quarterly. 3 (10), pp 10 – 14. (available from EBSCO).
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Bertini, M. & Gourville, J.T. (2012) “Pricing to Create Shared Value.” Harvard Business Review. 90
(6), pp 96 – 104. (available from EBSCO).
Court, D. & Narasimhan, L. (2010) “Capturing the World’s Emerging Middle Class.” McKinsey
Quarterly. Issue 3, pp 12 – 17. (available from EBSCO).
Deshpande, R. (2010) “Why Aren’t You Buying Venezuelan Chocolate?” Harvard Business Review.
88 (12), pp 25 – 27.
Ghemawat, P. & Hout, T. (2008) “Tomorrow’s Global Giants.” Harvard Business Review. 86 (11),
pp 80 – 88.
Maksimovic, V. (2011) “Firm Innovation in Emerging Markets: The Role of Finance, Governance, and Competition.” Journal of Financial & Quantitative Analysis. 46 (6), pp 1545 – 1580. (available
from EBSCO).
Wakayama, T., Shintaku, J. & Amano, T. (2012) “What Panasonic Learned in China.” Harvard
Business Review. 90 (12), pp 109 – 113. (Available from EBSCO).
Yusuf, A.M. & Madichie, N.O. (2012) “An Exploratory Enquiry into the Challenges of Modern Retailing on Muslim Consumers in Northern Nigeria.” African Journal of Business and Economic
Research. 7 (1), pp 99 – 114. (available from Sabinet).
CHAPTER 6:
DELIVERING VALUE
Basu, R., Sengupta, K. & Guin, K.K. (2012) “Format Perception of Indian Apparel Shoppers: Case of Single and Multi-Brand Stores.” Journal of Marketing Management. 11 (3), pp 25 – 37. (available
from EBSCO).
Elberse, A. (2008) “Should You Invest in the Long Tail?” Harvard Business Review. 86 (7/8), pp 88
– 96. (available from EBSCO).
Hinson, R.E., Anning-Dorson, T. & Kastner, A.A.N.A (2012) “Consumer Attitude Towards Shopping Malls in Sub-Saharan Africa: An Exploration of the ‘New’ Retail Format in Ghana.” African Journal
of Business & Economic Research. 7 (2 + 3), pp 97 – 134.
Lenartowica, R. & Balasubramanian, S. (2009) “Practices & Performances of Small Retail Stores in Developing Economies.” Journal of International Marketing. 17 (1), pp 58 – 90. (available from
EBSCO).
Syed Shah Alam, Ali Khatibi, Mohd Ismail Sayyed Ahmad, Hishamuddin Bin Ismail (2008) "Factors
affecting e-commerce adoption in the electronic manufacturing companies in Malaysia"
International Journal of Commerce and Management. 17(1), pp 125 – 139. (available from
Emerald).
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Wei, T.T., Marthandan, G., Chong, A.Y.L., Ooi, K.B., Arumugan, S. (2009) “What Drives Malaysian M-Commerce Adoption? An Empirical Analysis.” Industrial Management & Data Systems. 109 (3),
pp 370 – 388. (available from Emerald).
CHAPTER 7:
COMMUNICATING VALUE
Du Chenne, S. (2010) “What Taboom!” Finweek. 2010 Ad Review Supplement. pp 80 – 82.
(available from EBSCO).
Johnson, G.D. (2009) “The Social Dimension of Multi-Racial Advertising: Its Impact on Consumers’ Attitude.” South African Journal of Business Management. 40 (2), pp 45 – 52. (available from
Sabinet).
Mason, R.B. (2008) “Word of Mouth as a Promotional Tool for Turbulent Markets.” Journal of
Marketing Communications. 14 (3), pp 207 – 224. (available from EBSCO).
Moguluwa, S.C. & Achor, P.N. (2012) “Mega-Events Corporate Image & Reputation: Preliminary
Insights from Nigeria.” African Journal of Business & Economic Research. 7 (2 + 3), pp 155 – 170.
(available from Sabinet).
Palanivelu, P. & Sureshkumar, D. (2010) “International Marketing Communication in Mobile Phone Industry.” Journal of Marketing Communication. 5 (3), pp 30 – 36. (available from EBSCO).
Patel, P., Okechukwu, C.A., Collin, J. & Hughes, B. (2009) “Bringing ‘Light, Life and Happiness’: British American Tobacco and Music Sponsorship in Sub-Saharan Africa.” Third World Quarterly.
30 (4), pp 685 – 700. (available from EBSCO).
Sacks, D. (2013) “Can You Hear Me Now?” Fast Company. Issues 172 Special Issue, pp 36 – 43.
(available from EBSCO).
Tindall, N.T.J. & Holtzhausen, D. (2012) “Toward an Integrated Model of Communication: the Case of South Africa.” Journal of Communication Management. 16 (4), pp 371 – 387. (available from
Emerald).
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CREATING SUCCESSFUL LONG TERM GROWTH
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APPENDIX B: CASE STUDY 1
RADICAL HOLDINGS (PTY) LTD: ENGINEERING MOBILITY FOR
ACCESSIBILITY
You are locked in a cocoon so tight it's hard to breathe. You want to move, but it doesn't feel like
it's your body. Emotion, fear and tears engulf you: you want to scream but you can't for there
are those around you that rely on your controlled demeanour. What will my life be like if I
cannot feel a gentle touch or move my body to the rhythm of music ever again? ... I'm
paralysed from the neck down - I am changed, time is now frozen at just 26. Why, when all was
going perfectly to plan? Why? Why me, God? I had always achieved what I set my mind to, be it
provincial colours in athletics, provincial and national colours in acrobatic dancing, being a
paramedic, a nurse, even scaling up cliffs or diving in the deep blue sea! But what I loved most of
all was being a professional Latin dancer and moving to every rhythm that the music demanded.
Being a paramedic was the period of my life that taught me the most and something I loved more
than life itself ... Well, now I have something else to put behind my name ... I broke my neck but
continued to excel in life every day ... .so why not me?
Facing the fact that you are now permanently physically disabled and paralysed from the neck
down is really a powerful blow and a major obstacle to overcome. All my achievements had
been physical in nature: dancing, sport, scuba diving, water-skiing - even my job that I loved so
much requires one to be in top physical shape. What now? How will I survive? What is my life
going be like from now? Imagine you had it all-your health, a car, a house, job, friends, achievements,
a great social life - and in three seconds, you lost it all! My entire world shifted from treating people to
being treated for the rest of my life. Since that day, my life has changed drastically - some good,
some not so good - but a few things are still the same ... my family, my Creator and my stubborn
drive to achieve at everything no matter what.
1. Introduction
Radical Holdings (Pty) Ltd is a South African company that designs, manufactures and markets power
wheelchairs. Martin Brown, founder and CEO of Radical Mobility, is a quadriplegic, who has been
confined to a wheelchair since 1998.
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2. A 'radical' idea is born
Studies have indicated that an individual's confidence in his or her own abilities to perform tasks
relevant to entrepreneurship is a robust predictor of the start-up decision (Townsend et al. 2010). These
studies suggest that although the desired outcomes from starting a venture might differ considerably
across a broad sample of entrepreneurs, a common motivating factor encouraging start-up activities is
the belief in your abilities. This is particularly true in Martin Brown's case because he did not happen
upon becoming an entrepreneur through the usual means and circumstances, such as being
retrenched, or looking for supplementary income or the desire for more free time. Rather, his was
through a life-changing event as he was driven to still do something with what life had dealt him.
His decision-making process was unlike that of other entrepreneurs as he had, in a split second, lost
everything that he had planned for his future, the result being a harsh reality that life was going to be
different from that day onward. His strong character and determination to succeed no matter what
obstacles were in his way, forced Martin to use his mind. After all, with months of recovery ahead of
him, lying on his back 24 hours a day, he had significant time to plan, create and imagine things into
being.
With the technology of computers and the internet as his lifeline, Martin set about screening the market
to find a power wheelchair that could give him some form of independence and mobility again. Martin
thought up and designed a desk set-up where he could work independently at his computer, while
sitting in a manual wheelchair, operating with a stick in his mouth and using a mouse and voice
recognition technology to get things done. The advent of blue tooth and touch-screen technology has
also gone a long way in improving his ability to function in the technologically advanced world we live in,
and to him, this meant greater independence.
In his internet searches and product review process, he found that the world leaders in power
wheelchair manufacture were primarily located overseas. This not only posed a logistical challenge in
getting the power wheelchair to South Africa but a large financial burden too. Being determined to get
back on his feet, so to speak, he soon realised that he had to find his own solution. Research has
shown that creativity and innovation are regarded as universally distinguishable variables in the make-up
of entrepreneurs (Antonites E, van Vuuren, 2005). This also applies to Radical Mobility: Martin has
innovation and creativity at his core. Before his accident, he would spend hours breaking things down in
the garage at home trying to find out how they work in an attempt to make them work better. He would
invent gadgets that would make things function better and he also exercised his creative ability in
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choreographing exciting, original dance sequences. As a result of his patience and logical thought
processes, he always achieved the desired outcome.
With the countless business opportunities that surround us every day, especially in the rapidly
changing society of South Africa, finding good ideas and converting these into viable business
ventures is a conscious, deliberate and creative process. Martin's thinking process after his accident
was detailed, creative and relentless. Spurred on by his personal frustration in trying to find a suitable
power wheelchair that catered for his needs, he dreamt up what is now a registered and prosperous
entity, Radical Holdings (Pty) Ltd.
With Martin at the helm, instinctively utilising his unique personal understanding of his customers'
needs, Radical Mobility strives to customise its products to meet individual customers' requirements. In
so doing, it aims to mobilise them to experience independence previously unattainable for the disabled in
South Africa. With headquarters in Mogale City, Gauteng, Radical Mobility has grown to become a
formidable leader in the design and manufacture of custom-built power wheelchairs in Africa. As he
builds his brand, Martin's clear dedication and passion is evident in value to the customer and
ongoing client satisfaction. Serving both the local and international markets, with their funky practical
power wheelchairs, Radical Mobility brings a fresh and innovative approach to an almost 'hospital-like'
stigmatic environment.
Identifying the niche
Martin instinctively identified the niche market within South Africa as people who, like himself, are
permanently physically disabled. Martin's personal affinity with this niche market gives him a competitive
edge, as it attracts customers with unique needs. The market is fairly small in size, profit and growth
potential, and is unlikely to attract many other competitors. In order to screen the opportunity identified,
Martin had to assess whether or not the niche market opportunity would translate into a lucrative
business venture that is timely, attractive and sustainable.
The challenges mount up
Any entrepreneur is faced with a myriad of challenges when contemplating a start-up. Martin's
entrepreneurial challenges were the same as anyone else's, including funding issues, resource
allocation, skills and cash flow. However, he had one challenge much greater than any able-bodied startup entrepreneur: he could not physically do anything for himself. He is a C3/6 (complete) quadriplegic.
This injury means that his spinal cord is completely severed, resulting in him being unable to use any
of his limbs from the neck down - he is not able to write, read a book (turning the pages is impossible),
dress or even feed himself.
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Faced with this reality, starting and running a business from scratch seemed unimaginable. He had to
arrange for power of attorney so that someone could sign documentation on his behalf. Martin could not
produce proof of income for obtaining financial assistance, as he had been without income for several
years following his accident. Simply working on the computer was a challenge, although he had devised
a way to work with a stick in his mouth. The hours required for running a business were far more
challenging than spending time playing games or social networking.
Securing the necessary finance to start the venture was a tremendous challenge: who was going to
agree to finance an untested business venture such as Radical Mobility run by a C/6 quadriplegic? Not
any of the banks, government or other such institutions. Finally, one venture capitalist company saw
the potential and agreed to finance Radical Mobility. Business Partners not only agreed to assist with
financing the venture but it also offered substantial business mentorship, support and guidance along the
way, which enabled Martin to complete a detailed business plan and to set his marketing plans in
motion. Martin is not a person who gives up easily. Tenacity is a key strength and, despite the seemingly
endless challenges he faced, he was not going to let them hold him back; on the contrary, they simply
made him more determined to find practical, workable solutions.
All this took much longer that it does for an able-bodied person. It took patience to explain to
others that he could not simply jump into his car and drive over to sign something. It took perseverance
not to give up and stop trying when the frustrations of being unable to do things himself were
overwhelming. It took support of family, friends, the church and social networks for him to
achieve what seemed impossible at the time. It took hours of planning and creative thinking,
innovation and patience. All in all, Radical Mobility took approximately four years to become a reality.
However, now that Martin has achieved the accolade 'Sanlam/Business Partners Entrepreneur of the
Year® for Small Business 2010', it was worth conquering each and every challenge.
Harvesting the gap
South Africans are world renowned for their innovation and creativity. In Martin's case, the challenge
was not only to design and manufacture a product to sell, but also to brand a uniquely South
African product for this specialised niche market. Without having gone through any theoretical
problem-solving process, Martin had begun to proactively and efficiently capitalise on an opportunity
in a manner that would reap benefit while simultaneously adding value for the Radical Mobility
customer. His affinity with his customers goes far beyond the physical similarities in that he is able to
show them through his razor sharp wit that life in a wheelchair is still fun. He jokes about how the
'ladies "dig" his wheels' and how 'walking is not all it's cracked up to be', thus putting people at ease and
helping them to see the fun side of living with a disability.
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In making his customers feel more comfortable, he is able to identify ways in which he can serve the
customers' needs in the niche market while ensuring the establishment of a sustainable competitive
advantage and ongoing customer loyalty.
With his creativity and innovation, he developed an idea and accompanying process in order to
create a new and different product, together with its associated after-sales service that suited both the
demands of the market and those of his customers. He realised that by being creative, utilising his
expertise and taking calculated risks, he would be able to satisfy his personal need for regaining
independence and help others in a similar situation. He had discovered a potential venture that would
deliver high levels of customer value far beyond just giving people a means of mobility. To realise this
dream, he had to build a prototype; but, with what means and from where?
3. Innovation and market analysis
After investigating all available products on the market and personally trying several options, Martin
decided that he would have to use his creative skills, technical expertise and high levels of intrinsic
motivation to find value-adding solutions for the various challenges experienced by his would-be
customers. It was a challenge indeed, but with his technical skills and emergency medical training,
he created and developed his own custom-made solution that resulted in the first prototype power
wheelchair fully manufactured in his garage with the help of an able-bodied friend, Pieter Nell. This
prototype is still used as the demonstration model to this day.
Innovation
Wheelchairs have not changed over decades and people have simply accepted the status quo.
Around the world, having a disability is seen as an embarrassment and something to be hidden, with
the result, that very little time, funding or focus has gone into improving wheelchair-users' lives, let
alone integrating them into society. Martin didn't accept that things should remain the same, and he
still doesn't. He is always one step ahead in price, performance and functionality within the
wheelchair market - keeping it 'radical'. The standard design of a wheelchair tends to neglect
aesthetics - they're sterile, ugly and hospital-like in nature. Aesthetics are vitally important in the design
of power wheelchairs, as the wheelchair forms an integral part of the disabled person's life, especially
when you spend all day, every day in one. Besides, as Martin says, 'People see the wheelchair long before
they see the person in the wheelchair - so let's make it look funky and fun, at least.' Aesthetics are as
important to Radical Mobility as they are to the end user because people are intrinsically attracted to
looks. As a result, Martin has made it a fundamental aspect of the design process to integrate
practicality and functionality with great looks.
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Today, Martin is constantly finding new opportunities to enrich the lives of people with disabilities. He has
included building computer access solutions, a 4 x 4 standing power wheelchair and vehicle modifications
to his portfolio. He even developed a self-drinking straw which involves attaching a bottle to the power
wheelchair using a bottle cage like those used on bicycles so that he need not ask someone for a drink
when he is thirsty. Other accessories such as laptop tables, cell phone chargers, lights, hazard lights and
compartmentalised bags are manufactured and fitted on the power wheelchairs to the customers'
individual requirements.
Technical prowess
With the ability to be creative and to think outside the box, Radical Mobility's products are 'radical' in
design and performance ability. Martin knows what a customer wants and understands their
requirements better than anybody-else, so with skilled, innovative and motivated staff, he is expanding
his market footprint daily. Their products are designed by the ultimate expert using innovative 3D CAD
software to create the best possible solutions for Radical Mobility's customers. All designs are
discussed with all the factory staff to get their input and ideas. The greater the input, the better and more
practical the product.
Radical Mobility regularly consults with occupational therapists and with the Tshwane University of
Technology to ensure that new developments conform to the highest standards. Martin's perseverance
in finding solutions is commendable. On numerous occasions, he has spent long hours with family and
friends trying to complete an order or find a solution to a customer's specific problem. He is not one to
give up or to stop trying. He will find a way or innovate something if necesary. For example, a customer
requested that his leg rests be adjusted to a 90degree angle from the downward position in order
to assist with blood flow to his lower legs. Martin and his team had never had this request before, but
they assured the customer that it was possible and set about making it happen.
Market analysis and positioning
Once the first prototype power wheelchair was completed, Martin began to realise the implications of
starting up a manufacturing concern. Deciding on the physical location of the business venture was
simple, as he had sufficient space at home to start small-scale manufacturing. He could relocate to a
nearby industrial area, Chamdor in Gauteng, South Africa, where he is currently manufacturing, once
additional space was required.
His next challenge was to study the existing physical disability market in order to understand the unique
positioning of his new product in comparison to existing products available in the market. As part of this
assessment, he conducted a SWOT analysis of the existing market.
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This enabled him to gain clarity on the strengths, weaknesses, opportunities and threats that existed at
the time. With a deeper understanding of the market forces that were at play, he was able to fully exploit
the proposed product offering in order to gain a sustainable competitive advantage over both existing
competitors and prospective entrants into the market.
Porter's Five Forces Model of Competition
To complete the market analysis, Martin undertook a feasibility study to gauge to what extent his ideas
and prototype products would be viable as a business. The issues and factors he investigated primarily
included his ability to pursue the ideas in terms of his current skill set and abilities. He also analysed the
market considerations and competitive forces and reviewed the necessary requirements for setting up
the business venture. This formed a vital part of the initial draft business plan.
As part of his business plan development and analysis of the competitive forces, Martin followed a
strategy based on a model by Michael Porter, called Porter's Five Forces Model of Competition. During the
screening and evaluation of all facets of the emergent opportunity, Martin reviewed the five forces of
competition identified by Porter.
Threat of new entrants
Within this niche market, Martin found that the threat of new entrants was low, primarily
due to the uniqueness of his products and the switching cost to the buyers in terms
of Martin's personal attention to their needs. Since these products are purchased, not as a luxury, but
as a necessity following a life-changing traumatic event, the potential purchasers are not willing to
compromise and are do not switch between suppliers easily. Switching would mean that the close
relationship between supplier and purchaser would be lost. The more substitutes there are available for a
specific product, the greater the price elasticity. In Martin's case, the price of the power wheelchairs is
inelastic due to the uniqueness of the product.
Martin also considered his value chain as part of his feasibility study. This consisted of primary and
support activities. Primary activities, including inbound and outbound logistics, marketing, sales and
service, are fundamental to the business, as these contribute value to the customers of Radical
Mobility and to the financial viability of the business as an entity. Support activities include the
procurement of raw materials, technological development, human resource management and business
infrastructure. These support activities enable the successful continuation of the primary activities.
Martin's initial realisation of his limited business management skills soon changed as he learnt along
the way. Following the research investigation, Martin found that in South Africa, barriers to entry are low
in terms of business start-up costs and effort.
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Buyer's power
The power of buyers in a market is determined by factors such as the number of buyers relative to sellers
and the importance of the product to the buyer. The primary power of the buyer in this market was
identified as being financial. This means that the greater the financial flexibility of the potential
purchasers, the greater the number of products available to them within this niche market. This was
particularly relevant as most of the electric power wheelchairs available were, at the time and still are,
fully imported, with the Radical Mobility offering being the only home-grown' exception.
The Radical Mobility custom-built designs are different from power wheelchairs available from
abroad in that they satisfy both the needs of local cost and the added value of ongoing back-up and
after-sales servicing offered locally at minimal rates. In terms of service delivery, Martin has even
gone as far as to loan customers’ power wheelchairs in extreme cases when the repairs took longer
than expected due to unforeseen circumstances. Local manufacture results in large cost benefits while
the importance of after-sales back-up and service encourage customers to buy locally.
Supplier's power
The power of suppliers in a market is determined by factors such as the concentration of suppliers
and the availability of substitute inputs. The power of the supplier in Martin's case lies in his unique
offering and his personal understanding of his potential customers' needs. Martin's ability to offer superior
after-sales service and to continually introduce new and exciting accessories and improvements to his
products ensures that his customers stay loyal and find it difficult to switch to an alternative supplier.
The threat of substitute products
Potential customers usually choose a product that best suits their particular needs. Radical
Mobility's customers rely heavily on the company's knowledge, support and advice and the loyalty built
up through the various touch points used during the purchase-analysis phase. The products are customised
towards their unique requirements, so new entrants cannot compete with the same or similar level of
understanding of the potential purchasers' needs.
The current available substitutes are fully imported and are not always suitable for the South African
terrain. They are not within the budget of the average customer and lack in local service, back up and
support. A potential competitor would need the customised design capability, superior service, delivery
and unique understanding of the niche market's characteristics, all of which are not easily attained.
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Rivalry and competition among existing firms
Rivalry for the market share covered by Radical Mobility is limited as Martin is the only supplier of a fully
locally designed and manufactured power wheelchair in South Africa. All other comparative products are
imported from overseas. This gives him a competitive advantage in terms of input costs, lead times, the
physical terrain (for example, the 4 x 4 Predator is specifically designed with the harsh outdoor
African terrain in mind), the market, his customers and their needs. His creative approach also
ensures that he will continually innovate to effectively counter any form of rivalry. The primary barriers
to entry into this market are therefore first-hand knowledge, skills and expertise in this market and Martin
has all of these to his advantage.
4. Mobilising customer value through passion
Martin has always wanted to add value to people's lives and has had a passion for sports and physical
activities from a very young age. His accident and subsequent disability did not quench his passion
but rather served to strengthen it further. Today, Martin and his team strive to make a difference in the
lives of others by giving them some mobility and independence to once again connect with the world. His
innovative and relentless dedication is proven through his tenacity despite challenges such as limited
cash flow, late delivery of critical items and other hindrances, including his own disability. His
customers can be assured of a solution no matter what their needs, even to the extent that Martin and
his team personally engineer a solution to a customer's specific problem at his workshop in Chamdor,
while they wait. The attention to detail and personal interaction with each individual customer adds
customer value far beyond the functional attributes of the products.
Successful entrepreneurs exhibit a good fit between what they wish to derive from the venture and
what the venture requires of them. In Martin's case, his passion to add value to society fuels his drive
and energy to custom-build power wheelchairs, despite any possible downside risks of running an
entrepreneurial business in a volatile economy such as South Africa's. Instead of getting caught up in a
routine centred on his disability, with firmly entrenched day-to-day activities, his desire and ability to
produce a product that would enable other people with physical disabilities to do things again in a
productive way, took root. His experience in emergency medical care, coupled with a technical
engineering and information technology foundation, put him in good stead to take the necessary
calculated risks, while being achievement-driven, committed to excellence, creative and innovative,
tolerant of ambiguity and uncertainty, and calmly accepting the relatively high stress levels of starting a
business venture.
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Martin encompasses the true meaning of the term 'social entrepreneur' as he is the type of person who
provides innovative solutions to one of society's pressing social issues: physical disability. He is dedicated to his
personal vision to create and sustain social value (not just his personal value) through a process of
continuous innovation, adaptation and learning. As such, he recognises and relentlessly pursues new
opportunities to serve his social value-adding mission. He acts boldly, never fearing failure, no matter how
challenging the opportunity, while exhibiting a high sense of accountability to his customers for the solutions he
creates. Martin is an entrepreneur who aims for value in the form of transformational change that will benefit
communities with disabilities and ultimately, society at large.
5. Building credibility and customer loyalty through consistency
Martin's 'can-do' attitude and dedication to his customers is clearly evident, as he and his team ensure that they
constantly build steadfast awareness of their integrated offering within their niche target market. One would think
that in selling a product such as a power wheelchair, the basic attributes of delivery, price, practicality and
technology would be sufficient to build the image of the brand. Not so. Customers in this niche market are
looking for more than just physical attributes; due to their untimely circumstances, they also need those
important intangible attributes.
Despite the odds and Martin's personal physical limitations, no challenge is too big for him. He is
disciplined in the way he approaches the running of his business, setting days aside for administration and
following up each call received. He makes sure that he is at the factory at least three times a week,
depending on the production schedule, to personally oversee the production and operational aspects of the
business. He also deals with the daily running of the business from his office, which is based at home for
easier access. This helps both to keep his team motivated, organised and effective and to ensure that he has
intricate knowledge of every aspect of the business.
On many occasions, he also sees customers in person and addresses their needs to ensure customer
satisfaction. His consistent delivery of value to the customer is limitless and based on steadfast knowledge
gained from personal experience and high-quality reliable products.
6. Sticking to the basics - the four Ps of marketing
Product
The Radical Mobility product range includes various models of custom-designed power wheelchairs for the
South African and international markets. The choice of products currently includes five different power
wheelchair models with numerous additional functionalities that can be added at the request of the customer,
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including power recline, tilt-in-space, power seat elevation and lights. Additional accessories that are
available include the Transporter, laptop tables, cell-phone chargers, gun rests and drink holders, to name
but a few. Varied packages are available, starting from the basic requirements to the most advanced.
Further service and back-up in the form of advice and maintenance is given post-sale as necessary by
the Radical Mobility Team. The brand is thereby able to reinforce its promise to the customer of service
beyond expectation. At Radical Mobility, even the tiresome process of following up payment with medical
aids, the Road Accident Fund and Workmen's Compensation are handled on behalf of the customer.
Radical Mobility is not just another wheelchair company. It was born from personal experience and now
continues to share its expertise with everybody who needs it.
In addition to the superior product attributes, its ability to give a value-added service in terms of advice
and computer set-up, gives Radical Mobility a further competitive advantage over the other distributors who
currently only supply fully imported electric wheelchairs with little or no customisation. Radical Mobility also
believes that the customer's experience is improved through interactive purchasing as Martin himself
visits the potential customer to better understand his or her needs and surroundings and to motivate him or
her on the road to independence, before quoting on a customised solution. To further strengthen the
concept of locally produced goods being of high quality and tailor-made to the customer's unique
circumstances and environment in South Africa, Radical Mobility has gone one step further in localising its
products, by giving the various models names with an African flair, for example, Dassie, Gazelle and the 4
x 4 Predator.
The products carry a 25-year warranty on the frame and workmanship while the electronic components
carry a warranty of 18 months. All other components and working parts are subject to normal wear and
tear and need periodic replacement. Martin also supplies a detailed customised manual and suggested
service intervals with each of his power wheelchairs. All products designed and manufactured by Martin at
Radical Mobility proudly display the company logo as a symbol of home-grown quality and passion.
Price
Due to the customised nature of the Radical Mobility products, a 50% deposit is required on placement
of an order. The balance is then due and payable on delivery of the finished power wheelchair. The deposit
assists Martin in covering the costs of the raw materials and electronics required for the manufacture of
the chairs. As the price of a power wheelchair is substantial, quality becomes a key factor in supplier
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selection. Quality includes specifications that the customer desires in the product, which may be
technical specifications, customisation to the customer's circumstances, physical product properties,
product design, the life of product, ease of repair, maintenance requirements, ease of use and dependability.
In addition, in order to remain competitive, Martin regularly researches other power wheelchair suppliers, as
well as the local industry leaders to assess their pricing and business strategies. This assists him in
benchmarking his offering as well as ensuring that he sustains product value for money at an economical
price, without undercutting the market to such an extent that he risks customers perceiving his products as
inferior. Prices are reviewed periodically, depending on the market volatility and the input costs of
manufacturing. With every power wheelchair custom-fitted to the individual's needs, Radical Mobility
strives to ensure that its brand is associated with a range of 'radical' power wheelchairs that are
affordable, comfortable, safe and versatile - especially in terms of functionality both in- and outdoors.
Promotion
Awareness of the Radical Mobility brand is further extended by advertising in publications directed at
occupational therapists, orthopaedists and people with disabilities. The brand awareness and
recognition is heightened through the use of the Radical Mobility logo and slogan 'Engineering Mobility for
Accessibility ...' uniformly across all marketing communication channels. Focused media advertising has
proven to be more effective in increasing brand awareness and conveying information on products to
companies than in affecting customers' value perception. It does, however, also seem effective in Radical
Mobility's niche market. The awareness extends beyond traditional print media as his staff even wear
uniforms clearly displaying the brand name. Building awareness of the brand adds significantly to its
reach into the market.
Sales promotion is intense through electronic media. Martin uses social networking as the largest
portion of his electronic marketing. In today's marketing environment, it would be foolish for any company
not to have a social media strategy. The days of simply relying on search engines to promote your
company profile and products are long gone. Blogs, Facebook, Twitter,Forums, Linkedln and Flicker
are now the norm - you can reach a billion people in seconds and it is free. Social media is the
electronic version of word-of-mouth marketing and the future for all companies and brands. Martin has
also ensured that he is featured as a supplier in leading magazines designed for the disabled community. He
has printed product pamphlets with detailed specifications and product information for customers. He
strongly relies on word-of-mouth recommendations by existing customers for new and additional sales.
Pieter is also tasked to visit all the rehabilitation centres periodically to talk to occupational
therapists, orthopaedists and other relevant medical personnel who would be able to advise patients
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on products available for people with disabilities. Follow-up of all sales touch points is done via
telephone, a direct visit or email, which Martin monitors diligently on a daily basis. He believes that
customers value speedy responses to their enquiries and truly experience superior service if they receive
timely and accurate communication from a supplier.
Place
The customised nature of the products does not allow for holding inventory. Subsequently, the average
lead time for delivery of a power wheelchair is between six and eight weeks, depending on the complexity
of the seat functions added. The demand for variety is catered for in that each chair can be custom
sprayed in a colour chosen by the customer and customers are free to choose any number and variety
of additional seat functions and accessories.
Although Radical Mobility is situated in Mogale City, Gauteng, the finished wheelchairs can easily be
transported to the customers using multimodal forms of transport to economise on costs. For
international deliveries, the main method of transportation is sea freight, for economic reasons.
However, using sea freight does mean that lead times are extended. Air freight is also possible but is
more expensive.
Martin has negotiated favourable rates with a local courier company that has a freight division. Lead
times locally are obviously far shorter than for international shipments. With regard to maintenance,
Martin also offers a service which involves the courier company collecting the power wheel chair from
the customer and delivering it to the Radical Mobility factory for servicing and maintenance. Afterwards,
the chair is returned to the customer at the customer's cost. Although this might seem excessive, it is
still far more economical for most of his customers with disabilities, as travel is difficult and risky for
them. Radical Mobility also caters for the replacement of consumables including tyres, batteries and other
miscellaneous items.
7. Creating new markets and building the brand
The drive behind the need to acquire a power wheelchair is usually the reclamation of a quality way of
life after a traumatic, life-changing event. Besides the realities of living with a physical disability for the
rest of your life, it's the psychological anguish that can be far more debilitating. Realization of the fact
that life will never be the same again takes on a life of its own. People with disabilities usually join
community webs where they can reach out, share experiences and difficulties and learn from one another.
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These forums serve as important support networks both to the people with the disabilities, and to
those who care for them. It has been proven that people with disabilities that are fortunate enough to have
an entrenched value system, and love and support of family and friends around them tend to be more
able to adapt and find new meaning in their lives than those without these foundations.
Know your customer
The founder and CEO of Radical Mobility, Martin Brown, understands this journey all too well, being a
C3/6 complete quadriplegic himself. His vision was to find a solution to his unfortunate situation and to
build an innovative, home-grown brand that could service other people with similar needs well into the
future. The Radical Mobility promise to its customers includes: purpose-built design, comfort, reliability,
affordability and people-focused service delivery. As Martin has insight and personally understands the
challenges facing his customers, his position statement clearly defines where his offering and brand
differs from that of his competitors.
It is therefore notable that within Radical Mobility's offering, the customer-company interaction has a
strong impact on the formation of the brand image and penetration into the market. His objective is to
add value to the lives of people with disabilities like his own and, in doing so, to create an engaging and
lasting experience for those customers. In essence, this is customer-based brand equity building. Martin
knows each and every customer by name, even years after he supplied them with a wheelchair,
because he really cares.
Brand association
In an attempt to ensure that the brand stands apart from competitors' brands or offerings, while
simultaneously meeting the customer's needs and expectations, the brand must be differentiated. The
meaning of a brand and its customer-brand associations are largely interpreted within the social fabric
of local context. The fact that Radical Mobility is a solely South African designed and manufactured concept
also serves to raise its brand association, particularly in terms of customers' willingness to support local
brands due to the 'Proudly South African' campaign and the catch phrase 'Local is lekker'.
The essence of the Radical Mobility brand association is accessibility. Whether it is the manufacture of
a customised power wheelchair or the set-up of a custom-made computer system, accessibility is the
core focus. Traditional customer association with wheelchair products is that they are predominantly
clinical in nature, unattractive and mass made in foreign countries. Radical Mobility's branding aims
to bring a breath of fresh air to a stagnant market, by providing a locally manufactured, affordable and
practical electrically powered wheelchair.
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Brand loyalty
A trusting relationship with customers is critical to a brand's success in today's highly competitive market.
As such, Radical Mobility is willing to seize every opportunity to enhance customers' trust, including
improving product quality and performance, innovating where necessary, stimulating favourable
word-of-mouth promotion and increasing advertising efforts to ensure increased brand loyalty. Brand
loyalty indicates the customer's attachment to a particular brand. At Radical Mobility, brand loyalty is
demonstrated and reinforced through one of three behaviours:
• Firstly, depending on need, over time customers do return to purchase either an additional
wheelchair or an upgrade of their existing power wheelchair. This reaffirms that they were completely
satisfied with the past performance of the product and have developed strong reasons to believe in the
brand.
• Secondly, existing and past customers are prone to bringing their wheelchairs back for periodic
maintenance with Radical Mobility, not because they are unable to get the parts anywhere else, but
rather due to the service they experience and the special way that Martin and his team make them feel
during every interaction.
• Thirdly, many new customers are sent to Radical Mobility by word -of-mouth recommendations
and testimonials from very satisfied customers. Proven and demonstrated loyalty is therefore critical to
the sustainability of the brand and company, particularly within a limited market such as the people-withdisabilities niche.
8. Managing competitors
Since Radical Mobility offers a unique product to the South African market, competition in the same
market space is not currently an issue. However, given the speed at which the market changes and
technological advancement occurs, Martin keeps a watchful eye over other wheelchair retailers and
distributors in the market. He regularly researches the internet to ascertain their strategies, objectives,
strengths and weaknesses while also reviewing the latest international trends and medical
breakthroughs.
Once Martin has an understanding of his competitors, he classifies them into specific categories in order
to focus his appropriate defence strategy. The categories include 'strong' versus 'weak' competitors;
'close' versus 'distant' competitors and 'good' versus 'bad' competitors.
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'Strong' versus 'weak' competitors
It would seem plausible to aim at gaining market share from weaker competitors as this process requires
fewer resources per market share gained. However, Martin also ensures that he understands the leading
suppliers globally to maintain his leading edge and to compete with the best out there.
'Close' versus 'distant' competitors
The customisation aspect of Radical Mobility has meant that it has no direct close or distant
competitors. However, Martin does recognise that this might change in the future. In fact, many of the
current wheelchair retailers in South Africa contact Martin for parts and other consumables when
required, which signifies that they acknowledge him as a market leader.
'Good' versus 'bad' competitors
All industries contain both 'good' and 'bad' competitors. 'Good' competitors play by the rules and
maintain certain quality standards. However, there is always the possibility of an emergent supplier
hoping to make a quick profit to take advantage of the niche market by importing or manufacturing
inferior products. This does not currently seem to be a threat to the market share of Radical Mobility, but
must be borne in mind when reviewing competitors and other emerging brands of wheelchairs.
9. Conclusion
Ultimately, Radical Mobility is led by an entrepreneur who passionately and relentlessly believes that a
quality product, value for money and superior levels of service delivery will win the customer over
every time, particularly in terms of value delivered to the customer. So far, Martin has been right. His
customers are loyal, his products continue to exceed all expectations, his creativity is infinite, his service
delivery unmatched and the high quality and value to the customer is unquestionable.
Source: Nieuwenhuizen, C. (2012) ‘Business and Marketing Cases”, Juta & Company Ltd. South Africa
1. Evaluate the various strategies that contributed to Radical Mobility’s success. Critically analyse the
role leadership played in the success.
2. Critically assess the marketing mix decisions that Martin made to influence the trade channels as well
as the final consumers. Are these strategies sustainable considering the dynamic changes in the
consumer market?
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3. Assess how Martin positioned his brand and “winning formula” to ensure sustainable growth and enable
wider market penetration into the future.
4. “There is always the possibility of an emergent supplier hoping to make a quick profit to take
advantage of the niche market by importing or manufacturing inferior products. This does not
currently seem to be a threat to the market share of Radical Mobility, but must be borne in mind when
reviewing competitors and other emerging brands of wheelchairs.” Bearing the above statement in mind; discuss how Radical Mobility can avert the entrance of other
suppliers, and retain its niche’ market.
5. Assess how Radical Mobility differentiated itself and maintained their position as the market leader in
power wheelchairs. Advise Radical Mobility on the most appropriate marketing strategy going forward.
6. Evaluate the importance of market research and the in-depth understanding of consumer behavior in
Radical Mobility’s business and its resulting impact on customer loyalty.
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APPENDIX C: CASE STUDY 2
GLORIA JEAN’S COFFEE IN MALAYSIA
Gloria Jean’s Coffee in Malaysia
The history and background
It was in the year 1979, Ed and Gloria Jean Kvetko first started Gloria Jean’s Coffee (GJC) in Chicago, the USA. A total of 25 years and 316 outlets worldwide later, Diedrich Coffee, the owner of GJC
decided to sell the GJC franchise. Many offers were made, but the deal went to Nabi Saleh, GJC’s Master Franchisee in Australia. For a cool $16 million, Saleh managed to own the rights to all GJC
worldwide minus 146 outlets in the USA and Puerto Rico, where Dierich Coffee owns the rights to
operate free of franchise royalty. In 2010, Dierich sold all of its rights and remaining 102 franchised
outlets across 24 states in the USA to Saleh for additional $3.1 million, making Saleh as the owner of
GJC franchise worldwide.
GJC ranks third globally among premium coffee brands. Saleh had to look into many issues after taking
over the GJC franchise. But he loved every second of it. He had to make sure all of the operations
worldwide were within his view and was all right. Among many other important matters that he had to
look into was the renewing of Malaysia’s Master Franchisee Agreement.
The first Malaysian master franchisee
In 1996, prior to Saleh’s taking over of GJC, the Malaysian Master Franchisee Agreement was signed with Tai Thong Group (TTG) of Restaurants Sdn Bhd, a huge Malaysian F&B company, with a tenure of
ten years which covers Malaysia, Thailand, Singapore and Brunei.
TTG owned many predominantly Chinese chain restaurants in Malaysia and overseas. One of the wellestablished Chinese restaurant chains in Malaysia is the Four Seasons Restaurant which focuses and
target mainly on the Malaysian Chinese segment. TTG later catered to a larger market segment by
venturing into western food and brand name such as Seafood Restaurant, Room Eighteen, Santini
Ristorante Italiano, Royal Thai, Palms Cafe & Bistro, 798 Wine Bar and 798 Sports & Wine Bar, adding
more firepower to their already massive arsenal.
TTG operated its first GJC outlet in KLCC and moved on until the total number rose up to 13 outlets by
the year 2000. TTG established most of its GJC outlets in the Klang Valley area, selecting the most
metropolitan area in Malaysia aside from Penang and Johor Bahru.
However, competition in Malaysian gourmet coffee market was fierce. Internationally well-established
competitors like Coffee Bean & Tea Leaf and Starbucks Coffee mushroomed almost everywhere.
Competitions between these franchises can be seen colliding in a head to head confrontation in malls
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and high end areas in Kuala Lumpur each trying and striving to carve an extra percentage of market
shares from its direct competitors.
It seems that the market in Malaysia seems to be very adaptive and welcoming towards this new
gourmet coffee-drinking lifestyle, where it was ‘‘beyond cool’’ just to be seen at these outlets. Despite
the tremendous (or ridiculous) price tag of the gourmet coffee to most Malaysian average income
earners, the market soared. A name was labelled to the group of people frequently patronizing these
outlets – Kippies – a word combination of Kiasu[1] and Yuppies[2] which were young (20-40 years old),
mostly single, executives with high disposable incomes (Singh, 2000).
Some may see it as a classic mismanagement which led to the downfall and non-performance of GJC
under TTG, but that was not the only problem faced by GJC. Many may think that GJC could no longer
sustain countless attacks from its competitors and had suffered wounding damages and extreme
losses. Many may also think that coupled with the impact of the early 2000 economic recession in
Malaysia, GJC had lost many of its customers to more affordable alternatives. Home-grown copycat
brands such as the Coffeehouse and the Coffee Shack in Damansara Utama (a very uptown and
upscale location within the Klang Valley) offered similar products with less hefty price tags.
Nevertheless, these copycats never lasted long anyway.
Many may think that as a result from these detrimental factors, many of GJC outlets had to be closed
down. Business seems to be so bad that TTG was left with only,3 GJC outlets by the end of 2005.
Perhaps, there was the beginning of an end. Saleh had to doubly rethink about renewing the master
franchise agreement with TTG, but he was almost certain that the answer was very obvious.
Enter MyFranchise Sdn Bhd (& PNS)
Shahrul Azlan, then was the Chief Executive Officer of MyFranchise Sdn Bhd, was browsing around in
a Franchise Exposition in Singapore in mid-2005. His official trip to the exposition was none other than
to scout for potential franchises for MyFranchise. His drive to secure several franchising rights was
strong. All of the franchises present at that exposition seem to be appealing, but not enough to strike
his attention, not until he met with an officer of GJC at the exposition which started the ball rolling.
Perbadanan Nasional Berhad (PNS)[3] is a government agency which was under the Ministry of
Entrepreneur and Cooperative Development prior to 2009. PNS is the sole government agency
responsible to develop the local franchise industry in line with Ninth Malaysia Plan (2006-2010). Under
the Plan, the agency is targeted to create and develop at least 50 Bumiputera franchisors and 1,000
local Bumiputera franchisees. PNS provides financial assistance in form of term-loan with very low
interest rate as well as guidance and training prior to the commencement of business of PNS’ potential candidates.
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Only recently, the ministry announced that in order to strengthen the franchise industry, an academy
will be established under the responsibility of PNS. The establishment of the academy is to ensure all
potential franchisees and franchisors are fully groomed and prepared to face the challenges in the
franchising world.
As a wholly owned subsidiary company of PNS, MyFranchise’s role primarily was to act as a franchising arm of PNS, supporting home-grown franchising companies by taking up their franchises.
Led by selected PNS officers, Myfranchise is well equipped with experienced management team. New
staffs were recruited from the local franchise industry itself to support and strengthen the management.
After obtaining the prior approval and blessings from the Board of Directors, PNS and the ministry, both
MyFranchise and GJC went through several meeting and numerous discussions. By the end of 2006,
MyFranchise succeeded in obtaining the rights of Master Franchisee of GJC covering both Malaysia
and Brunei. Unlike TTG, Thailand and Singapore were not included in the agreement.
The ministry officials were really pleased with MyFranchise since this will have a spill-over effect on
their mission, which is to create more Bumiputera franchisees. The ministry also looked at the potential
spill-over benefit on the value chain, where Bumiputera entrepreneurs can participate. MyFranchise
contracted out renovation works of GJC’s outlets to Bumiputra contractors and also sought for
Bumiputra food suppliers for its daily supplies of pie, cakes, sandwiches and many more.
Meticulous planning of skills and resources led to the opening of a total of five outlets in ,6 months in
2007. The table on the next page shows the outlet locations, its outlet opening date and the date
variation between each opening of outlets (Table I).
Another side of the coin – the Tan brothers
Consider another factor which may have led to the non-renewable contract of the Master Franchisee
under TTG. Owned by a business tycoon, Tan Sri Dato’ Vincent Tan Chee Yioun, Berjaya Group is known to be as one of the most successful business conglomerate in Malaysia, involving in many
diversified businesses locally and internationally. In 2009, Berjaya Group has annual income of RM2.93
billion.
Among its vast area of businesses includes the F&B industry holding the rights to operate
San Francisco Steakhouse, Wendy’s, Krispie Kreme Doughnuts, Papa John’s Pizza and Starbucks Coffee. Berjaya Group realized the raising positive trend in the gourmet coffee market, was quick to
react. By late 1998, Berjaya Group through Berjaya Starbucks Coffee Company Sdn Bhd is jointly
owned by Starbucks Coffee International and Berjaya Group opened its first outlet in KL Plaza Mall
right in the heart of the Golden Triangle of Kuala Lumpur.
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TTG, a subsidiary of Tai Thong Resources Berhad, also a huge conglomerate similar to Berjaya Group
is owned by Tan Sri Dato’ Danny Tan Chee Sing. Also as the Executive Chairman of TTG, Danny Tan
also held a critical position in his brother’s Berjaya Group as theDeputy Chairman.
One may wonder how GJC under the management of Saleh’s predecessor overlooked this detrimental factor on GJC’s overall position in Malaysia. How healthy would it be for GJC, if TTG’s Danny Tan simultaneously held indirect rights to operate Starbuck Coffee through Berjaya Group? If Danny Tan
decided to resign from his post in Berjaya Group, would he compete head to head with Vincent Tan, his
brother?
Considering the background and strong financial position of both companies, would it be reasonable to
assume that TTG can sustain and afford GJC’s losses (if they did at all) and still be a player in the gourmet coffee market in Malaysia?
Competitions
In Malaysia, GJC has less number of outlets compared to its direct competitors – Starbucks Coffee and
Coffee Bean. Table II demonstrates the comparison.
Efforts by GJC to capture more shares from the market can be seen through its various strategies
implemented. According to Suhaimi Bakar ofMyFranchise, there are no differences in the beans
between all threemajor players except for the aroma and flavor. ForGJC, these two factors can only be
obtained through the bean roasting process in Australia, its trade secret.
The localization strategies demonstrated in some of the outlets in Kuala Lumpur were as a result from
GJC responding to customers’ suggestion. After obtaining approval from their Australian franchisor, GJC offered local delights and food: Nasi Lemak Bungkus, Nasi Briyani with Chicken and even
Murtabak at a slightly elevated price. Though still at market-testing phase, the positive response from
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once we have established the supply chain’’, said Suhaimi. ‘‘However, there is no new product introduction on local drinks and beverages like ‘cendol’ or ‘sugarcane juice’ for the time being’’, he added.
Drinking coffee is a long-term growing trend that is becoming more and more popular among adults,
especially the younger adults who make up the largest percentage of the market. By catering to young
educated adults, GJC will see increased profit levels now as well as in the future as the generation
ages. Attempts to attract more young college students and young adults were done in 2009. Trying to
relate to them, GJC hosted a talent show contest and got local music acts to perform at their Sunway
Pyramid outlet, where there is a high concentration of college students from nearby colleges like
Taylor’s College, INTI College, Sunway College, Metropolitan College and many more. But the impact on the sales was not too significant and MyFranchise decided that the strategy should be shelved.
Instead, a GJC student club was introduced, where students can get 30 per cent discounts on F&B
items.
Similar to its competitors, GJC provides WIFI connection which appeals to young adults and the
working group. By doing that, customers feel more comfortable, allowing them to sit back and enjoy
their coffee while being virtually connected to the world. By keeping customers in the outlets longer,
there are greater opportunities for more purchases, whether they are more cups of coffee, food items or
other products. Merchandise such as thermal mugs does appeal to this segment as customers love to
be associated with brands.
Another strategy adopted by GJC is by introducing the ‘‘Running Baristas’’ or in plain words, it refers to the ‘‘Delivery boys’’. This strategy is adopted mostly by outlets located within office buildings or within
the reach of nearby offices such as near the IBM Plaza, Kenanga Plaza, Midvalley Megamall (all of
which are located in the heart of the Kuala Lumpur city centre) and proved to be very effective since it
caters and appeals to many working people.
Challenges ahead
‘‘It is quite challenging to find the right franchisee’’, a fact stated by Shahrul. Most potential franchisee candidates who approached MyFranchise usually lack the sense of business and clear absence in
financial commitment.
Aspiring Bumiputera entrepreneurs can obtain their loans from PNS or any other supporting financial
institutions like SME Bank to take up GJC franchises. But prior to that, candidates will go though a
compulsory behavioral interview for screening purposes. Upon succeeding the interview, candidates
will have to go through in-house training at the Coffee Academy.
MyFranchise’s approach on GJC’s market expansion is rather different compared to its competitor Starbucks who do not franchise its outlet. Of the 13 outlets, four are owner-operated by franchisees and
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the remaining balances are corporate owned by MyFranchise. MyFranchise hopes to identify more
dynamic entrepreneur to take over their corporate outlets. Through this approach the franchisees’ failure rate will be decreased as MyFranchise proves that the business can actually work and selected
location is premium. Another challenge for GJC is to secure choice business premise. Most premise will
either be taken up by GJC’s competitor long before the actual construction actually started, or the
premises are being offered to them directly. This may be the works of the ‘‘unseen hand’’ as explained earlier since GJC’s competitors are owned and operated by companies with very large network and
deep pocket. Good for GJC, they managed to win the heart of Chris Bush, then CEO of Tesco
Malaysia. From then onwards, Tesco has been offering excellent premises to GJC in all of its upcoming
stores which includes Tesco Kepong and the upcoming Tesco Seremban.
When asked about the changing trend or rather the rise of the Kopitiam in Malaysia, Shahrul replied
that GJC is not worried too much on that matter, as GJC caters to a different segment of the market. He
continued explaining the differences between GJC and Kopitiam customers in general. But can GJC
remain and stay competitive when Kopitiam offers similar products, i.e. good mixture of localized and
international food plus coffee that cost so much lesser yet tasty in a very (sometimes) up-scaled
environment?
GJC has yet to obtain Halal certification from JAKIM (a government body which issues certification on
products that are safe and according to Islamic dietary law), unlike Starbucks. ‘‘We are preparing ourselves for the JAKIM certification; it takes a little bit more time as it is a lengthy and meticulous
process, yet necessary’’, explained Suhaimi.
The direction GJC is heading in Malaysia
MyFranchise strived hard to reach its goal to open its targeted number of outlets of 30 within the next
few years. Though the torch has been passed on a few months ago to their new CEO, Fauzi Awang,
their mission to excel had never change. Fauzi hopes to achieve more than 30 outlets in Malaysia, he
told us. More ambitious, Fauzi did not cross-out the hope to control GJC in the South East Asia region
or even worldwide.
Source: www.emerald.co.za
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QUESTIONS
1. Assess the factors that led to GJC’s (under TTG management) downfall and recommend strategies
that could have averted the downfall.
2. Evaluate the competitive strategies used by the various the players in the Malaysian market and the
sustainability of these strategies in the current market climate.
3. MyFranchise’s approach on GJC’s market expansion is rather different compared to its competitor Starbucks. Explain how the expansion methods differ and why GJC opted for this particular mode of
entry mode.
4. Using the 10 Ps in marketing, create a marketing strategy for GJC that would enable them to grow
and differentiate their business.
5. Evaluate the changing market landscapes impact on consumer and business decision making and
how the marketers of GJC can accommodate these changing factors in the current economic climate.
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