Commercialization of Beauty Essay
Commercialization of Beauty
To help with any queries you may have about the examination, I have written some guidelines below. You will have had experience preparing exam questions in your review sessions. The following document provides some further hints and tips, with some sample questions at the end. I have also attached a document with questions from January and Resit last year, with an outline of what the answer should contain.
What do I have to do?
In the examination, you will be asked to select three questions to answer from a choice of six. Very broadly, these areas might be taken from the nine major sections listed in the course outline as below.
3) Marketing to Consumers & Consumer Behaviour
* Why is customer analysis an important component of strategic marketing management? Making reference to a company of your choice suggest TWO models that can be used in undertaking such an analysis.
* With reference to models and products of your choice, describe both the Consumer Buying Process and four common types of behaviour that consumer’s exhibit.
* Explain, using examples, how marketers try to influence consumers at the different stages of the consumer decision process.
5) Product Strategy, Brand Management
* Describe and discuss each of the key stages involved in new product development and explain why innovation is a key marketing strategy for organisations today.
* What is the Boston share/growth matrix?  In turn, give an example product for each of the four boxes and describe the marketing implications. 
* What is a positioning map and how are they useful to marketers?  For an industry of your choice draw an example of a positioning map with at least 6 product/brands located on it according to appropriate criteria with comments on the strengths and weaknesses of each location. 
* Assess the advantages and disadvantages of brand extensions. Use appropriate examples to illustrate your answer.
* Examine the components of effective brand positioning, illustrating your answer with examples of well-positioned brands and poorly positioned ones.
6) Pricing Strategy
* Discuss the following strategy using pricing theories and concepts from the course: The only reason that companies set low prices is that their products are undifferentiated.
* List and explain the keys mistakes a strategic marketer could make when setting the price of a good or service.
* You have been asked by a company specialising in consumer electronics about the pricing of a new product about to be launched. Describe the factors that the company should consider in setting the price of their new product.
* Discuss how pricing should play a strategic rather than a tactical role for an organisation. Use relevant industry examples to illustrate your answer.
7) Distribution Strategy
* Marketing channel issues are amongst the most important decisions that management faces. To what extent do you agree with this statement?
* Why might a supply channel become disintermediated?
8) Promotions Strategy, Marketing Communications
* Advertising is the most obvious form of promotion. Using examples, describe at least three other forms of promotional activity.
* Identify and discuss the key strategic actions marketers must take to ensure Integrated Marketing Communications are successful.
* Different advertising campaigns can have different objectives. With reference to recent examples, list and discuss four different types of objective.
* There are five main promotional tools. Define each and use examples to illustrate their potential usefulness.
9) Services Marketing
* Using strategic marketing theories and concepts, state whether you agree or disagree with the following statement: “Creating marketing strategies for services is no different to the marketing of goods”.
* Discuss the extended marketing mix used for services. Why are these useful, given the characteristics of services?
Below are listed the exam questions and outline answers for a previous January examination and Resit. The outline answers are produced so that the external examiner and markers have a good idea about what the answer should contain. However, to achieve top marks (70+) you would need to include these points in a coherent argument, aided by relevant examples and context.
1) What are the four distinguishing characteristics of services marketing? What challenges do these present to the formulation of marketing strategy and implementation?
Answers should define what is meant by a service: a provider/client interaction that creates and captures value. Definitions such as “Deeds, processes, performances” (Zeithaml & Bitner, 1996); “An activity or series of activities… provided as solution to customer problems”(Gronroos, 2000); may be used. The four distinguishing characteristics of services marketing will be defined as:
Intangible (as opposed to tangible goods): The implication of this is that services cannot be inventoried, or easily patented. They may therefore be easier to copy, and gaining real competitive advantage may be more difficult. Services cannot be readily displayed or communicated- this raises issues in terms of the promotional strategy and message designs that can be used. Airlines may emphasise the relaxation of being on board as the actual process of travel is more difficult to represent, and might be more problematic when communicating the company’s positioning strategy.
Intangibility also makes pricing more difficult. With goods, a differentiation focus and premium pricing strategy may be clearly identified by the consumer through the tangible attributes of the products and the difference in quality. The quality of a set of accounts, or a medical procedure may be less tangible, and therefore high prices may need to be supported by other aspects of the strategy and marketing management process. The extended marketing mix, such as physical evidence may be helped to signal quality to consumers.
Heterogeneous (as opposed to standardized): Service delivery and customer satisfaction depend on employee and customer actions. Therefore plans for marketing strategy and implementation cannot be guaranteed in the same way as for products. Service quality depends on many uncontrollable factors. There is no sure knowledge that the service delivered matches what was planned and promoted. The extended marketing mix, particularly the planning of the ‘process’ may be to alleviate problems of standardization. Some companies such as McDonalds have tried to implement a standardized service experience. This may only be appropriate for some sectors however. For luxury services or professional services, the heterogeneous and client-specific exchange may be part of the value of the service. Companies will need to carefully monitor and control implementation.
Simultaneous production and consumption – customers participate in and affect the transaction, and each other. Employees also affect the service outcome. Decentralisation may be essential. Mass production is difficult. Because services depend critically on the co-production relationship, it is very important that the service contract spell out mutual responsibilities and expectations. A significant percentage of service engagements (estimates range from 10-50 percent) do not meet the client’s or provider’s expectations, resulting in poor performance and low satisfaction, and, therefore, in less value created and captured than anticipated. This gap is an opportunity for services innovation that will improve returns, performance and satisfaction. The training and management of people, another aspect of the extended marketing mix, may help the control and implementation of strategy in this respect.
Perishability (as opposed to non-perishable)- It’s difficult to synchronise supply and demand. For many services, demand may be affected by geographical location, seasons, timing etc. Marketing management has to try to balance supply and demand, for example through pricing strategies- bundling return journeys or making seasonal promotions to stimulate demand off-peak. In this sense, segmentation, targeting and positioning is of key importance- identifying the value sought by different consumers and managing the marketing mix accordingly. Services cannot be resold or returned, therefore pricing and promotional tactics may be to sell services at cost alone, for example last minute hotel bookings and flights. Considering overheads are fixed, it is better to have costs covered than an empty seat or hotel room. However, these tactics may not integrate effectively with the company’s generic strategy.
2) What marketing strategies and marketing mix decisions are associated with the different phases of the product life cycle? Discuss how the product life cycle can help companies to plan its product portfolio.
The concept of the plc should be introduced and how marketers use it to make strategic planning and marketing mix decisions. The four phases should be identified as:
Introduction: Characterised by low sales and high cost per customer. There are ways which marketers categorise consumer’s willingness to adopt new products, such as Rogers (1983) seminal work on the adoption of innovation. At this phase the segments which should be indentified and targeted are innovators, who are risk takers and open to new ideas. A similar adoption model is proposed by Moore (1999). His chasm strategy would argue that the early phases should involve techies, to iron out bugs.
There are few competitors at this stage, and therefore some advantages may be found in being first to market. Consumers may be willing to pay a premium price for products at the introduction stage, and therefore a market skimming strategy may be adopted. Alternatively depending on product type, a cost-plus or penetration strategy may be appropriate. Promotional strategy will have the objective of raising awareness. Heavy sales promotion may also be used. Distribution is likely to be selective at this phase.
Growth: This phase is charaterised by rapidly rising sales, lower average cost per customer, and rising profits. At this phase early adopters will consider purchase. They should be targeted by companies as they tend to be respected opinion leaders in the product field will promote wider adoption through word of mouth. Moore’s (1999) model would propose that visionaries should be targeted to help find competitive advantage and to establish the basis of the appeal for the pragmatists.
There will be a growing number of competitors at this phase so marketing management and strategy is likely to reflect this. Extensions, warranty, and service may become more important add-ons to secure competitive advantage. Pricing may be competitor-orientated or for penetration. Efforts should be made to build intensive distribution to try to remain market leader. Promotional efforts
will continue to build awareness but in the mass market, rather than targeted at a niche.
Maturity: This phase is characterised by peak sales, low cost per customer and high profits. Purchasers will be the early/late majority (or the pragmatists and conservatives). Competition is likely to have stabilized as weaker products are forced out of the market. Strategies at this stage might involve diversifying brands (brand leverage, brand extension) and product line changes (widening, filling, stretching). Prices will most likely be lowered at this stage, possibly to match or beat competitors. Sales promotion may become more prevalent. Generally promotional strategy will be to stress brand differences and encourage brand loyalty. Advertising will try to remind and reinforce the brand.
Decline: This phase is characterised by declining sales, and declining profits. Laggards or the skeptics will buy the product now cost and risk is low and most other people have purchased the product. Competition will reduce as company’s divest products in a declining market with declining sales. Strategies at this phase may be to phase out weak items. Prices may be cut. All aspects of the marketing mix might be cut back to reduce costs with efforts made at the level to retain loyalists.
The PLC can be used in planning a company’s product portfolio. The ideal is to have products at different phases of the life cycle so that products at the maturity phase can provide profits for investment in the mix for products at the introduction and growth phases. Portfolio planning models like the BCG matrix allow firms to address this, and to make sure they are channelling their efforts into products which have potential for growth (stars and question marks) or profit generation (cash cows). Portfolio planning will also be about phasing out products which do not have a future (dogs). Best answers will emphasise the limitations of the plc model (linearity, not all products ever do into decline).
3) Discuss the main areas an advertising company will consider when given a creative brief. Using examples, explain why a celebrity may be chosen as a message source. What factors determine the success of a celebrity endorsement?
Answers should outline the following areas for a creative brief:
Positioning statement- what is the overall positioning of the brand. What are the key brand benefits and brand promise. It could be based on: Features: how the brand delivers its promise; Values and personality: what the brand stands for and signifies, which affects relationship and loyalty; or Key reward: may be based on one of these features, safety, classy personality etc.
Proposition: spells out what you want to say: big ideas, strategically central. Potential sources of a proposition are: user characteristics, price, brand image, product service heritage, ways of using the product, comparison with rivals, surprising points etc.
What are the specific objectives for the campaign- may be to inform, persuade, remind or reinforce. This should help formulate specific, measurable, achievable, realistic and targeted/timed objectives. Objectives may be to move buyers through readiness stages. Models such as AIDA and Dagmar may be mentioned.
Target market- what segments are being targeted. This will impact greatly on the message strategy, creative considerations and media choice. Communication is a transactional process whereby meaning is exchanged through the intentional use of symbols. The firm must encode- reduce the concepts to a set of symbols which the recipient will decode. There must be a shared view of what the symbols mean, a shared field of experience. This will be determined by the target market as well.
Message strategy: appeals, themes or ideas that tie into the brand positioning and establish points of parity or points of difference. Rewards may be intrinsic e.g. quality or extrinsic e.g. traditional. Buyers expect one or more of the following rewards: rational, sensory, social or ego satisfaction
Creative structure- how should we express our message: informational (rational, logical, product demo, comparison, testimonials); transformational (non-product related benefit or image, stir up emotions, negative: fear, guilt, shame, positive: humour, love, pride and joy, often use borrowed interest devices- music, provocative images, cute animals etc.).
Media choice- Where is the communication(s) going to appear? Media classes (media types such as PR, press, TV- does it reach the chosen audience?); Media vehicles (choice within the chosen class such as the Times or the Sun). How frequently? What impact? What exposure? (Burst- concentrated, Continuity, Pulsing etc.). How much is to be spent? Budget and control measures.
Message source- who should express the message? Credibility, celebrity endorsement, modelling.
Celebrity endorsement: used extensively. The product or service is given credibility through association with someone the audience trust or aspire to be like. Success depends on having a believable link between the meanings associated with the celebrity and the product; Class, status, gender, age, personality and lifestyle are all part of what the celebrity transfers to the product. Likeability also important; Celebrity credibility is comprised of attractiveness, trustworthiness and expertise. The various endorsements of a celebrity such as Tiger Woods may be used to discuss the effectiveness of this method.
4) Using the purchase of a particular product as an example, describe the decision process model of consumer behaviour. What are the short comings of the model in understanding this purchase?
The answer to this question will largely depend on whether the student decides to focus on a high involvement purchase such as a car, or a low involvement purchase such as a can of soft drink. All answer will identify the 5 stages of the decision process model of consumer behaviour:
Problem recognition: consumer’s either recognise a problem or have a need triggered by internal or external stimuli. If the stimulus is internal for example hunger, it may rise to threshold level and become a drive. A need can be aroused by an external stimulus such as seeing a neighbour’s new car may trigger thoughts about buying one yourself. Information search: Sources of information may be personal, commercial, public or experiential. Of the total set of brands available, the consumer will only be aware of a subset called the awareness set. Some brands will meet the initial buying criteria and become part of the consideration set. As the consumer searches for further information, a few brands will form the choice set from which the final choice will be made. The awareness set will depend on whether companies have got themselves noticed.
Consumers will then have positioned these according to a hierarchy of attributes- type/price/brand dominant. The car purchaser may decide on brands in the consideration set: audi/BMW/Mercedes. The drink purchaser may decide on type, cola with the options of Pepsi, Coca Cola and Supermarket own-brand. Evaluation- will depend on the need the consumer is satisfying; the benefits they are seeking; and the bundle of attributes that will satisfy this need. Attributes that deliver sought after benefits will vary: for the soft drink it may be taste, price, packaging, for the car it may be safety, performance, price.
Expectancy value model assumes consumers arrive at decision about brands through an attribute evaluation procedure, combining brand beliefs, the positives and the negatives according to importance. Decision- the consumer makes the choice of their preferred brand and also decisions about quantity, timing and payment method. The car purchaser may have decided on a BMW but there was a waiting time and no interest-free finance so actually decided on an Audi. The soft drink purchaser discovered Pepsi had a trial price and opted for that. Post purchase behaviour- consumer’s often feel dissonance that stems from noticing disquieting features or hearing unfavourable things about the brand and will be alert to information that supports the purchase decision.
No single process is used by all consumers, or by one consumer in all buying situations. There are several processes which are not necessarily made on the basis of such conscious and rational judgements. Non-compensatory models of decision making using heuristics may be used, depending on brand knowledge, differences among brands and the social context. In reality, the soft drink purchaser is very likely just to choose the Cola brand they have previous experience of, or the one all their friends drink.
The elaboration likelihood model would suggest consumers may take a peripheral route for this type of purchase, as they are unlikely to have the motivation for a diligent rational evaluation of alternatives. The consumer could just go straight from problem to decision, or certainly skip stages. This model also ignores other consumer psychology such as variety seeking, which happens in low involvement but significant brand difference sectors. Therefore consumers try Cherry Coke, Coke with Lime etc. purely for variety. A car on the other hand would demand the central route.
Perceived risk will vary with the amount of money at stake, the amount of attribute uncertainty and the consumer’s self-confidence. For the purchase of a car, there could be functional, physical, financial, social, psychological and time risk. This uncertainty may lead the customer to postpone the decision, as might unanticipated situational factors, both of which are not included in the decision model. High involvement decisions are more likely to proceed down this central route for purchases that are financially involving, technically complex or have social implications (examples might be cars, mobiles).
5) What are the three key stages of the strategic marketing management process? Explain what activities are undertaken at each stage of the process and why this is so critical to a firm’s long term competitive advantage.
Strategic analysis- where are we now? This is concerned with understanding the strategic position of the organisation in terms of its external environment, internal resources and competencies and the expectations and influences of stakeholders. Strategy is the development of long-range plans for the effective management of environmental opportunities and threats while taking into account the organisation’s strengths and weaknesses. At this stage firms will collect and analyse relevant types of information about environmental forces and trends. This will be on two levels: the macro- for which a PEST analysis may be performed; and the micro- for which the Five Forces model for industry analysis may be used, in addition to analysing other relevant factors such as consumer behaviour and perceptive competitor analysis.
The other environment is the internal environment in which a firm will identify its assets, resources and their application to determine where strengths and weaknesses may exist. Models such as a resource audit or value chain are used to collect this information. All relevant environmental analysis is then compiled into SWOT from which the organisation will determine where its future strategy should lie given the major factors and trends identified. This stage is crucial for competitive advantage as market information and intelligence is essential for developing a successful marketing strategy based on and for creating and sustaining competitive advantage is today’s rapidly changing environment.
Strategic choice- where do we want to be? This involves understanding the underlying bases guiding future strategy, and generating strategic options for evaluation and selecting from among them. Strategy is decided upon in terms of objectives, financial decisions, segmentation, and positioning. These are the crucial and central decisions in developing a competitive marketing strategy. Based on the SWOT, strategic alternatives may be suggested and a decision needs to be made at corporate and SBU levels. Deciding the the mission and directional strategy and allocating resources will be decided at a corporate level. Portfolio planning models such as the BCG matrix may be used. At the SBU level, a generic strategic orientation (cost leadership, differentiation, focus) will be chosen based on unique competitive advantages.
At the functional level, strategists consider decision such as what products to offer. Ansoff’s matrix may be used a tool to choose between the four possible options available to any organisation with regard to product/market strategy. Market segments to target and market position strategy are also decided at this stage, as well as competitive positioning and relationship strategies. Segmentation, targeting and positioning are the cornerstone of marketing strategy and key in developing a distinctive position in the consumer’s mind, developing brand loyalty and therefore building long term consumer franchise that will help the company defend itself from competitive threats.
Strategic implementation- how are we going to get there? This is the translation of strategy into organisational action through organisational structure and design, resource planning, and the management of strategic change. This involves the strategic, rather than tactical planning of product innovation, branding, services, pricing and distribution, marketing communications and emarketing.
Some responses may also identify a fourth stage- strategic monitoring and control- did we get there? The importance of monitoring and control in strategic planning.
6) Identify what is meant by Value Chain Analysis. Why would a firm decide to use this analytical tool?
Framework developed by Porter (1985) as a way of examining the nature and extent, if any, among the internal activities of a firm. Porter argues every firm is a collection of activities that are performed to design, produce, promote, deliver and support its product. All these activities can be represented in five primary activities and four support activities using a value chain concept. The primary activities of the value chain are inbound logistics, operations, outbound logistics, marketing and sales and services. Support activities are firm infrastructure, human resource management, technology development and procurement.
Value chain analysis has been widely used by firms as a means of analysing the internal activities of an organisation. One of the key benefits is the recognition that organisations are much more than a random collection of machines, money and people because these resources have no value unless they are deployed in activities and organised into systems which ensure products and services are produced and valued by the end customer. Firms which produce several products may evaluate several value chains. Examining each chain and the linkages may allow firms to examine the potential synergies between the value chains of different products.
Internal analysis provides a detailed understanding of those aspects of an organisation that are of strategic importance. It is often the way a firm’s assets and resources are applied that explain differences in performance among companies, rather than industry structure. It has been argued that the significance of the external environment has been over emphasised and a more appropriate focus for strategy is the organisation’s resource base.
The key idea is that the value chain is a systematic way of examining all the activities a firm performs and how they interact to differentiate a firm’s value chain from its competitors value chains. This differentiation is recognised as a key source of competitive advantage. A firm is therefore likely to use this tool when undertaking a strategic analysis. It will analyse the various activities and determine where its strengths and weaknesses lie. For example high levels of absenteeism and ineffective warehouse automation may be identified as weaknesses. Strong research and development and salesforce results might be strengths. The company will then decide whether to match their strengths or to convert or nullify their weaknesses. The value chain would be used when determining a strategic capability profile or using a SWOT analysis.
Answers may explore the alternative forms of internal analysis, such as the resource-based approach, performance analysis approach and functional analysis approach, commenting on potential strengths and weaknesses of these analytical tools. Like any strategic environmental analysis, internal analysis must be rigorously performed and undertaken at regular intervals to monitor and evaluate strategies and changes.
Answers may also critique the fact that value creation does not only occur in the organisation but also in the supply and distribution channels. For example the quality of a car is influenced not only by the activities within the firm but by the quality of spare parts, components and the performance of distributors.
1) Discuss the factors that influence a company’s choice of promotional mix. (50%) Name and describe the scope and characteristics of various promotional tools. (50%)
The main 5 factors that influence the choice of the marketing mix are:
1) Resource availability and cost of promotional tools
2) Market size and concentration
3) Customer information needs
4) Product characteristics
5) Distribution push versus consumer pull strategies
Other relevant points are that: decisions must not be made in isolation from the rest of the marketing mix- must be aligned; marketers need to make the correct choice of the promotional blend to communicate to the target audience; Marketers weigh strengths and weaknesses of tools against promotional objectives
Advertising is defined as “Paid for communication by an identified sponsor with the aim of influencing and informing one or more people”. It is mainly used in the long term and is useful for raising awareness or influencing consumer’s attitudes about brands. Advantages are that it can communicate amplified and expressive messages through the use of sight, sound, music, experience etc. Disadvantages are that is is one directional, impersonal, expensive and can be seen as pervasive.
Direct marketing is defined as “The recording, analysis and tracking of customers’ direct responses in order to develop loyalty”. It is used in the long term and short term. It is mostly used for retention but can also be used for acquisition of new customers. With improvements in databases, direct marketing can increasingly be customised and up to date. It is also interactive i.e. generates responses from customers and builds relationships. Disadvantages can be cost, and that telemarketing and direct mail etc. are often seen as a nuisance by consumers.
Public Relations is defined as the “Formulation, execution and sustained effort to establish and maintain goodwill and mutual understanding and reciprocal goodwill between an organisation and its stakeholders”. It is used in the short and long term and is particularly useful for building reputation. It has the advantages of low media costs, credibility, visibility, and dramatisation- can catch consumers off guard. Major disadvantage is that it is difficult to control.
Sales promotion is “An incentive for the customer, salesforce or distributor to make an immediate purchase”. It is mainly used in the short term. When used strategically, it can be useful for encouraging trial, re-trial, extended trial, building databases and getting rid of old stock. From a trade perspective it can be useful for increasing distribution, increasing inventory, and improving shelving space/position. Disadvantages are that it does not build brand loyalty and is mainly tactical in its horizons.
2) Explain the concept and purpose of analysing industry competition using Porter’s Five Forces model. Use illustrative examples to support your answer.
The reason the Five Forces are important is that whilst industry structure has a strong influence in determining the competitive rules of the game as well as the strategies potentially available to the firm. Forces outside the firm are significant primarily in a relative sense; since outside forces usually affect all firms in the industry, the key is found in the differing ability of the firms to deal with them. The purpose of analysing industry competition is that it: – Determines sectoral structural attractiveness
– Collective strength determines the ultimate profit potential of the industry and the ability of firms to earn rates of ROI in excess of the cost of capital – Links with strategy development- goal of business is to find a position in the industry where it can defend itself – Strategists should evaluate and rate these forces (high/medium/low threat or power) – Accounts for most of the micro-environment by acknowledging that competitive structure is not just determined by direct industry competitors
Answers may outline the different Forces and raise some or all of the following points:
Rivalry determinants: Industry growth; exit barriers; brand identity; switching costs; concentration; corporate stakes; diversity of competitors; informational complexity; intermittent overcapacity; fixed costs/value added; product/service differences
Buyer power : Bargaining leverage e.g. Buyer information, Buyer switching costs Buyer volume Price sensitivity Brand identity, Product/service differences, Impact on quality performance
Supplier power e.g. Switching costs; substitute inputs; impact of inputs on differentation; threat of forward integration; importance of volume to supplier
Substitute threats e.g. Relative price performance of substitutes; switching costs; buyer propensity to substitute
Entry Barriers e.g. Economies of scale; brand identity; switching costs; capital requirements; access to distribution; expected retaliation
3) Discuss the role that segmentation, targeting and positioning each play in developing a successful marketing strategy including managing the marketing mix.
STP is central to development a marketing strategy. The marketing concept assumes different preferences amongst consumers, and STP is how consumers are grouped into clusters with similar characteristics or needs, so that products and services can be targeted to satisfy them. Segmentation is dividing a market into distinct groups of buyers with different needs, characteristics or behaviours, who might require separate products or marketing mixes.
The reason companies use STP is that:
* It is profitable business.
* May discover unfulfilled consumer needs.
* Strengthens management capabilities.
* Allocates marketing resources.
* Sets market objectives.
There are 6 stages to STP, which are:
When considering which segments to target, marketers consider a mixture of managerial concerns and customer needs which include: * Is servicing the segment consistent with corporate goals? * What is the strength of competition targeting the segment? * Is it desirable in terms of size, future growth and saturation? * Selecting segments whose needs match the companies ability to deliver. * Profitability and strategic fit- SWOT
* Ultimately the decision is conceptual- who we are as a company, and where we want to be
The strategic role that STP plays is in allocating resources to the potentially most profitable segment of the market. Product lines are then designed to match demand in the market place or match resources. STP means companies can catch the first sign of change to give time to prepare and take advantage of it, and consider best competitive position to adopt for each segment. With marketing management STP allows firms to determine the right style of comms campaign; choose the most cost effective advertising media; apply demographic data effectively; price for maximum effectiveness; and develop the right channel strategy.
Ultimately STP results in positioning which is possibly the most important aspect of marketing- it results in changing and forming perceptions about brands, creating brand identity and is about designing, communicating and delivering value (crafting the marketing mix to the needs of the target market is the foundation upon which customer relationships and brands are built). A product’s position is the way the product is defined by consumers on important attributes, it is the place the product occupies in the consumer’s mind relative to competing products. Positioning is based on unique selling proposition (USP) (what is unique/what are you selling); a Brand’s competitive advantage- with whom are you competing and how are you better? And who will use the product?
4) What personal, social and cultural factors influence buyer behaviour? (50%) Choose an example of a ‘high involvement’ purchase, such as a car, and describe how these factors influence the consumer’s choice.(50%)
Cultural Influences have the broadest and deepest influence. Culture is the fundamental determinant of a person’s wants and behaviors acquired through socialization processes with family and other key institutions. Your values are formed on achievement and success, individuality, freedom, humanitarianism etc. (or Hofstede’s model). Subcultures- more specific identification and socialisation for members on the basis of nationalities, religion, geographical location, political perspectives. Social classes: show distinct preferences in terms of product choice, brands, media choice and languages.
Social influences. Relevant factors include: Reference groups: have a direct or indirect effect on attitudes or behaviours; consist of primary and secondary; aspirational and dissociative; they introduce ideas and behaviours, influence attitudes and self concept; they create pressures for conformity which may affect brand choice. Opinion formers (e.g. designers), opinion leaders (offers information and usage advice), confident social and involved with category; and opinion followers. Companies try to reach leaders to disseminate messages. Family- the most important consumer buying organisation and the primary reference group, different priorities and decision-making influences.
Personal Influences: Relevant factors include: Age and stage in life cycle- family/ psychological/ transitions. Occupation and economic circumstances- occupation may affect products and services required and what you can afford. Personality: a set of distinguishing human psychological traits that lead to relatively consistent and enduring responses to environmental stimuli. Often consumers try to buy brands that reflect their own personality (Aaker’s brand personality typologies: sincerity/ excitement/ competence/ sophistication/ ruggedness). Self-concept: actual/ ideal/ others’ self-concept/ multiple selves. Lifestyle: pattern of living as expressed in activities, interests and opinions and values; influences such as time constrained, multi-tasking. Core values: the belief systems that underlie attitudes and behaviours.
5) Discuss THREE different approaches to pricing, outlining the advantages and disadvantages of each approach.
The three approaches are:
– Cost-based pricing : strong internal orientation and based on costs – Competitor-orientated pricing : major emphasis on levels set by competitors – Market-led pricing: focuses on the value that customers place on a product in the market place and the nature of the marketing strategy used to support the product. Cost-based pricing involves setting prices based on the costs of producing, distributing and selling the product plus a fair rate of return for the company’s effort and risk. Methods include: Cost-plus pricing- simplest method of pricing- involves adding a standard mark-up to the product; break-even- what’s the minimum price we can charge to match the cost of making and marketing a product (BE= (fixed costs)/[(price-variable costs)]. Marginal cost- setting prices below full cost.
Often used by service companies like hotels and airlines to make a contribution to direct costs. More complicated for services- variable costs move faster with an increase in demand. Advantages: simple; ensure you stay in business by setting minimum floor on pricing; and helps to set objectives in terms of the minimum number of units that need to be sold Disadvantages: In reality many business use cost-based approaches but they can have huge disadvantages: illogical: raised prices when sales fall; sales estimates are made before a price is set; ignores elasticity of demand; ignores competitor’s pricing; no incentive to reduce costs; ignore the impact of consumer perception and psychology; estimates overheads against individual
products in an arbitrary way
Competitor-based pricing- Can take three forms:
1) Firms follow the prices set by leading competitors
– Benchmark then set either above, below or the same as competitor
– Popular in financial services
– Can be risky, especially if cost position is not as good as a competitor
– Could start price war
2) Going Rate- all competitors receive the same because it is the going rate
– Undifferentiated commodities like coffee beans
– Challenge for marketer is to find creative ways of differentiating to charge higher price e.g. fair trade coffee beans, premium quality coffee beans 3) Competitive bidding process- contract goes out to tender – sealed bids or competitive auction
– usually lowest price accepted
– increasing price pressures, European competition legislation and growing use of technology has increased the use of competitive bidding – Very common in government and public sector markets
Market-led pricing- favourable as it takes into account value rather than price. Main methods: 1) Trade-off analysis- also known as conjoint analysis, determines the trade-off between price and other features – different combinations of variables such as brand, packaging, product features and price are tested – can measure the impact on preferences of increasing price and determine the price level customers are willing to pay 2) Experimentation- places products on sale in various locations at different prices
3) Economic Value to the Customer (EVC)
– reducing costs and increasing revenue are primary concerns of companies – Therefore in industrial markets, EVC is calculated- can charge more for a product if it will help your customer increase their revenue more than the competition e.g. new technology.
Market led pricing is favourable as it takes into account the psychology of prices and not simply economics; the price is used to say something about the product, and other factors such as stage in the product life cycle. Price often indicates quality especially in services. However, organisational considerations such as costs and the nature and structure of competition must also be considered.
6) Outline how you would construct a SWOT analysis. (50%) Explain the purpose of a SWOT analysis in the marketing planning process. (50)
Answers should explain how the marketing environment is analysed- Macro environmental analysis conducing a PESTEL analysis, Micro-environment- examining Five Forces and other factors such as consumer behaviour. These result in identifying opportunities and threats. An internal analysis using e.g. value chain, identifies an organisations strengths and weaknesses. The purpose of conducting a SWOT is to identify strategic choices available to a company. It’s the internal communication of external information about emerging issues, situations and potential threats that potentially influence an organisation’s decision making (Albright 2004).
SWOT is essential for firms growing in size and complexity and is an important component of a company’s approach to developing a market orientation. Market orientated companies are more profitable. SWOT is essential in markets where the pace of change and uncertainty is increasingly high- companies need to take a proactive direction. It identifies fads, trends, and megatrends. Scanning customer trends helps you create, communicate and deliver value and beat the competition.
SWOT/TOWS is the basis for making strategic decisions about growth, what products, what markets, and whether to convert weaknesses or capitalise on strengths etc. Decisions are then made about STP and how the marketing mix will be managed in order to achieve marketing objectives. SWOT is the result of the strategic analysis which is followed by strategic choice, strategic implementation, and strategic control.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 9 October 2016
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