University of Chieti “G.

d’Annunzio”
Faculty of Economy and Management
Department of Business Studies

S V IL O P IM
- P ro je c t IN T E R R“DEeGv e lo p m e n t a n d
p ro m o tio n o f lo c a l s y s te m s to s u p p o rt in n o
S .M .E . in A lb a n ia , B o s n ia a ”n.d S e rb ia
Tuzla – Belgrade

Daniela Di Berardino
Researcher in Economy and Management of the Enterprises
Department of Business Studies
University of Pescara – Chieti
daniela.diberardino@unich.it
Tel number: +39 085 4537609

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 MARKETING IN SMALL AND MEDIUM ENTERPRISES
Daniela Di Berardino

1. PREVIEW

Small and medium enterprises are the typical business model of the Italian entrepreneurial system
and a lot of these SME are family business. In Italy the 80% of working people are into SME,
instead in the UK the 55%, in France the 67%, in Germany the 60%, in Spain the 79%.
More than 95% of all European enterprises belong to the SME size. The 55% of these SME in
Europe was born between 1951 and 1970 years, the economic boom period, and a lot of them
became medium firms.
The Sme’s features are: narrow management (one o few persons); small task environment;
resources, equity and human capital assigned by propriety.
The Italian’s experience shows that the SME:
- can obtain relevant competitive advantage into the bound task environment;
- can make success into the large market by the focus or niche strategy or by the partnership
with other firms (big o small);
The competitive advantage that SME can obtain in the large markets requires these conditions:
- No economy of scale;
- High flexibility;
- few big company;
- fragmented market.

During the last ten years many events threatened the SME: globalisation, outsourcing,
enterprises’trust, brief product life cycle, consecutive innovation.
However, the SME are able to change their organizations, manufactoring and process with more
flexibility than global players and during the last years many SME opened their market to the
foreign customers, specially in the country in growth. The tools used for this purpose are the
relationship with foreign partner and internet, thought that the Italian SME doing e-commerce, e-
procurement, global promotion and market penetration into the foreign markets. A lot of them have
an internet web site where presents their product, their history, their distribution system, the price
and other but few of SME, in Italy too, use internet channel for value generation.
The main relationship built with big enterprises are franchising and supply chain relations (to
support the growth and the market penetration), licensing and joint venture (to support the
innovation, the product development, the leaning organization, to receive financial resources), and
other concracts. Greater cooperativeness, sense of community, innovation, strategic flexibility and
core competence are necessary to SME’s growth and competitiveness. We can try these features
into the network systems, where economic exchange is embedded inside a network of social and
trust relations. Trust is necessary to create cooperation and value by the relations. The economic
effects, largely, are low cost, learning, market penetration and growth of management
competencies.
The main objectives of european SME, usually, are the sales growth and hight return on equity. The
Italian core industry is the mechanical, specially in the North East. This industry is composed by
tools and machinery for other industry, while textile industry, clothing factory, leather industry,
shoe factory, and only the 9% of these SME has the 20% of sales by one client. These SME have
make a lot of relations with suppliers and retalires to support their growth.
The Italian SME are much focused and produce speciality goods for the consumer market. These
SME prefere niche strategies, focus on core competencies, differentiated goods and service, support
more quality than price competition.

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The 55% of Italian SME situated in the North-East prefer foreign market, the 37% of their sales
come from export, from global niche market. The main market are in the East Europe and
Mediterranean, but this is a domestic market of the European Union.
But the Italian SME needs more competencies, because the new value generation activities are the
Research and Development and Marketing and no more the manufactoring activities.
Management competencies are essential to sound business practices; SME, generally, have severe
limitation and lack of resource, thus they must rely heavily on developing suitable and appropriate
competencies specially for marketing and strategy. What competencies are appropriate for SME
marketing and strategy activities? How do SME’s develop such competencies?

2. THE ROLE OF MARKETING COMPETENCES IN SME

Into the SME the marketing and strategic competencies may be determined by the entrepreneur/
owner manager and by the size an stage of the develompment of the enterprises. SME marketing is
often haphazard and informal, spontaneus, structured around industry norms an reactive, because
the manager makes most decisions independent of others, responding to current opportunities and
circumstances and so decision making occurs in an chaotic way, according to personal and business
priorities at any given point in time.
The scope and variety of the decisions needed in running the SME business are more generalists
than specialists in any one area, with the exception of a technical competence. The SME
owners/managers is unlikely to take decisions on marketing issues in isolation from other aspect of
the business. Marketing decisions have to consider other aspect of the business.
For example, decisions on aspects of pricing may be taken because of a need to clear stocks, to
relieve pressure on cash flows, rather than being marketing related. SME decision making is
characterised by the other aspects of the business whenever taking decision and these are different
from conventional marketing competencies required for large companies. Specific competencies
have a life cycle in the context of organisational change and in the different business environments
passed by SME, so SME needs to adjust their competencies, resurces and product to their ever
changing external environment.
SME marketing related decision making will inherently consist of knowledge, experience, judgment
and communication according to their industry.
Networking is used by managers to make sense of what happens in complicated markets and
support the competitiveness against strong competitors. Networking is also a useful way for SME’s
managers to expand marketing expertise and knowledge and it can help SME’s managers to use
their limited resources and compete more effectively with more powerful companies
In a competitive environment managers have network contracts that consist of people who have
potential to provide some specific service or support or from whom the might expect service or
support. networking can include the product decisions, promotional activity, innovation,
distribution, marketing activities and other.
The access to profitable markets and the customer satisfaction are the key factors which determines
the longterm success for all business. For SME, however, various factors limits this access, such as
inadequate technology, geographic isolation, lack of financial and marketing resources, limited
research and development activities. Marketing play an essential role in developing the business of
SME, supporting the access to profitable and international markets, .increasing SME’s effectiveness
and investiment growth.

3. THE MARKETING PROCESS

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There are many definitions of marketing. The better definitions are focused upon customer
orientation and satisfaction of customer needs. The following definition is a most common
description of marketing:

Marketing is the social process by which individuals and groups obtain what they need
and want through creating and exchanging products and value with others (Kotler)

There is a more recent and very realistic definition that considers the economic and social aspects of
marketing.

Marketing is the process whereby society, to supply its consumption needs, evolves
distributive systems composed of participants, who, interacting under constraints -
technical (economic) and ethical (social) - create the transactions or flows which
resolve market separations and result in exchange and consumption. (Bartles).

The marketing concept is a philosophy that makes the customer, and the satisfaction of his or her
needs, the focal point of all business activities. The important elements contained into marketing
definitions are:
• Marketing focuses on the satisfaction of customer needs, wants and requirements.
• The philosophy of marketing needs to be owned by everyone from within the organization.
• Future needs have to be identified and anticipated.
• There is normally a focus upon profitability, especially in the corporate sector. However, as public
sector organizations and not-for-profit organizations adopt the concept of marketing, this need not
always be the case.
• More recent definitions recognize the influence of marketing upon society

Marketing process includes these phases: analytic; strategic; tactics.

The first one includes the analysis concerning the internal and external environment of marketing
and the marketing research. These phases support the marketing planning and the marketing tactics
development.

3.1. The strategic planning process

In the organizations there are two planning process: strategic and marketing.
Strategic planning is the process by the organization defines its strategy, or direction, and making
decisions on allocating its resources to pursue this strategy, including its capital and people. Various
business analysis techniques can be used in strategic planning, including SWOT analysis and PEST
analysis.
The outcome is normally a strategic plan which is used as guidance to define functional and
divisional plans, including technology, marketing, manufactoring, etc.
Strategic Planning is the formal consideration of an organization's future course. All strategic
planning deals with at least one of three key questions:
1. "What do we do?"
2. "For whom do we do it?"
3. "How do we excel?" or "How can we beat or avoid competition?"
The strategic planning is viewed as a process for determining where an organization is going over
the next year or more -typically 3 to 5 years, although some extend their vision to 20 years. In order
to determine where it is going, the organization needs to know exactly where it stands, then
determines where it wants to go and how it will get there. The resulting document is called the
"strategic plan".

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It is also true that strategic planning may be a tool for effectively plotting the direction of a
company; however, strategic planning itself cannot foretell exactly how the market will evolve and
what issues will surface in the coming days in order to plan your organizational strategy. Therefore,
the 'strategic plan' presents the strategy for an organization to survive the turbulent business climate.
The first section of the strategic plan concerning the description of the vision, mission and values
Vision defines where the organization wants to be in the future. It reflects the optimistic view of the
organization's future.
Mission defines where the organization is going now, basically describing the purpose, why this
organization exists.
Values reflect the organization's culture and priorities.
There are many approaches to strategic planning but typically a three-step process may be used:

SITUATION - evaluate the current situation and how it came about.

TARGET - define goals and/or objectives (sometimes called ideal state)
PATH - map a possible route to the goals/objectives

One alternative approach is called Draw-See-Think

DRAW - what is the ideal image or the desired end state?

SEE - what is today's situation? What is the gap from ideal and why?
THINK - what specific actions must be taken to close the gap between today's situation and the
ideal state?
PLAN - what resources are required to execute the activities?

An alternative to the Draw-See-Think approach is called See-Think-Draw

SEE - what is today's situation?
THINK - define goals/objectives
DRAW - map a route to achieving the goals/objectives

In other terms strategic planning can be as follows:

• Vision - Define the vision and set a mission statement with hierarchy of goals
• Strategic Analysis - According to the desired goals conduct analysis
• Formulate - Formulate actions and processes to be taken to attain these goals
• Implement - Implementation of the agreed upon processes
• Control - Monitor and get feedback from implemented processes to fully control the
operation

When developing strategies, analysis of the organization and its environment as it is at the moment
and how it may develop in the future, is important. The analysis has to be executed at an internal
level as well as an external level to identify all opportunities and threats of the new strategy.
There are several factors to assess in the external situation analysis: Markets (customers),
competition, Technology, Supplier markets, Labor markets, The economy, The regulatory
environment. SWOT and PEST are the tools used for this purpose.
Analysis of the external environment normally focuses on the customer. Management should be
visionary in formulating customer strategy, and should do so by thinking about market environment
shifts, how these could impact customer sets, and whether those customer sets are the ones the
company wishes to serve.
Analysis of the competitive environment is also performed, many times based on the framework
suggested by Michael Porter: the five forces analysis.

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Strategic planning and decision processes should end with objectives and a roadmap of ways to
achieve those objectives. The following terms have been used in Strategic Planning: desired end
states, plans, policies, goals, objectives, strategies, tactics and actions. Definitions vary, overlap and
fail to achieve clarity. The most common of these concepts are specific, time bound statements of
intended future results and general and continuing statements of intended future results, which most
models refer to as either goals or objectives (sometimes interchangeably).

3.1.1. The mission statement and the objectives

One model of organizing objectives uses hierarchies. The items listed above may be organized in a
hierarchy of means and ends and numbered as follows: Top Rank Objective (TRO), Second Rank
Objective, Third Rank Objective, etc.
From any rank, the objective in a lower rank answers to the question "How?" and the objective in a
higher rank answers to the question "Why?" The exception is the Top Rank Objective (TRO): there
is no answer to the "Why?" question. That is how the TRO is defined.
People typically have several goals at the same time. "Goal congruency" refers to how well the
goals combine with each other. Does goal A appear compatible with goal B? Do they fit together to
form a unified strategy? "Goal hierarchy" consists of the nesting of one or more goals within other
goal(s).
One approach recommends having short-term goals, medium-term goals, and long-term goals. In
this model, one can expect to attain short-term goals fairly easily: they stand just slightly above
one's reach. At the other extreme, long-term goals appear very difficult, almost impossible to attain.
Using one goal as a stepping-stone to the next involves goal sequencing. A person or group starts
by attaining the easy short-term goals, then steps up to the medium-term, then to the long-term
goals. Goal sequencing can create a "goal stairway". In an organizational setting, the organization
may co-ordinate goals so that they do not conflict with each other. The goals of one part of the
organization should mesh compatibly with those of other parts of the organization.
Organizations sometimes summarize goals and objectives into a mission statement and/or a vision
statement:
While the existence of a shared mission is extremely useful, many strategy specialists question the
requirement for a written mission statement. However, there are many models of strategic planning
that start with mission statements, so it is useful to examine them here.
• A Mission statement: tells you what the company is now. It concentrates on present; it defines the
customer(s), critical processes and it informs you about the desired level of performance.
• A Vision statement: outlines what a company wants to be. It concentrates on future; it is a source
of inspiration; it provides clear decision-making criteria.
Many people mistake vision statement for mission statement.
The Vision describes a future identity and the Mission describes why it will be achieved. A Mission
statement defines the purpose or broader goal for being in existence or in the business. It serves as
an ongoing guide without time frame. The mission can remain the same for decades if crafted well.
Vision is more specific in terms of objective and future state. Vision is related to some form of
achievement if successful.
A mission statement can resemble a vision statement in a few companies, but that can be a grave
mistake. It can confuse people. The vision statement can galvanize the people to achieve defined
objectives, even if they are stretch objectives, provided the vision is SMART (Specific, Measurable,
Achievable, Relevant and Timebound). A mission statement provides a path to realize the vision in
line with its values. These statements have a direct bearing on the bottomline and success of the
organization.
This `corporate mission' can be thought of as a definition of what the organization is; of what it
does: 'Our business is …'. This definition should not be too narrow, or it will constrict the
development of the organization; a too rigorous concentration on the view. Someone suggested that

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the definition should cover three dimensions: 'customer groups' to be served, 'customer needs' to be
served, and 'technologies' to be utilized.
Thus, the definition of IBM's `corporate mission' in the 1940s might well have been:

`We are in the business of handling accounting information [customer need] for the larger US
organizations [customer group] by means of punched cards [technology].'

If the organization in general, and its chief executive in particular, has a strong vision of where its
future lies, then there is a good chance that the organization will achieve a strong position in its
markets (and attain that future). This will be not least because its strategies will be consistent; and
will be supported by its staff at all levels.
Henry Mintzberg explained: "... in some cases, in addition to the mission there is the `sense of
mission', that is, a feeling that the group has banded together to create something new and exciting.
This is common in new organizations".
What a worthwhile vision consists of is, however, usually open to debate; hence the reason why
such visions tend to be associated with strong, charismatic leaders. But the vision must be relevant.
The message for the marketer is that, to be most effective, the marketing strategies must be
converted into a powerful long-term vision; if such a vision does not already exist.
If you have a new start up business, new program or plan to re engineer your current services, then
the vision will guide the mission statement and the rest of the strategic plan. If you have an
established business where the mission is established, then many times, the mission guides the
vision statement and the rest of the strategic plan.
Either way, you need to know where you are, your current resources, your current obstacles, and
where you want to go - the vision for the future.
Features of an effective vision statement may include:
• Clarity and lack of ambiguity
• Paint a vivid and clear picture, not ambiguous
• Describing a bright future (hope)
• Memorable and engaging expression
• Realistic aspirations, achievable
• Alignment with organizational values and culture, Rational
• Time bound if it talks of achieving any goal or objective
To become really effective, an organizational vision statement must (the theory states) become
assimilated into the organization's culture. Leaders have the responsibility of communicating the
vision regularly, creating narratives that illustrate the vision, acting as role-models by embodying
the vision, creating short-term objectives compatible with the vision, and encouraging others to
craft their own personal vision compatible with the organization's overall vision.

3.2. The marketing planning process

In most organizations, strategic planning is an annual process, typically covering just the year
ahead. Occasionally, a few organizations may look at a practical plan which stretches three or more
years ahead.To be most effective, the plan has to be formalized, usually in written form, as a formal
`marketing plan'. The essence of the process is that it moves from the general to the specific; from
the overall objectives of the organization down to the individual action plan for a part of one
marketing programme. It is also an interactive process, so that the draft output of each stage is
checked to see what impact it has on the earlier stages - and is amended accordingly.
A marketing plan is a document that details the necessary actions to achieve one or more
marketing objectives. It can be for a product or service, a brand, or a product line. It can cover one

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year (referred to as an annual marketing plan), or cover up to 5 (sometimes referred to as five)
years.
Marketing plans are vital to marketing success. They help to focus the mind of companies and
marketing teams on the process of marketing (what is going to be achieved and how we intend to do
it). There are many approaches to marketing plans. The marketing planning process includes these
elements: analysis; objectives; strategies; tactics; control.
A marketing plan may be part of an overall business plan. Solid marketing strategy is the
foundation of a well-written marketing plan. While a marketing plan contains a list of actions, a
marketing plan without a sound strategic foundation is of little use.
The first phase include the results of environment’s analysis, carried out by the SWOT, PEST
approach, five force or marketing audit.
The second stage include the objectives development. These objectives have to be:
• Specific - Be precise about what you are going to achieve.
• Measurable - Quantify you objectives.
• Achievable - Are you attempting too much?
• Realistic - Do you have the resource to make the objective happen (men, money,machines,
materials, minutes)?
• Timed - State when you will achieve the objective (within a month? By February 2010?).
The rest of the plan hinges on the objective. If it is not correct, the plan may fail. Behind the
corporate objectives, which in themselves offer the main context for the marketing plan, will lie the
'corporate mission'; which in turn provides the context for these corporate objectives.
The first formal step in the marketing planning process is that of conducting the marketing audit.
Ideally, at the time of producing the marketing plan, this should only involve bringing together the
source material which has already been collected throughout the year - as part of the normal work
of the marketing department.
The emphasis at this stage is on obtaining a complete and accurate picture. In a single organization,
however, it is likely that only a few aspects will be sufficiently important to have any significant
impact on the marketing plan; but all may need to be reviewed to determine just which 'are' the few.
In this context some factors related to the customer, which should be included in the material
collected for the audit, may be:

• Who are the customers? What are their key characteristics?

• What differentiates them from other members of the population?
• What are their needs and wants? What do they expect the `product' to do?
• What are their special requirements and perceptions? What do they think of the organization and
its products or services?
• What are their attitudes? What are their buying intentions?

3.2.1. The marketing audit

This audit is conducted not only at the beginning of the process, but also at a series of points during
the implementation of the plan. The marketing audit considers both internal and external influences
on marketing planning, as well as a review of the plan itself. There are a number of tools and audits
that can be used, for example SWOT analysis for the internal environment, as well as the external
environment. Other examples include PEST and Five Forces Analysis, which focus solely on the
external environment.
In many ways the marketing audit clarifies opportunities and threats, and allows the marketing
manager to make alterations to the plan if necessary. We consider the marketing audit under three
key headings:

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• The Internal Marketing Environment.
• The External Marketing Environment.
• A Review of Our Current Marketing Plan.

3.1.2. The analysis of marketing environment

To analyse the internal marketing environment we can use a check list as follows:

• What resources do we have at hand? MEN (Labor/Labour). MONEY (Finances).

MACHINERY (Equipment). MINUTES (Time). (Factors of Production).
• What competences do we have at hand? (
• How is our marketing team organised? How efficient/effective is our marketing team?
• How does our marketing team interface with other organisations and internal functions?
• What is the state of our marketing planning process? Is our marketing planning information
current and accurate?
• What is the current state of New Product Development? (Product)• How profitable is our
product portfolio? (Product)
• Are we pricing in the right way? (Price)
• How effective and efficient is distribution? (Place)
• Are we getting our marketing communications right? (Promotion)
• Do we have the right people facing our customers? (People)
• How effective are our customer facing processes? (Process)
• What is the state of our business's physical evidence? (Physical Evidence)

To analyse the external environment we must start by asking - What is the nature of our customers?
Such as:
• Their needs and how we satisfy them.
• Their buyer decision process and consumer behaviour.
• Their perception of our brand, and loyalty to it.
• The nature of segmentation, targeting and positioning in our markets.
• What customers 'value' and how we provide that 'value?
• What is the nature of competition in our target markets?
• Our competitors' level of profitability.Their number/concentration. The relative strengths
and weaknesses of competition.
• The marketing plans and strategies of our competition.
• What is the cultural nature of the environment(s)? Beliefs and religions. The standards and
average levels of education. The evolving lifestyles of our target consumers.
• The nature of consumerism in our target markets.
• What is the demography of our consumers? Such as average age, levels of population,
gender make up, and so on. How does technology play a part?
• The level of adoption of mobile and Internet technologies. The way in which goods are
manufactured. Information systems.
• Marketing communications uses of technology and media. What is the economic condition
of our markets?
• Levels of average disposable income.Taxation policy in the target market. Economic
indicators such as inflation levels, interest rates, exchange rates and unemployment.
• Is the political and legal landscape changing in any way?
• Laws, for example, copyright and patents. Levels of regulation such as quotas or tariffs.
• Labour/labor laws such as minimum wage legislation.

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It is apparent that a marketing audit can be a complex process, but the aim is simple: 'it is only to
identify those existing (external and internal) factors which will have a significant impact on the
future plans of the companies.
It is clear that the basic material to be input to the marketing audit should be comprehensive.
Accordingly, the best approach is to accumulate this material continuously, as and when it becomes
available; since this avoids the otherwise heavy workload involved in collecting it as part of the
regular, typically annual, planning process itself - when time is usually at a premium. Even so, the
first task of this `annual' process should be to check that the material held in the current `facts book'
or `facts files' actually 'is' comprehensive and accurate, and can form a sound basis for the
marketing audit itself.
The structure of the facts book will be designed to match the specific needs of the organization, but
one simple format may be applicable in many cases. This splits the material into three groups:
1. 'Review of the marketing environment'. A study of the organization's markets, customers,
competitors and the overall economic, political, cultural and technical environment; covering
developing trends, as well as the current situation.
2. 'Review of the detailed marketing activity'. A study of the company's marketing mix; in terms of
the 4 Ps - product, price, promotion and place.
3. 'Review of the marketing system'. A study of the marketing organization, marketing research
systems and the current marketing objectives and strategies.
The last of these is too frequently ignored. The marketing system itself needs to be regularly
questioned, because the validity of the whole marketing plan is reliant upon the accuracy of the
input from this system, and `garbage in, garbage out' applies with a vengeance.
The analysis of this material will, no doubt, require significant effort. In the first instance it is a
matter of selection, of sorting the wheat from the chaff. What is important, and will need to be taken
into account in the marketing plan that will eventually emerge from the overall process, will be
different for each product or service in each situation. One of the most important skills to be learned
in marketing is that of being able to concentrate on just what is important.
It is important to say not just what happened but why.

3.2.3. The analysis’ tools and approachs

Market research and marketing research are often confused. The first one is a survey into a specific
market, but this is a very narrow concept. 'Marketing' research not only includes 'market' research,
but also areas such as research into new products, or modes of distribution such as via the Internet.
Here are a couple of definitions:

"Marketing research is the function that links the consumer, customer, and public to the marketer
through information - information used to identify and define marketing opportunities and
problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and
improve understanding of marketing as a process. Marketing research specifies the information
required to address these issues, designs the methods for collecting information, manages and
implements the data collection process, analyzes, and communicates the findings and their
implications." (American Marketing Association - Official Definition of Marketing Research)

Marketing research is gathered using a systematic approach. An example of one follows:

1. Define the problem that becomes the focus of the research. For example, why are sales falling in
the domestic market?
2. Define the methods of data collection: telephone survey, arrange a focus group, questionnaire…

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3. Select a sampling method: for exemple a random sample, stratified sample, or cluster sample
4. define the method to analyse the data collected: What software will we use? What degree of
accuracy is required?
5. Decide upon a budget and a timeframe.
6. Go back and speak to the managers or clients requesting the research. Make sure that you agree
on the problem! If you gain approval, then move on to step seven.
7. Go ahead and collect the data.
8. Conduct the analysis of the data.
9. Check for errors. It is not uncommon to find errors in sampling, data collection method, or
analytic mistakes.
10. Final report editing. This will contain charts, tables, and diagrams that will communicate the
results of the research, and hopefully lead to a solution to your problem. Watch out for errors in
interpretation.

There are two main sources of data - primary and secondary. Primary research is conducted from
scratch. It is original and collected to solve the problem in hand. Secondary research, also known as
desk research, already exists since it has been collected for other purposes.
There are many sources available to the marketer, and the following list is by no means conclusive:
Trade associations, National and local press Industry magazines, National/international
governments, Websites, Informal contacts, Trade directories, Published company accounts,
Business libraries, Professional institutes and organisations, Omnibus surveys, Previously gathered
marketing research, Census data, Public records

SWOT Analysis

Swot Analysis is a common tools for auditing an organization and its internal and external
environment. It is the first stage of marketing and strategic planning and helps marketers to focus on
key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and
weaknesses are internal factors. Opportunities and threats are external factors.
For example:A strength could be: the specialist marketing expertise; a new, innovative product or
service; location of your business; quality processes and procedures; any other aspect of your
business that adds value to your product or service.
A weakness could be: Lack of marketing expertise, Undifferentiated products or services (i.e. in
relation to your competitors), Location of your business., Poor quality goods or services, Damaged
reputation.
An opportunity could be: A developing market such as the Internet, Mergers, joint ventures or
strategic alliances, Moving into new market segments that offer improved profits, A new
international market, A market vacated by an ineffective competitor, a new law that built a new
requirements
A threat could be: A new competitor in your home market, Price wars with competitors, A
competitor has a new, innovative product or service, Competitors have superior access to channels
of distribution, Taxation is introduced on your product or service.

SWOT analysis, however, can be very subjective. Two people rarely come-up with the same final
version of SWOT. This analysis can be used in a variety of scenarios and it has to be flexible.
However this can lead to a number of anomalies. So use SWOT as guide and not a prescription.
There are simple rules to respect for successful SWOT analysis.
• Be realistic about the strengths and weaknesses of the organization when conducting SWOT
analysis.

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• SWOT analysis should distinguish between where the organization is today, and where it could be
in the future.
• SWOT should always be specific. Avoid grey areas.
• Always apply SWOT in relation to your competition i.e. better than or worse than the competition.
• Keep your SWOT short and simple. Avoid complexity and over analysis
• SWOT is subjective.

Once key issues have been identified with your SWOT analysis, they feed into marketing
objectives. SWOT can be used in conjunction with other tools for audit and analysis, such as PEST
analysis and Porter's Five-Forces analysis.

For example, if we observe the Nike company’ features we can obtained the follows factors:
Strengths.
• Nike is a very competitive organization. Phil Knight (Founder and CEO) is often quoted as saying
that 'Business is war without bullets.' Nike has a healthy dislike of is competitors. At the Atlanta
Olympics, Reebok went to the expense of sponsoring the games. Nike did not. However Nike
sponsored the top athletes and gained valuable coverage.
• Nike has no factories. It does not tie up cash in buildings and manufacturing workers. This makes
a very lean organization. Nike is strong at research and development, as is evidenced by its evolving
and innovative product range. They then manufacture wherever they can produce high quality
product at the lowest possible price. If prices rise, and products can be made more cheaply
elsewhere (to the same or better specification), Nike will move production. Nike is a global brand.
It is the number one sports brand in the World. Its famous 'Swoosh' is instantly recognisable, and
Phil Knight even has it tattooed on his ankle.
Weaknesses.
• The organization does have a diversified range of sports products. However, the income of the
business is still heavily dependent upon its share of the footwear market. This may leave it
vulnerable if for any reason its market share erodes.
• The retail sector is very price sensitive. Nike does have its own retailer in Nike Town. However,
most of its income is derived from selling into retailers. Retailers tend to offer a very similar
experience to the consumer. Can you tell one sports retailer from another? So margins tend to get
squeezed as retailers try to pass some of the low price competition pressure into Nike.
Opportunities.
• Product development offers Nike many opportunities. The brand is fiercely defended by its
owners whom truly believe that Nike is not a fashion brand. However, like it or not, consumers that
wear Nike product do not always buy it to participate in sport. Some would argue that in youth
culture especially, Nike is a fashion brand. This creates its own opportunities, since product could
become unfashionable before it wears out i.e. consumers need to replace shoes.
• There is also the opportunity to develop products such as sport wear, sunglasses and jewellery.
Such high value items do tend to have associated with them, high profits.
• The business could also be developed internationally, building upon its strong global brand
recognition. There are many markets that have the disposable income to spend on high value sports
goods. For example, emerging markets such as China and India have a new richer generation of
consumers. There are also global marketing events that can be utilised to support the brand such as
the World Cup (soccer) and The Olympics.
Threats.
• Nike is exposed to the international nature of trade. It buys and sells in different currencies and so
costs and margins are not stable over long periods of time. Such an exposure could mean that Nike
may be manufacturing and/or selling at a loss. This is an issue that faces all global brands.
• The market for sports shoes and garments is very competitive. The model developed by Phil
Knight in his Stamford Business School days (high value branded product manufactured at a low

12
cost) is now commonly used and to an extent is no longer a basis for sustainable competitive
advantage. Competitors are developing alternative brands to take away Nike's market share.
• As discussed above in weaknesses, the retail sector is becoming price competitive. This ultimately
means that consumers are shopping around for a better deal. So if one store charges a price for a
pair of sports shoes, the consumer could go to the store along the street to compare prices for the
exactly the same item, and buy the cheaper of the two. Such consumer price sensitivity is a potential
external threat to Nike.

Problems with basic SWOT analysis can be addressed using a more critical POWER SWOT.
POWER is an acronym for Personal experience, Order, Weighting, Emphasize detail, and Rank
and prioritize. This is how it works.
P = Personal experience.
How do you the marketing manger fit in relation with the SWOT analysis? You bring your
experiences, skills, knowledge, attitudes and beliefs to the audit. Your perception or simple gut
feeling will impact the SWOT.
O = Order - strengths or weaknesses, opportunities or threats.
Often marketing managers will inadvertently reverse opportunities and strengths, and threats and
weaknesses. This is because the line between internal strengths and weaknesses, and external
opportunities and threats is sometimes difficult to spot. For example, in relation to global warming
and climate change, one could mistake environmentalism as a threat rather than a potential
opportunity.
W = Weighting.
Too often elements of a SWOT analysis are not weighted. Naturally some points will be more
controversial than others. So weight the factors. One way would be to use percentages e.g. Threat A
= 10%, Threat B = 70%, and Threat C = 20% (they total 100%).
E = Emphasize detail.
Detail, reasoning and justification are often omitted from the SWOT analysis. What one tends to
find is that the analysis contains lists of single words. For example, under opportunities one might
find the term 'Technology.' This single word does not tell a reader very much. What is really meant
is: 'Technology enables marketers to communicate via mobile devices close to the point of
purchase. This provides the opportunity of a distinct competitive advantage for our company.'
This will greatly assist you when deciding upon how best to score and weight each element.
R = Rank and prioritize.
Once detail has been added, and factors have been reviewed for weighting, you can then progress to
give the SWOT analysis some strategic meaning i.e. you can begin to select those factors that will
most greatly influence your marketing strategy albeit a mix of strengths, weaknesses, opportunities
and threats. Essentially you rank them highest to lowest, and then prioritize those with the highest
rank e.g. Where Opportunity C = 60%, Opportunity A = 25%, and Opportunity B = 10% - your
marketing plan would address Opportunity C first, and Opportunity B last. It is important to address
opportunities primarily since your business should be market oriented. Then match strengths to
opportunities and look for a fit. Address any gaps between current strengths and future
opportunities. Finally attempt to rephrase threats as opportunities (as with global warming and
climate change above), and address weaknesses so that they become strengths. Gap analysis would
be useful at this point i.e. where we are now, and where do we want to be? Strategies would bridge
the gap between them.

PEST analysis

It is very important that an organization considers its environment before beginning the marketing
process. In fact, environmental analysis should be continuous and feed all aspects of planning. The
organization's marketing environment is made up of:

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1. The internal environment e.g. staff (or internal customers), office technology, wages and finance,
etc.
2. The micro-environment e.g. our external customers, agents and distributors, suppliers, our
competitors, etc.
3. The macro-environment e.g. Political (and legal) forces, Economic forces, Sociocultural forces,
and Technological forces. These are known as PEST factors.

Political Factors.
The political arena has a huge influence upon the regulation of businesses, and the spending power
of consumers and other businesses. You must consider issues such as: How stable is the political
environment? Will government policy influence laws that regulate or tax your business? What is the
government's position on marketing ethics? What is the government's policy on the economy? Does
the government have a view on culture and religion? Is the government involved in trading
agreements such as EU, NAFTA, ASEAN, or others?
Economic Factors.
Marketers need to consider the state of a trading economy in the short and long-terms. This is
especially true when planning for international marketing. You need to look at: Interest rates; The
level of inflation Employment level per capita; Long-term prospects for the economy Gross
Domestic Product (GDP) per capita, and so on.
Sociocultural Factors.
The social and cultural influences on business vary from country to country. It is very important
that such factors are considered. Factors include: what is the dominant religion? What are attitudes
to foreign products and services? Does language impact upon the diffusion of products onto
markets? How much time do consumers have for leisure? What are the roles of men and women
within society? How long are the population living? Are the older generations wealthy? Do the
population have a strong/weak opinion on green issues?
Technological Factors.
Technology is vital for competitive advantage, and is a major driver of globalization. Consider the
following points: Does technology allow for products and services to be made more cheaply and to
a better standard of quality? Do the technologies offer consumers and businesses more innovative
products and services such as Internet banking, new generation mobile telephones, etc? How is
distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?

PORTER’S Analysis

Five Forces Analysis helps the marketer to contrast a competitive environment. It has similarities
with other tools for environmental audit, but tends to focus on the single, stand alone, business or
SBU (Strategic Business Unit) rather than a single product or range of products. For example, Dell
would analyse the market for Business Computers i.e. one of its Strategic Business Units.
Five forces analysis looks at five key areas namely the threat of entry, the power of buyers, the
power of suppliers, the threat of substitutes, and competitive rivalry.

The threat of entry.

These are the factors that limit the entry into the competitive environment. They can be described as
follow:
• Economies of scale: the reduction of the costs associated with hight level of production.
• The high or low cost of entry: how much will it cost for the latest technology?
• Ease of access to distribution channels:do our competitors have the distribution channels sewn up?
• Cost advantages not related to the size of the company: personal contacts or. knowledge that larger
companies do not own or learning curve effects.

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• Will competitors retaliate?
• Government action: will new laws be introduced that will weaken our competitive position?
• How important is differentiation? A strong brand cannot be copied. This desensitises the influence
of the environment.
The power of buyers.
This is high where there are a few, large players in a market (for ex. the large grocery chains) or If
there are a large number of undifferentiated, small suppliers (small farming businesses supplying
the large grocery chains) or when The cost of switching between suppliers is low (from one fleet
supplier of trucks to another).
The power of suppliers.
The power of suppliers tends to be a reversal of the power of buyers. It’s high:
• where the switching costs are high (Switching from one software supplier to another).
• where the brand is powerful (BMW, Bulgari, Microsoft).
• when there is a possibility of the supplier integrating forward (Brewers buying bars).
•when customers are fragmented (not in clusters) so that they have little bargaining power
(Gas/Petrol stations in remote places.)
The threat of substitutes
Where there is product-for-product substitution (email for fax ) or where there is substitution of
need (better toothpaste reduces the need for dentists).
Where there is generic substitution (competing for the currency in your pocket) (Video suppliers
compete with travel companies.)
We could always do without (cigarettes, alcool).
Competitive Rivalry
This is most likely to be high where entry is likely; there is the threat of substitute products, and
suppliers and buyers in the market attempt to control. This is why it is always seen in the center of
the diagram.

The results of this analysis support the study of the sector and the competitiveness.

Core Competence’s analysis

A core competence is the result of a specific unique set of skills or production techniques that
deliver value to the customer. Such competences give an organization access to a wide variety of
markets. Hamel and Prahalad (1990) refer to a number of organizations and their products to
support their concept including NEC, Honda and Canon.
Core competences are interesting from a traditional marketing point of view since it could be
argued that they take a product or production orientation rather than a market orientation. If you
focus on production techniques and skills then aren't you looking at your business from an internal
point of view? The answer is yes. However, the core competences give a business a competitive
advantage in a number of markets, markets where customers perceive a benefit from the product. So
if needs are being met better than the competition, there is an argument that core competences are
indeed market-oriented. There are at least three tests of a core competence.

Three tests of core competence.

• Provides potential access to a wide variety of markets.
• Should make a significant contribution to the perceived customer benefits of the end product.
• Should be difficult for competitors to imitate.

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For example, Microsoft has expertise in many IT-based innovations and technologies. Customers
perceive many benefits in relation to Microsoft's products. For a variety of reasons including unique
skills, it is difficult for competitors to imitate Microsoft's core competences.
When trying to identify a core competence, it is often easy to mistake them for scarce or unique
resources i.e. resources rather than skills or production technologies. Also often skills and
production technologies do not amount to a core competence or resource because they do not
comply with one or more of the three tests. They are the thresholds that the organization must
achieve to remain competitive. Threshold competences and scarce resources may not provide
access to a variety of markets, may not be so significant to customers and may be less difficult to
imitate. In summary there are core competences and scarce resources, and threshold
competences and threshold resources.
In order to be competitive an organization needs material resources such as premises, a factory or
offices - depending on the nature of business of course. Material resources tend to be the most
straightforward to achieve. Then an organization needs to achieve the right balance between Human
Resources, training and recruitment. This state is more difficult to achieve. Intangible resources,
including core competences are the most difficult and challenging to achieve.

3.2.3. The Marketing objectives

It is only at this stage that the active part of the marketing planning process begins.
The marketing objectives state just where the company intends to be; at some specific time in the
future. The Goals (or objectives) state 'what' is to be achieved and 'when' results are to be
accomplished, but they do not state 'how' the results are to be achieved".
They typically relate to what products (or services) will be where in what markets (and must be
realistically based on customer behaviour in those markets). They are essentially about the match
between those 'products' and 'markets'. To be most effective, objectives should be capable of
measurement and therefore 'quantifiable'. This measurement may be in terms of sales volume,
money value, market share, percentage penetration of distribution outlets and so on.
An example of such a measurable marketing objective might be `to enter the market with product Y
and capture 10% of the market by value within one year. As it is quantified it can, within limits, be
unequivocally monitored; and corrective action taken as necessary.
The marketing objectives must usually be based, above all, on the organization's financial
objectives; converting these financial measurements into the related marketing measurements.
In marketing, objectives are often built using the SMART acronym.
It is conventionally assumed that marketing objectives will be designed to maximize volume or
profit (or to optimize the utilization of resources in the non-profit sector), by creating demand or
rejuvenating existing demand, say; although the various sub-objectives may indicate many different
routes to achieving such optimization.
Some examples of SMART objectives follow:

1. Profitability Objectives: To achieve a 20% return on capital employed by August 2008.

2. Market Share Objectives: To gain 25% of the market for sports shoes by September 2007
3. Promotional Objectives: To increase awareness of the dangers of AIDS in France from 12% to
25% by June 2004. To increase trail of X washing powder from 2% to 5% of our target group by
January 2005.
4. Objectives for Survival: To survive the current double-dip recession.
5. Objectives for Growth: To increase the size of our German Brazilian operation from $200,000
in 2002 to $400,000 in 2003.
6. Objectives for Branding: To make Y brand of bottled beer the preferred brand of 21-28 year old
females in North Europe by February 2007.

16
There are many examples of objectives. Be careful not to confuse objectives with goals and aims.
Goals and aims tend to be more vague and focus on the longer-term. They will not be SMART.
However, many objectives start off as aims or goals and therefore they are of equal importance.

The process of marketing planning encompasses all of the marketing skills. However, a number of
these may be particularly relevant at this stage:
• 'Positioning'. The starting point of the marketing plan must be the consumer. It is a matter of
definition that his or her needs should drive the whole marketing process. The techniques of
positioning and segmentation therefore usually offer the best starting point for what has to
be achieved by the whole planning process.
• 'Portfolio planning'. In addition, the coordinated planning of the individual products and
services can contribute towards the balanced portfolio.
• To achieve the maximum impact, the marketing plan must be clear, concise and simple.
• '4 Ps': Product, Placement, Price and Promotion. The 4 Ps can sometimes divert attention
from the customer, but the framework they offer can be very useful in building the action
plans.

3.2.4. The marketing mix

In the next stage we have to describe the target market, the particular customers to which the firm
offer its products or service. We can use this check list to guide the targeting:
• How will we target the segment? Which segment? How should we position within the
segment?
• Why this segment and not a different one? (This will focus the mind).
The segment is defined in terms of demographics, geographics or lifestyle. After target has been
selected, we must show how we intend to 'position' the product or service within that segment. We
can use other tools to assist in strategic marketing decisions such as Ansoff's Matrix, Porter's
Competitive Strategies, etc. Then we can define the marketing policies.
"Policies are rules or guidelines that express the 'limits' within which action should occur.
Simplifying somewhat, marketing strategies can be seen as the means, or `game plan', by which
marketing objectives will be achieved and, in the framework that we have chosen to use, are
generally concerned with the 4 Ps. These 4 elements are:

PRODUCT
• developing new products, repositioning or relaunching existing ones and scrapping old ones
• adding new features and benefits
• balancing product portfolios
• changing the design or packaging

PRICE
• setting the price to skim or to penetrate
• pricing for different market segments
• deciding how to meet competitive pricing

PROMOTION
• specifying the advertising platform and media
• deciding the public relations brief
• organizing the salesforce to cover new products and services or markets

PLACEMENT

17
• choosing the channels
• deciding levels of customer service

The 4 Ps are a useful framework for deciding how the company's resources will be manipulated
(strategically) to achieve the objectives. It should be noted, however, that they are not the only
framework, and may divert attention from the real issues. The focus of the strategies must be the
objectives to be achieved – not the process of planning itself. Only if it fits the needs of these
objectives should you choose, as we have done, to use the framework of the 4 Ps.
The strategy statement can take the form of a purely verbal description of the strategic options
which have been chosen. Alternatively, and perhaps more positively, it might include a structured
list of the major options chosen.
One aspect of strategy which is often overlooked is that of 'timing'. Exactly when it is the best time
for each element of the strategy to be implemented is often critical. Taking the right action at the
wrong time can sometimes be almost as bad as taking the wrong action at the right time. Timing is,
therefore, an essential part of any plan; and should normally appear as a schedule of planned
activities.
Having completed this crucial stage of the planning process, you will need to re-check the
feasibility of your objectives and strategies in terms of the market share, sales, costs, profits and so
on which these demand in practice.

3.2.4. Detailed plans and programmes

At this stage, you will need to develop your overall marketing strategies into detailed plans and
programmes. Although these detailed plans may cover each of the 4 Ps, the focus will vary,
depending upon your organization's specific strategies. A product-oriented company will focus its
plans for the 4 Ps around each of its products. A market or geographically oriented company will
concentrate on each market or geographical area. Each will base its plans upon the detailed needs of
its customers, and on the strategies chosen to satisfy these needs.
Again, the most important element is, indeed, that of the detailed plans; which spell out exactly
what programmes and individual activities will take place over the period of the plan (usually over
the next year). Without these specified - and preferably quantified - activities the plan cannot be
monitored, even in terms of success in meeting its objectives.
It is these programmes and activities which will then constitute the `marketing' of the organization
over the period. As a result, these detailed marketing programmes are the most important, practical
outcome of the whole planning process. These plans should therefore be:
• Clear - They should be an unambiguous statement of 'exactly' what is to be done.
• Quantified - The predicted outcome of each activity should be, as far as possible, quantified; so
that its performance can be monitored.
• Focused - The temptation to proliferate activities beyond the numbers which can be realistically
controlled should be avoided. The 80:20 Rule applies in this context too.
• Realistic - They should be achievable.
• Agreed - Those who are to implement them should be committed to them, and agree that they are
achievable.
The resulting plans should become a working document which will guide the campaigns taking
place throughout the organization over the period of the plan. If the marketing plan is to work,
every exception to it (throughout the year) must be questioned; and the lessons learned, to be
incorporated in the next year's plan. so then they said was updude\

3.2.5. The Content of the marketing plan for Small business

A marketing plan for a small business typically includes:

18
1. Demographics of customers
2. Description of external environment and competitors, including the level of demand for the
product or service and the strengths and weaknesses of them (SWOT)
3. Marketing Strategy: segmented marketing actions and market share objectives by product, by
customer segment, by geographical market, by distribution channel.
4.Description of the product or service, including special features
5. Marketing budget, including the advertising and promotional plan
6. Description of the business location, including advantages and disadvantages for marketing
7. Pricing and promotion strategy: goals, mix, tools
8. Distribution: geographical coverage; distribution channels; physical distribution and logistics,
electronic distribution.
9. Economic and Financial Summary: sales goals; income statement.

Plans only have validity if they are actually used to control the progress of a company: their success
lies in their implementation, not in the writing'.
The classic quantification of a marketing plan appears in the form of budgets. Because these are so
rigorously quantified, they are particularly important. They should, thus, represent an unequivocal
projection of actions and expected results. What is more, they should be capable of being monitored
accurately; and, indeed, performance against budget is the main (regular) management review
process.
The purpose of a marketing budget is, thus, to pull together all the revenues and costs involved in
marketing into one comprehensive document. It is a managerial tool that balances what is needed to
be spent against what can be afforded, and helps make choices about priorities. It is then used in
monitoring performance in practice.
The marketing budget is usually the most powerful tool by which you think through the relationship
between desired results and available means. Its starting point should be the marketing strategies
and plans, which have already been formulated in the marketing plan itself; although, in practice,
the two will run in parallel and will interact. At the very least, the rigorous, highly quantified,
budgets may cause a rethink of some of the more optimistic elements of the plans.
Many budgets are based on history. They are the equivalent of `time-series' forecasting. It is
assumed that next year's budgets should follow some trend that is discernible over recent history.
Other alternatives are based on a simple `percentage of sales' or on `what the competitors are doing'.
However, there are many other alternatives:
• Affordable - This may be the most common approach to budgeting. Someone, typically the
managing director on behalf of the board, decides what is a `reasonable' promotional budget; what
can be afforded. This figure is most often based on historical spending. This approach assumes that
promotion is a cost; and sometimes is seen as an avoidable cost.
• Percentage of revenue - This is a variation of `affordable', but at least it forges a link with sales
volume, in that the budget will be set at a certain percentage of revenue, and thus follows trends in
sales. However, it does imply that promotion is a result of sales, rather than the other way round.

Both of these methods are seen by many managements to be `realistic', in that they reflect the
reality of the business strategies as those managements see it. On the other hand, neither makes any
allowance for change. They do not allow for the development to meet emerging market
opportunities and, at the other end of the scale, they continue to pour money into a dying product or
service.
• Competitive parity - In this case, the organization relates its budgets to what the competitors are
doing: for example, it matches their budgets, or beats them, or spends a proportion of what the
brand leader is spending. On the other hand, it assumes that the competitors know best; in which
case, the service or product can expect to be nothing more than a follower.

19
• Zero-based budgeting - In essence, this approach takes the objectives, as set out in the marketing
plan, together with the resulting planned activities and then costs them out.

4. THE STRATEGIES: ANSOFF’S MATRIX

This well known marketing tool was first published in the Harvard Business Review (1957) in an
article called 'Strategies for Diversification'. It is used by marketers who have objectives for growth.
Ansoff's matrix offers strategic choices to achieve the objectives and it is one of the most well know
frameworks for deciding upon strategies for growth.
There are four main categories for selection.

Market Penetration
Here we market our existing products to our existing customers. This means increasing our revenue
by, for example, promoting the product, repositioning the brand, and so on. However, the product is
not altered and we do not seek any new customers.
Market Development
Here we market our existing product range in a new market. This means that the product remains
the same, but it is marketed to a new audience. Exporting the product, or marketing it in a new
region, are examples of market development.
Product Development
This is a new product to be marketed to our existing customers. Here we develop and innovate new
product offerings to replace existing ones. Such products are then marketed to our existing
customers. This often happens with the auto markets where existing models are updated or replaced
and then marketed to existing customers.
Diversification
This is where we market completely new products to new customers. There are two types of
diversification, namely related and unrelated diversification. Related diversification means that we
remain in a market or industry with which we are familiar. For example, a soup manufacturer
diversifies into cake manufacture (i.e. the food industry). Unrelated diversification is where we have
no previous industry nor market experience. For example a soup manufacturer invests in the rail
business.

4.1. Competitive strategies

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Porter describe the generic strategies used initially in the early 1980s, and seem to be even more
popular today. They outline the three main strategic options open to organization that wish to
achieve a sustainable competitive advantage. Each of the three options are considered within the
context of two aspects of the competitive environment:
1. Sources of competitive advantage - are the products differentiated in any way, or are they the
lowest cost producer in an industry?
2. Competitive scope of the market – does the company target a wide market, or does it focus on a
very narrow, niche market?

The generic strategies are:Cost leadership,Differentiation and Focus.

1. Cost Leadership.
The low cost leader in any market gains competitive advantage from being able to many to produce
at the lowest cost. Factories are built and maintained, labour is recruited and trained to deliver the
lowest possible costs of production. 'cost advantage' is the focus. Costs are shaved off every element
of the value chain.
Products tend to be 'no frills.' However, low cost does not always lead to low price. Producers could
price at competitive parity, exploiting the benefits of a bigger margin than competitors. Some
organizations, such as Toyota, are very good not only at producing high quality autos at a low price,
but have the brand and marketing skills to use a premium pricing policy.
2. Differentiation
Differentiated goods and services satisfy the needs of customers through a sustainable competitive
advantage. This allows companies to desensitize prices and focus on value that generates a
comparatively higher price and a better margin. The benefits of differentiation require producers to
segment markets in order to target goods and services at specific segments, generating a higher than
average price. For example, British Airways differentiates its service.
The differentiating organization will incur additional costs in creating their competitive advantage.
These costs must be offset by the increase in revenue generated by sales. Costs must be recovered.
There is also the chance that any differentiation could be copied by competitors. Therefore there is
always an incentive to innovated and continuously improve.
3. Focus or Niche strategy.
The focus strategy is also known as a 'niche' strategy. Where an organization can afford neither a
wide scope cost leadership nor a wide scope differentiation strategy, a niche strategy could be more
suitable. Here an organization focuses effort and resources on a narrow, defined segment of a
market. Competitive advantage is generated specifically for the niche. A niche strategy is often used
by smaller firms. A company could use either a cost focus or a differentiation focus.
With a cost focus a firm aims at being the lowest cost producer in that niche or segment. With a
differentiation focus a firm creates competitive advantage through differentiation within the niche
or segment. There are potentially problems with the niche approach. Small, specialist niches could
disappear in the long term. Cost focus is unachievable with an industry depending upon economies
of scale e.g. telecommunications.
The danger of being 'stuck in the middle.'
Make sure that you select one generic strategy. It is argued that if you select one or more
approaches, and then fail to achieve them, that your organization gets stuck in the middle without a
competitive advantage.

5. THE SEGMENTATION AND THE POSITIONING

To get a product or service to the right person or company, a marketer would firstly segment the
market, then target a single segment or series of segments, and finally position within the
segment(s). .

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Segmentation is essentially the identification of subsets of buyers within a market who share similar
needs and who demonstrate similar buyer behavior. The world is made up from billions of buyers
with their own sets of needs and behavior. Segmentation aims to match groups of purchasers with
the same set of needs and buyer behavior. Segmentation is a form of critical evaluation rather than a
prescribed process or system, and hence no two markets are defined and segmented in the same
way.
However there are a number of underpinning criteria that assist us with segmentation:
• Is the segment viable? Can we make a profit from it?
• Is the segment accessible? How easy is it for us to get into the segment?
• Is the segment measurable? Can we obtain realistic data to consider its potential?
The are many ways that a segment can be considered. For example, the auto market could be
segmented by: driver age, engine size, model type, cost, and so on. However the more general bases
include:
• by geography - such as where in the world was the product bought.
• by psychographics - such as lifestyle or beliefs.
• by socio-cultural factors - such as class.
• by demography - such as age, sex, and so on.
A company will evaluate each segment based upon potential business success.
Opportunities will depend upon factors such as: the potential growth of the segment the state of
competitive rivalry within the segment how much profit the segment will deliver how big the
segment is how the segment fits with the current direction of the company and its vision.

Targeting is the second stage of the Segment Target Position (STP) process. After the market has
been separated into its segments, the marketer will select a segment or series of segments and
'target' it/them. The first is the single segment with a single product. In other word, the marketer
targets a single product offering at a single segment in a market with many segments.
For example, British Airway's Concorde is a high value product aimed specifically at business
people and tourists willing to pay more for speed.
Secondly the marketer could ignore the differences in the segments, and choose to aim a single
product at all segments i.e. the whole market. This is typical in 'mass marketing' or where
differentiation is less important than cost. An example of this is the approach taken by budget
airlines such as Go.
Finally there is a multi-segment approach. Here a marketer will target a variety of different
segments with a series of differentiated products. This is typical in the motor industry. Here there
are a variety of products such as diesel, four-wheel-drive, sports saloons, and so on.

Positioning is one of the simplest and most useful tools to marketers. After segmenting a market
and then targeting a consumer, you would proceed to position a product within that market.
Positioning is all about 'perception'. As perception differs from person to person, so do the results of
the positioning map e.g what you perceive as quality, value for money, etc, is different to my
perception. However, there will be similarities.
Products or services are 'mapped' together on a 'positioning map'. This allows them to be compared
and contrasted in relation to each other. This is the main strength of this tool. Marketers decide
upon a competitive position which enables them to distinguish their own products from the
offerings of their competition (hence the term positioning strategy).
The term 'positioning' refers to the consumer's perception of a product or service in relation to its
competitors. You need to ask yourself, what is the position of the product in the mind of the
consumer?
Trout and Ries suggest a six-step question framework for successful positioning:
1. What position do you currently own?
2. What position do you want to own?

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3. Whom you have to defeat to own the position you want.
4. Do you have the resources to do it?
5. Can you persist until you get there?
6. Are your tactics supporting the positioning objective you set?

For example: Product: Ferrari, BMW, Proton, Mercury Cougar, Hyundai, Daewoo.

The seven products are plotted upon the positioning map. It can be concluded that products tend to
bunch in the high price/low economy(fast) sector and also in the low price/high economy sector.
There is an opportunity in the low price/ low economy (fast) sector. Maybe Hyundai or Daewoo
could consider introducing a low cost sport saloon. However, remember that it is all down to the
perception of the individual.

6. THE MARKETING MIX: PRODUCT

For many a product is simply the tangible, phsysical entity that they may be buying or selling. You
buy a new car and that's the product - simple! Or maybe not. When you buy a car, is the product
more complex than you first thought?
In order to actively explore the nature of a product further, lets consider it as three different
products – the CORE product, the ACTUAL product, and finally the AUGMENTED product.
These are known as the 'Three Levels of a Product.' So what is the difference between the three
products, or more precisely 'levels?'

The CORE product is NOT the tangible, physical product. You can't touch it. That's because the
core product is the BENEFIT of the product that makes it valuable to you.
So with the car example, the benefit is convenience i.e. the ease at which you can go where you
like, when you want to. Another core benefit is speed since you can travel around relatively quickly.
The ACTUAL product is the tangible, physical product. You can get some use out of it. Again with
the car example, it is the vehicle that you test drive, buy and then collect.
The AUGMENTED product is the non-physical part of the product. It usually consists of lots of
added value, for which you may or may not pay a premium. So when you buy a car, part of the
augmented product would be the warranty, the customer service support offered by the car's
manufacture, and any after-sales service.

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Another marketing tool for evaluating product is the Product Life Cycle (PLC).

6.1 The product life cycle

Long-term patterns of international trade are influenced by product innovation and subsequent
diffusion. A country that produces technically superior goods will sell these first to its domestic
market, then to other technically advanced countries. In time, developing countries will import and
later manufacture these goods, by which stage the original innovator will have produced new
products.
On a smaller scale, individual products pass through distinct phases: after a period of research and
development, and trial manufacture, there is a period of introduction characterized by slow growth
and high development costs. This is followed by a period of growth as sales and profits rise. A
phase of maturity and saturation is then experienced as sales level off and the first signs of decline
occur. The final phase is decline, characterized by lower sales and reduced profits, and perhaps final
disappearance from the market.
The duration of each stage of the cycle varies with the product and the type of management
supporting it.
The Product Life Cycle (PLC) is based upon the biological life cycle. However, most products fail
in the introduction phase. Others have very cyclical maturity phases where declines see the product
promoted to regain customers.

The Strategies for the differing stages of the Product Life Cycle are the following:

Introduction.
The need for immediate profit is not a pressure. The product is promoted to create awareness. If the
product has no or few competitors, a skimming price strategy is employed. Limited numbers of

sales
product are available in few channels of distribution.

Growth.
Competitors are attracted into the market with very similar offerings. Products become more
profitable and companies form alliances, joint ventures and take each other over. Advertising spend
is high and focuses upon building brand. Market share tends to stabilise.

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Maturity.
Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a
decreasing rate and then stabilise. Producers attempt to differentiate products and brands are key to
this. Price wars and intense competition occur. At this point the market reaches saturation.
Producers begin to leave the market due to poor margins. Promotion becomes more widespread and
use a greater variety of media.
Decline.
At this point there is a downturn in the market. For example more innovative products are
introduced or consumer tastes have changed. There is intense price-cutting and many more products
are withdrawn from the market. Profits can be improved by reducing marketing spend and cost
cutting. But sometimes the marketer can keep alive the product into the market by whitch a
repositionig whitin the customer’s mind, showing new utility of the same product.

In reality very few products follow such a prescriptive cycle. The length of each stage varies
enormously. The decisions of marketers can change the stage, for example from maturity to decline
by price-cutting. Not all products go through each stage. Some go from introduction to decline. It is
not easy to tell which stage the product is in.

6.2. Placement

Another element of Marketing Mix is Placement, also known as channel, distribution, or

intermediary. It is the mechanism through which goods and/or services are moved from the
manufacturer/ service provider to the user or consumer.

A channel of distribution comprises a set of institutions which perform all of the activities utilised
to move a product and its title from production to consumption. (Bucklin - Theory of Distribution
Channel Structure - 1966)

There are six basic channel decisions:

• Do we use direct or indirect channels? (e.g. 'direct' to a consumer, 'indirect' via a wholesaler).
• Single or multiple channels; Cumulative length of the multiple channels.
• Types of intermediary (see later).
• Number of intermediaries at each level (e.g. how many retailers in Southern Spain).
• Which companies as intermediaries to avoid 'intrachannel conflict' (i.e. infighting between
local distributors).
Selection Consideration - how do we decide upon a distributor?
• Market segment - the distributor must be familiar with your target consumer and segment.
• Changes during the product life cycle - different channels can be exploited at different points in
the PLC e.g. Foldaway scooters are now available everywhere. Once they were sold via a few
specific stores.
• Producer - distributor fit - Is there a match between their polices, strategies, image, and yours?
Look for 'synergy'.
• Qualification assessment - establish the experience and track record of your intermediary.
• How much training and support will your distributor require?

Types of Channel Intermediaries.

There are many types of intermediaries such as wholesalers, agents, retailers, the Internet, overseas
distributors, direct marketing (from manufacturer to user without an intermediary), and many
others.
1. Channel Intermediaries - Wholesalers

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• They break down 'bulk' into smaller packages for resale by a retailer.
• They buy from producers and resell to retailers. They take ownership or 'title' to goods whereas
agents do not.
• They provide storage facilities. For example, cheese manufacturers seldom wait for their product
to mature. They sell on to a wholesaler that will store it and eventually resell to a retailer.
• Wholesalers offer reduce the physical contact cost between the producer and consumer e.g.
customer service costs, or sales force costs.
• A wholesaler will often take on the some of the marketing responsibilities. Many produce their
own brochures and use their own telesales operations.
2. Channel Intermediaries - Agents
• Agents are mainly used in international markets.
• An agent will typically secure an order for a producer and will take a commission. They do not
tend to take title to the goods. This means that capital is not tied up in goods. However, a 'stockist
agent' will hold consignment stock (i.e. will store the stock, but the title will remain with the
producer. This approach is used where goods need to get into a market soon after the order is placed
e.g. foodstuffs).
• Agents can be very expensive to train. They are difficult to keep control of due to the physical
distances involved. They are difficult to motivate.
3. Channel Intermediaries - Retailers
• Retailers will have a much stronger personal relationship with the consumer.
• The retailer will hold several other brands and products. A consumer will expect to be exposed to
many products.
• Retailers will often offer credit to the customer e.g. electrical wholesalers, or travel agents. •
Products and services are promoted and merchandised by the retailer.
• The retailer will give the final selling price to the product.
• Retailers often have a strong 'brand' themselves
4. Channel Intermediaries - Internet
• The Internet has a geographically disperse market.
• The main benefit of the Internet is that niche products reach a wider audience e.g. Scottish Salmon
direct from an Inverness fishery.
• There are low barriers low barriers to entry as set up costs are low.
• Use e-commerce technology (for payment, shopping software, etc)
• There is a paradigm shift in commerce and consumption which benefits distribution via the
Internet

6.3. Promotion and communication

Another one of the 4P's is 'promotion'. This includes all of the tools available to the marketer for
marketing communication'. Marketing communications has its own 'promotions mix.' You can
integrate' different aspects of the promotions mix to deliver a unique campaign.
Different messages confuse your customers and damage brands. So if a TV advert carries a
particular logo, images and message, then all newspaper adverts and point of sale materials should
carry the same logo, images or message, or one that fits the same theme. Coca-Cola uses its familiar
red and white logos and retains themes of togetherness and enjoyment throughout its marketing
communications.
The elements of the promotions mix are: Personal Selling, Sales Promotion, Public Relations,
Direct Mail, Trade Fairs and Exhibitions, Advertising, Sponsorship, Merchandising, Brand,
E-marketing.
The elements of the promotions mix are integrated to form a coherent campaign. As with all forms
of communication. The message from the marketer follows the communications process. A direct

26
mail campaign would push the consumer to the point of purchase. Noise represent the thousand of
marketing communications that a consumer is exposed to everyday, all competing for attention.

6.3.1. The Promotions Mix.

All the individual components of the promotions mix are integrated to form a specific
communications campaign.

1. Branding is a strategy that is used by marketers to differentiate products and companies,

and to build economic value for both the consumer and the brand owner. Brand occupies space in
the perception of the consumer, and is what results from the totality of what the consumer takes into
consideration before making a purchase decision (Pickton and Broderick 2001).
So branding is a strategy, and brand is what has meaning to the consumer. There are some other
terms used in branding. Brand Equity is the addition of the brand's attributes including reputation,
symbols, associations and names. Then the financial expression of the elements of brand equity is
called Brand Value. There are a number of interpretations of the term brand (De Chernatony
2003). They are described as follows:
• A brand is simply a logo e.g. McDonald's Golden Arches.
• A brand is a legal instrument, existing in a similar way to a patent or copyright.
• A brand is a company e.g. Coca-Cola.
• A brand is positioning. It is situated in relation to other brands in the mind of the consumer as
better, worse, quicker, slower, etc.
• A brand is a personality, beyond function e.g. Apple's iPod versus just any MP3 player.
• A brand is a cluster of values e.g. Google is reliable, ethical, invaluable, innovative and so on.
• A brand is added value, where the consumer sees value in a brand over and above its competition
e.g. Audi over Volkswagen, and Volkswagen over Skoda - despite similarities.
• A brand is an identity that includes all sorts of components; depending on the brand
• A brand is an image where the consumer perceives a brand as representing a particular reality e.g.
Stella Artois Reassuring Expensive.
• A brand is a relationship where the consumer reflects upon him or herself through the experience
of consuming a product or service.
A marketer can employ for branding decision-making the Four Banding Alternatives (Tauber
1981). This is a strategic marketing communications technique. It is a fun and creative approach
that can add value to any class that likes to discuss brands and how they could be innovatively
developed. It is used when an organization considers adding a product to its portfolio and its
associated brand name.
The two variables for this matrix are Product Category (Existing or New) and Band Category
(Existing or New).
a) New Product - a new product is developed with a series of new brand ideas and meanings to the
consumer.
b) Flanker Brand - a new brand is introduced into a category where the organization already has
established products.
c) Line Extension - a current brand name is introduced into a category where the organization
already has established products.
d) Franchise Extension - a familiar brand is taken to a product category where it is unknown.

An example for the Japanese company, Sony Inc is as follows:

• New Product - Sony enters the market for music downloads under a new sub-branding idea and
concept.
• Flanker Brand - Sony introduces the Sony Vaio laptops (as it indeed has).
• Line Extension - Sony enter the market for digital HD TV's (as it has).

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• Franchise Extension - Sony enters the market for innovative environmentally friendly small cars
that run on solar power.

2. Personal Selling.
Personal selling occurs where an individual salesperson sells a product, service or solution to a
client. Salespeople match the benefits of their offering to the specific needs of a client. Today,
personal selling involves the development of longstanding client relationships. In comparison to
other marketing communications tools such as advertising, personal selling tends to:

• Use fewer resources, pricing is often negotiated.

• Products tend to be fairly complex (e.g. financial services or new cars).
• There is some contact between buyer and seller after the sale so that an ongoing relationship is
built.
• Client/prospects need specific information.
• The purchase tends to involve large sums of money.

There are exceptions of course, but most personal selling takes place in this way. Personal selling
involves a selling process that is summarised in the following Stage Personal Selling Process. The
stages are: Prospecting; Making first contact; The sales call; Objection handling; Closing the sale.

a) Prospecting: Prospecting is all about finding prospects, or potential new customers. Prospects
should be 'qualified,' which means that they need to be assessed to see if there is business potential,
otherwise you could be wasting your time. In order to qualify your prospects, one needs to: Plan a
sales approach focused upon the needs of the customer; Determine which products or services best
meet their needs; rank the prospects and leave out those that are least likely to buy.
b) Making First Contact: This is the preparation that a salesperson goes through before they meet
with the client, for example via e-mail, telephone or letter. Preparation will make a call more
focused. It’s important, before meeting with the client, set some objectives for the sales call (the
purpose of the call; which outcome is desirable before you leave?)
Then, to save time, send some information before you visit. This will wet the prospect's appetite.
Keep a set of samples at hand, and make sure that they are in very good condition. Within the first
minute or two, state the purpose of your call so that time with the client is maximised, and also to
demonstrate to the client that your are not wasting his or her time. Humour is fine, but try to be
sincere and friendly.
c) The Sales Call (or Sales Presentation): It is best to be enthusiastic about your product or
service. If you are not excited about it, don't expect your prospect to be excited.
Focus on the real benefits of the product or service to the specific needs of your client, rather than
listing endless lists of features. Try to be relaxed during the call, and put your client at ease.
Let the client do at least 80% of the talking. This will give you invaluable information on your
client's needs.
Remember to ask plenty of questions. Use open questions This way you can dictate the direction of
the conversation. Never be too afraid to ask for the business straight off.
d) Objection Handling: Objection handling is the way in which salespeople tackle obstacles put in
their way by clients. Some objections may prove too difficult to handle, and sometimes the client
may just take a dislike to you. Here are some approaches for overcoming objections:
• Firstly, try to anticipate them before they arise.
• 'Yes but' technique allows you to accept the objection and then to divert it. For example, a client
may say that they do not like a particular colour, to which the salesperson counters 'Yes but X is
also available in many other colours.'
• Ask 'why' the client feels the way that they do.

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• 'Restate' the objection, and put it back into the client's lap. For example, the client may say, 'I don't
like the taste of X,' to which the salesperson responds, 'You don't like the taste of X,' generating the
response 'since I do not like garlic' from the client. The salesperson could suggest that X is no
longer made with garlic to meet the client's needs.
• The sales person could also tactfully and respectfully contradict the client.
e) Closing the Sale: This is a very important stage. Often salespeople will leave without ever
successfully closing a deal. Therefore it is vital to learn the skills of closing.
• Just ask for the business! - 'Please may I take an order?' This really works well.
• Look for buying signals (i.e. body language or comments made by the client that they want to
place an order). For example, asking about availability, asking for details such as discounts, or
asking for you to go over something again to clarify.
• Just stop talking, and let the client say 'yes.' Again, this really works.
• The 'summary close' allows the salesperson to summarise everything that the client needs, based
upon the discussions during the call. For example, 'You need product X in blue, by Friday,
packaged accordingly, and delivered to your wife's office.' Then ask for the order.
• The 'alternative close' does not give the client the opportunity to say no, but forces them towards a
yes. For example 'Do you want product X in blue or red?' Cheeky, but effective.

3. Sales Promotion.
Sales promotion is any initiative undertaken by an organisation to promote an increase in sales,
usage or trial of a product or service (i.e. initiatives that are not covered by the other elements of the
marketing communications or promotions mix). Sales promotions are varied. Often they are
original and creative, and hence a comprehensive list of all available techniques is virtually
impossible (since original sales promotions are launched daily!). Here are some examples of
popular sales promotions activities:
(a) Buy-One-Get-One-Free (BOGOF) - which is an example of a self-liquidating promotion. For
example if a loaf of bread is priced at €1, and cost 50 cents to manufacture, if you sell two for €1,
you are still in profit - especially if there is a corresponding increase in sales. This is known as a
PREMIUM sales promotion tactic.
(b) Customer Relationship Management (CRM) incentives such as bonus points or money off
coupons. There are many examples of CRM, from banks to supermarkets.
(c) New media - Websites and mobile phones that support a sales promotion. For example, in the
United Kingdom, Nestle printed individual codes on KIT-KAT packaging, whereby a consumer
would enter the code into a dynamic website to see if they had won a prize. Consumers could also
text codes via their mobile phones to the same effect.
(d) Merchandising additions such as dump bins, point-of-sale materials and product
demonstrations.
(e) Free gifts e.g. Subway gave away a card with six spaces for stickers with each sandwich
purchase. Once the card was full the consumer was given a free sandwich.
(f) Discounted prices e.g. Budget airline such as EasyJet and Ryanair, e-mail their customers with
the latest low-price deals once new flights are released, or additional destinations are announced.
(g) Joint promotions between brands owned by a company, or with another company's brands. For
example fast food restaurants often run sales promotions where toys, relating to a specific movie
release, are given away with promoted meals.
(h) Free samples e.g. tasting of food and drink at sampling points in supermarkets. For example
Red Bull (a caffeinated fizzy drink) was given away to potential consumers at supermarkets, in high
streets and at petrol stations (by a promotions team).
(i) Vouchers and coupons, often seen in newspapers and magazines, on packs.
(j) Competitions and prize draws, in newspapers, magazines, on the TV and radio, on The
Internet, and on packs.

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(k) Cause-related and fair-trade products that raise money for charities, and the less well off
farmers and producers, are becoming more popular.

4. Public Relations (PR).

Public Relations is defined as 'the deliberate, planned and sustained effort to establish and
maintain mutual understanding between an organization and its publics' (Institute of Public
Relations). It is relatively cheap, but certainly not cheap. Successful strategies tend to be long-term
and plan for all eventualities. All airlines exploit PR; just watch what happens when there is a
disaster. The pre-planned PR machine clicks in very quickly with a very effective rehearsed plan.

5. Direct marketing: is a channel free approach to distribution and/or marketing

communications. So a company may have a strategy of dealing with its customers 'directly,' for
example banks (such as CityBank) or computer manufacturers (such as Dell). There are no channel
intermediaries i.e. distributors, retailers or wholesalers. Therefore - 'direct' in the sense that the deal
is done directly between the manufacturer and the customer.
As mentioned above, 'direct' also in the sense that marketing communications are targeted at
consumers by the manufacturers. For example, a brand that uses channels of distribution would
target marketing communications at wholesalers/distributors, retailers, and consumers, or a blend of
all three. On the other hand, a direct marketing company could focus upon communicating directly
with its customers. Direct marketing and direct mail are often confused - although direct mail is a
direct marketing tool.
There are a number of direct marketing media other than direct mail. These include (and are by no
means limited to): inserts in newspapers and magazines; customer care lines; CatalogueS, Coupons,
Door drops, TV and radio adverts with free phone numbers or per-minute-charging, Internet and
New Media.
The Internet and New Media (e.g. mobile phones or PDA's) are perfect for direct marketing.
Consumers have never had so many sources of supply, and suppliers have never had access to so
many markets. There is even room for niche marketers – for example Scottish salmon could ordered
online, packed and chilled, and sent to customers in any part of the world by courier.
Many companies use direct marketing, and a current example of its use, as part of a business model,
is the way in which it is used by low-cost airlines. There is no intermediary or agent, customers
book tickets directly with the airlines over The Internet. Airlines capture data that can be used for
marketing research or a loyalty scheme. Information can be processed quickly, and then categorised
into complex relational databases.
Then, for example, special offers or new flights destinations can be communicated directly to
customers using e-mail campaigns. Data is not only collected on markets and segments, but also on
individuals and their individual buyer behaviour. Companies such as Amazon are wholesalers of
books (i.e. they do not write or publish them) – so they use Customer Relationship Management
and marketing communications targeted directly at individual customers - which is another, slightly
different example of direct marketing.

6. Trade Fairs and Exhibitions.

Such approaches are very good for making new contacts and renewing old ones. Companies will
seldom sell much at such events. The purpose is to increase awareness and to encourage trial. They
offer the opportunity for companies to meet with both the trade and the consumer. Expo has
recently finish in Germany with the next one planned for Japan in 2005, despite a recent decline in
interest in such events.

7. Advertising.
Advertising is a 'paid for' communication. It is used to develop attitudes, create awareness, and
transmit information in order to gain a response from the target market. There are many advertising

30
'media' such as newspapers (local, national, free, trade), magazines and journals, television (local,
national, terrestrial, satellite) cinema, outdoor advertising (such as posters, bus sides).

8. Sponsorship.
Sponsorship is where an organization pays to be associated with a particular event, cause or image.
Companies will sponsor sports events such as the Olympics or Formula One. The attributes of the
event are then associated with the sponsoring organization. The elements of the promotional mix
are then integrated to form a unique, but coherent campaign.

6.4. The others elements of the mix: physical evidence, people, customer service

Physical evidence is the material part of a service. Strictly speaking there are no physical attributes
to a service, so a consumer tends to rely on material cues. There are many examples of physical
evidence, including some of the following:
• Packaging; Internet/web pages; Paperwork (such as invoices, tickets and despatch notes);
Brochures; Furnishings; Signage (such as those on aircraft and vehicles); Uniforms;Business cards;
The building itself (such as prestigious offices or scenic headquarters); Mailboxes and many others .

People are the most important element of any service or experience. Services tend to be produced
and consumed at the same moment, and aspects of the customer experience are altered to meet the
'individual needs' of the person consuming it. Most of us can think of a situation where the personal
service offered by individuals has made or tainted a tour, vacation or restaurant meal. Remember,
people buy from people that they like, so the attitude, skills and appearance of all staff need to be
first class. Here are some ways in which people add value to an experience, as part of the marketing
mix - training, personal selling and customer service.

Customer Service
Many products, services and experiences are supported by customer services teams.
Customer services provided expertise (e.g. on the selection of financial services), technical
support(e.g. offering advice on IT and software) and coordinate the customer interface (e.g.
controlling service engineers, or communicating with a salesman). The disposition and attitude of
such people is vitally important to a company. The way in which a complaint is handled can mean
the difference between retaining or losing a customer, or improving or ruining a company's
reputation. Today, customer service can be face-to-face, over the telephone or using the Internet.
People tend to buy from people that they like, and so effective customer service is vital. Customer
services can add value by offering customers technical support and expertise and advice.

6.5. Price

There are many ways to price a product.

Premium Pricing.
Use a high price where there is a uniqueness about the product or service. This approach is used
where a a substantial competitive advantage exists. Such high prices are charge for luxuries such as
Cunard Cruises, Savoy Hotel rooms, and Concorde flights.
Penetration Pricing.
The price charged for products and services is set artificially low in order to gain market share.
Once this is achieved, the price is increased. This approach was used by France Telecom in order to
Economy Pricing.
This is a no frills low price. The cost of marketing and manufacture are kept at a minimum.
Supermarkets often have economy brands for soups, spaghetti, etc.
Price Skimming.

31
Charge a high price because you have a substantial competitive advantage. However, the advantage
is not sustainable. The high price tends to attract new competitors into the market, and the price
inevitably falls due to increased supply. Manufacturers of digital watches used a skimming
approach in the 1970s. Once other manufacturers were tempted into the market and the watches
were produced at a lower unit cost, other marketing strategies and pricing approaches are
implemented.
Premium pricing, penetration pricing, economy pricing, and price skimming are the four main
pricing policies/strategies.
Psychological Pricing.
This approach is used when the marketer wants the consumer to respond on an emotional, rather
than rational basis. For example 'price point perspective' 99 cents not one dollar.
Product Line Pricing.
Where there is a range of product or services the pricing reflect the benefits of parts of the range.
For example car washes. Basic wash could be $2, wash and wax $4, and the whole package $6.
Optional Product Pricing.
Companies will attempt to increase the amount customer spend once they start to buy. Optional
'extras' increase the overall price of the product or service. For example airlines will charge for
optional extras such as guaranteeing a window seat or reserving a row of seats next to each other.
Captive Product Pricing
Where products have complements, companies will charge a premium price where the consumer is
captured. For example a razor manufacturer will charge a low price and recoup its margin (and
more) from the sale of the only design of blades which fit the razor.
Product Bundle Pricing.
Here sellers combine several products in the same package. This also serves to move old stock.
Videos and CDs are often sold using the bundle approach.
Promotional Pricing.
Pricing to promote a product is a very common application. There are many examples of
promotional pricing including approaches such as BOGOF (Buy One Get One Free).
Geographical Pricing.
Geographical pricing is evident where there are variations in price in different parts of the world.
For example rarity value, or where shipping costs increase price.
Value Pricing.
This approach is used where external factors such as recession or increased competition force
companies to provide 'value' products and services to retain sales e.g. value meals at McDonalds.

7. THE INTERNATIONAL MARKETING

International marketing is simply the application of marketing principles to more than one
country. However, there is a crossover between what is commonly expressed as international
marketing and global marketing, which is a similar term.
Many authors see international marketing as a simple extension of exporting, whereby the
marketing mix is simply adapted in some way to take into account differences in consumers and
segments. It then follows that global marketing takes a more standardised approach to world
markets and focuses upon sameness, in other words the similarities in consumers and segments.
Instead, Global marketing refers to marketing activities coordinated and integrated across multiple
country markets
One of the fundamental steps that needs to be taken prior to beginning international marketing is the
environmental analysis. However, the very specific and unique nature of each individual nation
needs to be looked into. Below we consider the nature of an international PEST Analysis, and the
influence of tariff and non-tariff barriers.

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An International PEST Analysis.
PEST is a well-known and widely applied tool when considering the external nature of the domestic
market. However, it is equally as useful when applied to the nature of the international marketing
environment. International PEST Analysis would consider:
• How easy will it be to move from purely domestic to international marketing?
• Would your business benefit from inward foreign investment?
• What is the nature of competition within each individual market, and how will companies from
other nations compete when you meet with them head-to-head in unfamiliar countries?
• Many other factors that are specific to your organization or industry. Political
• Is there any historical relationship between countries that would benefit or hinder international
marketing?
• What is the influence of communities or unions for trading? E.g. The European Union and its
authority over European laws and regulation.
• What kind of international and domestic laws will your business encounter?
• What is the nature of politics in the country that you are targeting, and what is their view on
encouraging foreign competition from overseas?
• What is the level of new industrial growth?
• What is the impact of currency fluctuations on exchange rates, and do your home market and your
new international market - share a common currency?
• There are of course the usual economic indicators that one needs to be aware of such as inflation,
Gross Domestic Product (GDP), levels of employment, national income, the predisposition of
consumers to spend savings or to use credit, as well as many others.
• Culture, religion and society are of huge importance.
• What are the cultural norms for doing business? E.g. is there a form of barter?
• Will cultural norms impact upon your ability to trade overseas?
• Do copyright, intellectual property laws or patents protect technology in other countries?
• Does your technology conform to local laws?
• Are technologies at different stages in the Product Life Cycle (PLC) in various countries?

Tariff and Non-Tariff Barriers.

There are a number of fences that companies need to plan for when initialising international
marketing. Tariff and non-tariff barriers are still very common, even today.
Tariff barriers are charges imposed upon imports - so they are a form of import taxation. This could
mean that your margins are reduced so much that trading overseas becomes too unprofitable.
However they are normally transparent and you can plan to take them into account.
Non-tariff barriers are trickier to spot. Governments sometimes act in favour of their own domestic
industries rather than allow competition from overseas. Bureaucracy is a hurdle often encountered
by exporting companies - it takes many forms and includes unnecessary hold-ups and red tape.
Quotas are another form of non-tariff barrier i.e. restricting the quantity of a product that can be
imported into a particular country.

What is the influence of culture on international marketing?

Culture could relate to a country (national culture), a distinct section of the community (sub-
culture), or an organization (corporate culture). Culture includes all that we have learned in relation
to values and norms, customs and traditions, beliefs and religions, rituals and artefacts (i.e. tangible
symbols of a culture, such as the Sydney Opera House or the Great Wall of China).
Therefore international marketing needs to take into account the local culture of the country in
which you wish to market.

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