Download Marketing - HAW Hamburg

This project is funded
by the European Union.
Training module
Marketing
Keywords: Marketing, product diversification, presentation, labeling, market packaging, distribution
system.
After completion of this sub module, you would have learnt about the definition of marketing and the
specific marketing strategies required in increasing product awareness amongst consumers, buyers,
producers and retailers. In addition, you would be able to familiarize with the current marketing
strategies used, to understand the definition of the terms used in marketing, and also to differentiate
the differences between the marketing strategies currently implemented.
Hamburg University of Applied Sciences
May 2009
MARKETING
In this sub module, you will be introduced to the definition of marketing and its specific
strategies required in raising awareness amongst consumers, buyers, producers and retailers.
Besides that, this section also explains the current marketing strategies used which are product
diversification, presentation, labeling, market packaging and distribution system. You will also
be exposed to the different current marketing terms used in the marketing world of today and
the terms’ own uniqueness of how they are able to create awareness amongst the global
society.
1
Introduction to Marketing
Marketing deals with customers and is defined as a social and managerial process
whereby individuals and groups obtain what they need and want through creating and
exchanging products and value with others/1/.
Understanding consumer behavior is always a challenging task for companies marketing
within the borders of a single country. As for global multinational companies such as
Starbucks or Nestle, operating in many countries and trading internationally, however,
understanding and serving the needs of consumers can be daunting. Although
consumers in many parts of the world may have some things in common, their
attitudes, values, and behaviors vary greatly/2/.
In light of the development in International Trade, the industry and government needs a
better understanding of consumers’ acceptance of commercial, fair trade and organic
farming products. Despite the potential benefits, these methods are moving at a very
slow rate due to consumers’ lack of awareness regarding such matter.
There are five marketing strategies used to raise the product awareness in consumers’
which are:



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product diversification;
presentation;
labeling;
packaging; and
distribution systems.
2.
Product Diversification
The meaning of product diversification is to increase the range of products or the
variety of things the product can do/3/Therefore, it can be said that the diversification
of a product is a form of growth marketing strategy for the company. It is one of the
most risky strategies to implement as it means penetrating through a new market with
a new product. Figure 1 shows the Ansoff Matrix Model/4/ which shows the four main
marketing strategies.
Figure 1: The Ansoff Matrix Model
Source: Adapted by the authors from Jobber (2001, p.260), originally from Ansoff (1987)/4/
There are three types of diversification: concentric, horizontal and conglomerate.
Concentric diversification means that there is a technological similarity between the
industries which means that the firm is able to leverage its technical expertise to gain
some advantage. Horizontal diversification is desirable if the present customers are loyal
to the current products and if the new products have a good quality and are well
promoted and priced. Conglomerate diversification or better known as lateral
diversification is used to firstly improve the profitability and the flexibility of the
company, and then to get a better reception in capital markets as the company gets
bigger/5/.
An example of product diversification in the international and domestic trade of
agriculture product is bananas. Bananas are mainly consumed as a fresh produce or
fruit. Product diversification strategies have led to diversification of fresh bananas into
other processed banana food products such as dried bananas, banana alcohol, banana
puree and even banana flour and powder.
3.
Product Presentation
In today’s highly competitive business environment especially in international trading,
one of the key elements of success is the product’s presentation. A presentation is vital
as it can either captivate the audience or make the audience lose interest quickly.
For processed product or fresh produce, it should have a distinctive style or design
which is a way to add customer value. Style is defined as the appearance of a product
which could either be eye-catching or yawn producing. However, design is a larger
concept than style as it goes to the very heart of a product and good designs always
contributes to product’s usefulness as well as to its looks /6/. For example, the style that
fresh produce such as bananas should be marketed is by appearing fresh, and not
damaged. Bananas whether fresh produce or processed products bores down to the
dietary or nutrition facts which is designed to assist in consumers’ healthy-eating
lifestyle.
One of the marketer’s major positioning tools is in the product quality. Quality is closely
linked to customer value and satisfaction hence the direct impact on product. In any
processed product or fresh produce, quality can be defined as “freedom from defects”
/7/. Therefore, the quality of a product is always associated with the way it is presented.
In addition to the above, the most distinctive skill in product presentation is the
marketer’s ability to create, maintain, protect and enhance brands of their products.
Branding is becoming stronger each day as hardly anything goes by unbranded/6/.
Consumers view a brand as important part of the presentation of a product. For
example, the Chiquita Brands International/8/ bananas would be perceived as a better
quality of bananas compared to bananas not of that brand even if the bananas were
identical.
Therefore, the product’s presentation consists of its style and design, quality of the
product and also it’s branding.
4.
Labeling
Labeling on products such as food and beverage products is basically complete
information about its ingredients, date of manufacturing and expiry, and nutritional
data. Labels could also consist of information about the conditions under which the
product was produced. Labels are usually to identify the product or brand such as
Colgate for toothpaste.
In Malaysia, food labeling is regulated whereby some products have to be labeled HALAL
as there are Muslim consumers. However, most consumers these days are looking for
better information about the price-building of food to have the choice to buy products
which are free from too much chemical usage and also from fair trade.
Consumers are better enabled to make the right choice when buying products with
labeling that provides all relevant information about the production process/9/.
Labeling would also be able to build up markets for quality products as it should consists
transparent information about specific qualities of a product and also have more strict
controls established to avoid fraud.
In the Netherlands, the Dutch Environmental Quality Label has been used for a steadily
increasing number of agricultural products and foodstuffs since 1995. Products with this
label meet the most stringent environmental criteria during their entire life cycle /10/.
Figure 2 shows examples of the labels used in European countries.
Figure 2: Examples of three European environmental labels: the EU flower, the Nordic
Swan and the German Blaue Engel
Source:
http://www2.mst.dk/common/Udgivramme/Frame.asp?http://www2.mst.dk/udgiv/Publications/2006/877052-180-8/html/kap03_eng.htm /11/
Environmental labels give the producer a simple message whereby products with the
eco-label are less environmentally harmful than those without the label. ISO is in the
midst of developing standards for environmental labels and the standardization of
products/11/. These labels assist to raise awareness to producers, retailers, and also
consumers on making the right choice of choosing products which are environmentalfriendly produced.
5.
Product Packaging
Product packaging involves designing and producing the container or wrapper for a
product/12/. Traditionally, packaging functions as a protection for the product it
contained which is in transit to the final consumer. In any international or domestic
trade, packaging physically protects the objects from temperature, compression and
others which also reduces the security risks of shipment.
Product safety is also a major packaging concern. Products are packaged with improved
tamper resistance to deter tampering. Child-proof packages are one of the reason why
products have tamper-evident features to help indicate tampering/13/.
Numerous factors have now made packaging an important marketing tool such as
instant consumer recognition of the company or brand and also help deter
counterfeiters. In a supermarket setting, a buyer would come across thousands of items;
hence the package may be the seller’s last chance to influence buyers. It is also termed
as a “five second commercial”. On a different note, some packaging may cause lost of
sales due to the complicated or poorly designed packages. A company can have an
advantage of raising awareness of its product or brand to its potential buyers by its
innovative packaging which may help deter counterfeiters/14/.
Figure 3: Examples of various household packaging types for food product.
Source: http://en.wikipedia.org/wiki/Packaging#cite_note-5/15/
Market packaging plays important marketing roles whereby it captures attention and
increases consumption or sales of product, to ensuring consumer safety and even to a
point of gaining access to new distribution system.
6.
Distribution Systems
Firms constantly evaluate their distribution systems as it is recognized that the
distribution of goods to and from their facilities can represent as much as 25% of the
cost of the products/16/. There are five kinds of distribution system which are
applicable to the international or domestic trade for agriculture which are distribution
system via wholesale auction markets, trucking, railroads, airfreight and waterways.
Fresh produce such as fresh fruits and vegetables uses a distribution system called the
wholesale auction market. This is because of the geographical proximity between
production and consumption areas, and a large number of producers, middlemen, and
retailers/17/. However, with the change of human beings’ lifestyle and the impact of
technological innovations such as domestic refrigerators, there is a tendency to
encourage the development of shopping at supermarkets on a once-a-week basis.
Wholesale auction markets then face a challenge to retain turnover by providing its
services to commercial places such as hotel, catering sectors and supermarkets/18/.
Most agriculture goods are moved by trucks. Realizing that shipping via truck could be
just as quick as airfreight for relatively short-haul shipments, many carriers have started
moving time sensitive freight such as fresh produce or processed products via ground
using 100% truck delivery/19/. Due to the time sensitive freight, truckers are pressured
to pick up and deliver on time, with no damages at a low cost.
Another mode of distribution system for agriculture product via land is known as the
railroads system. A popular means of distribution via the railroad system is to have
containerization whereby intermodal shipping of truck trailers on railroad flat cars,
often piggybacked as double-deckers. However, the share of rail transport has been
declining because small-batch manufacture requires frequent, smaller shipments that
are likely to move via truck or air/20/.
The fastest mode of shipping goods for international trading is by airfreight. To date,
airfreight represents only about 1% of tonnage shipped in the United States. Air freight
offers speed and reliability for national and international movement of lightweight
items such as fresh produce – fruits, flowers, and vegetables/21/.
Lastly, waterways are one of the nation’s oldest distribution systems of freight
transportation. Usually, the cargo which utilizes the waterway is bulky, low-value cargo
such as iron ore, grains, cement, coal, chemicals and others. For international trade,
millions of containers are shipped out at very low cost via huge oceangoing ships each
year /22/. When speed is not an issue but shipping cost is, water transportation will
have the upper hand. For example, since 50 years the Geest Line has been involved in
the transport of perishable fruits eastbound and claims to carry more cargo between
Europe and the Windward and Leeward islands than any other shipping line. Figure 4
shows an example of a Geest Line vessel.
Figure 4: Geest Line vessel (Distribution via waterways)
Source: http://www.geestline.com/ships/timor-stream.html /24/
7.
Summary
Awareness-raising amongst buyers, producers, and growers in the agriculture trade can
be achieved via five marketing strategies. These strategies are known as product
diversification, presentation, labeling, and market packaging and distribution systems.
According to the Ansoff Matrix Model, product diversification is riskiest as it involves
introducing a new product to a new market. There are three types of diversification:
concentric, horizontal and conglomerate.
Presentation is one of the key elements of success to international and domestic trade.
The product’s presentation is vital as it holds the upper hand in the marketing strategy.
It is usually judged by its style and design, quality and branding.
Besides that, labeling is also an important marketing strategy as the buyer is able to
make a right choice before purchasing. Labels play an important role in raising
awareness to people of today. This is because buyers are now not only health conscious
but also beginning to be environmental-friendly, and the label on the products which
has certain logos or trademarks that can be identified is crucial to their purchase
decision.
All products have to be packaged securely due to food safety, to avoid tampering and
also deter counterfeiters. This marketing strategy that also includes having the product
packaged with innovative designs would help booster sales for the firm and at the same
time raise awareness on product safety before purchased.
In addition to all these, there are several distribution systems which are used for the
distribution of products or fresh produce internationally and domestically. These
distribution systems are done via wholesale auction markets, trucking, railroads, air
freight and waterways.
1 P Kotler, G Armstrong, S W Ang, S M Leong, C T Tan, D K Tse, 2005. Principles of Marketing: An
Asian Perspective, Pearson Education Inc Publication, pg 5.
2 P Kotler, G Armstrong, S W Ang, S M Leong, C T Tan, D K Tse, 2005. Principles of Marketing: An
Asian Perspective, Pearson Education Inc Publication, pg 163.
3 C Cobuild, 1996. Learner’s Dictionary: Helping learners with real English, Harper Collins
Publishers, pg 320.
4 Jobber D, 2001. Principles & Practice of Marketing, McGraw Hill, Maidenhead, page 260.
5 Wikipedia official website. Diversification (Marketing Strategy)
URL: http://en.wikipedia.org/wiki/Diversification_(marketing_strategy)
6 P Kotler, G Armstrong, S W Ang, S M Leong, C T Tan, D K Tse, 2005. Principles of Marketing: An
Asian Perspective, Pearson Education Inc Publication, pg 227.
7 O Lamikanra, 2002. Fresh-cut fruits and vegetables: science, technology, and market, CRC
Press, pg 12.
8 Green America Today official website. Chiquita brands.
URL: http://www.coopamerica.org/programs/responsibleshopper/company.cfm?id=202
9 Memorandum for Food Safety and Quality, Position Paper; GREEN/EFA Group in the European
Parliament. 18th September 2003.
URL: http://www.greens-efa.org/cms/topics/dokbin/102/102822.pdf
10 B Mattsson, U Sonesson, 2003. Environmentally-friendly food processing, Woodhead
Publishing, pg 20.
11 N J Busch, S H Ramboll, 2004. Guidelines for the Inclusion of Environmental Aspects in
Product Standards,
URL: http://www2.mst.dk/udgiv/Publications/2006/87-7052-180-8/pdf/87-7052-181-6.pdf
12 P Kotler, G Armstrong, S W Ang, S M Leong, C T Tan, D K Tse, 2005. Principles of Marketing:
An Asian Perspective, Pearson Education Inc Publication, pg 228.
13 Johnston, R.G. (July 1997). "Effective Vulnerability Assessment of Tamper-Indicating Seals". J.
Testing and Evaluation 25 (4).
14 P Kotler, G Armstrong, S W Ang, S M Leong, C T Tan, D K Tse, 2005. Principles of Marketing:
An Asian Perspective, Pearson Education Inc Publication, pg 228.
15 Wikipedia Official Website. Packaging and Labeling.
URL: http://en.wikipedia.org/wiki/Packaging#cite_note-5
16 J Heizer, B Render, 2008. Operations Management, Pearson Education Inc Publication, pg 449
17 Jussaume, R.A.Jr., Suzuki, N., Judson, D. H. (April 1991). "Characteristics of Japanese
wholesale auction markets for fresh fruits and vegetables". Quarterly Journal of Agricultural
Economy (Japan,) 45 (2), pg 45-75.
18 Andrew W. Shepherd, “The implications of supermarket development for horticultural
farmers and traditional marketing systems in Asia”, FAO, Rome 2005.
URL: http://www.fao.org/ag/ags/subjects/en/agmarket/docs/asia_sups.pdf
19 T Boyaci, R Saibal. (Winter 2003), “Product Differentiation and Capacity Cost Interaction in
Time and Price Sensitive Markets”. Manufacturing and Service Operations Management 5 (1), pg
19.
20 J Heizer, B Render, 2008. Operations Management, Pearson Education Inc Publication, pg 449
21 Ballou, Ronald H. 2004. Business Logistics Management, 5th ed. Upper Saddle River, NJ;
Prentice Hall.
22 J Heizer, B Render, 2008. Operations Management, Pearson Education Inc Publication, pg 450
23 Trade and Logistics Malaysia Website.
URL: http://logistics-malaysia.blogspot.com/2009/06/misc-liner-division-will-exit-asia.html
24 Geest Line Website.
URL: http://www.geestline.com/ships/timor-stream.html