MARKETING

MARKETING

AN INTRODUCTORY TEXT

Martin Christopher

and

Malcolm McDonald

~\ 1.-\(\"LL:\\Business

© Martin Christopher and Malcolm McDonald 1995

All rights reserved. No reproduction, copy or transmission ofthis publication may be made without written permission.

No paragraph of this publication may be reproduced, copied ortransmitted save with written permission or in accordance withthe provisions of the Copyright, Designs and Patents Act 1988,or under the terms of any licence permitting limited copyingissued by the Copyright Licensing Agency, 90 Tottenham CourtRoad, London W1P 9HE.

Any person who does any unauthorised act in relation to thispublication may be liable to criminal prosecution and civilclaims for damages.

First published 1995 byMACMILLAN PRESS LTDHoundmills, Basingstoke, Hampshire RG21 2XSand LondonCompanies and representativesthroughout the world

ISBN 978-0-333-62587-3DOl 10.1007/978-1-349-23858-3

ISBN 978-1-349-23858-3 (eBook)

A catalogue record for this book is availablefrom the British Library.

10 9 8 7 6 5 4 3 2 104 03 02 01 00 99 98 97 96 95

Copy-edited and typeset by Povey-EdmondsonOkehampton and Rochdale, England

I Contents

List of Figures and Tabies x

Preface Xlll

Module 1: The Role of Marketing in Business

1 Introduction: Marketing's Role in the Organisation 3What is Marketing? 3The Company's Marketing Assets 4The Search for Differential Advantage 7Marketing and the Bottom Line 9Industrial, Consumer and Service Marketing 10International Marketing 11Is Marketing Unethical? 14Summary 23

2 Managing Marketing 24The Marketing Mix 24Programming the Marketing Mix 29The Challenges to the Corporation 30Meeting the Challenge 34Summary 39

3 Relationship Marketing 40Marketing as a Process 41The Six Markets 42Relationships as Partnerships 46Managing Relationships in the Marketing Channel 48Building End-User Relationships 51Summary 51

Module 2: Understanding Customers and Markets

4 Buyer Behaviour 55Buyers and Consumers: Know the Difference 55A General Model 56Consumer versus Industrial Purchase Decisions 69Summary 71

v

vi Contents

5 Market Segmentation 72Customers as Sources of Profit Through Segmentation 72Criteria for Viable Market Segmentation 73Analysis of the Way Customers Respond or Behave 74Analysis of Customer Characteristics 78Summary 81

6 Scanning the Environment 83The Marketing Environment 83Means of Scanning the Environment 88Reactive Marketing Research 89Non-Reactive Marketing Research 92Integrating Marketing Research with Marketing Action 94International Marketing Intelligence 95Preparing the Marketing Research Brief 96Preparing the Research Proposal 98Summary 99

7 Competitive Analysis and Strategy 100Cost Advantage 101Value Advantage 102Market Share Strategies 104Competitive Analysis 105Competitive Information 108Competitive Benchmarking 110Summary 111

8 The Marketing Audit 113The Auditing Process 113The Form of the Audit 114The Management Audit 115The Marketing Audit 116When Should the Marketing Audit be Carried Out? 119What Happens to the Results of the Audit? 121How to Organize the Findings of the Audit 121Summary 122

Module 3: Managing the Offer

9 Product Management 127What is a Product/Service? 127The Product/Service Life Cycle 132Life Cycle - Costs and Strategies 135Product/Market Strategy 138Product Revitalisation versus New Product Development 140Summary 141

Contents Vll

10 Product Strategy 142Product Portfolios 142The Boston Matrix 143The Directional Policy Matrix 145The Directional Policy Matrix as a Predictive Device 149Developing New Products and Services 150A Screening Procedure for Ideas for New Products or Services 154Forecasting Future Sales 159Summary 164

Module 4: Positioning the Offer

11 Branding 167What is a Brand? 167The Difference Between Successful and Unsuccessful Brands 173The Components of a Brand 174The Company as a Brand 178Global versus Local Brands 180Summary 182

12 Pricing Strategy 183Benefits and Price 184Price and Value 185Benefit Evaluation 188Trade-off Analysis 188Competitive Pricing Strategy 193International Pricing Management 195Summary 198

13 Communications Strategy 200Communication Methods 200Corporate Communications Audit 205The Communication Process 206The Receiver's Viewpoint 207Developing Communication Objectives 209The Communication Plan 210Selecting the Right Media 213International Communications 213Summary 214

Module 5: Managing Marketing Relationships

14 Sales Force Strategy 217How Important is Personal Selling? 217The Role of Personal Selling 218Buy Classes 218

Vll1 Contents

Pressure on the Individual Buyer 220What Does All This Mean to the Sales Person? 222Understanding the Salesman's Role 222Identifying Who Has Influence 225Territory Planning and Obtaining the Interview 227Advantages of Personal Selling 230Sales Promotion 231Summary 235

15 Managing the Sales Force 236How Many Salesmen and Women do we Need? 236Directing the Sales Effort 239What do we Want our Sales Men and Women To Do? 243How Should we Manage our Sales Force? 245Preparing the Sales Plan 246Summary 246

16 Marketing Channel Strategy 249Channels of Distribution 249Choosing the Channel 250Marketing Strategies 252Working with Intermediaries 252Selecting an Intermediary 254Relationships with Intermediaries 255Effectiveness of Channel Intermediaries 256Dealer Development Strategy 257Vertical Integration 258Summary 259

17 Distribution and Logistics Strategy 260Distribution and the Marketing Mix 260An Overview 260The Logistics Concept 262The Service-Level Decision 264Establishing the Profit Consequences of Running out of Stock 265Bringing the Logistics Mix Together 266Summary 268

18 Customer Retention Strategies 269The Ladder of Loyalty 271Developing a Customer Retention Strategy 273Customer Retention Programmes 274DataBase Marketing 277Summary 280

Contents IX

19 Customer Service Strategy 281What is Customer Service? 282The Components of Customer Service 284Customer Service Trade-offs 285Designing the Customer Service Package 286Strategies for Service 287Developing a Customer Service Culture 288Summary 289

Module 6: Planning and Control

20 Marketing Planning 293What is Marketing Planning? 293Benefits of Formalised Marketing Planning 293Why is Marketing Planning Essential? 294The Marketing Planning Process 295Problems Associated with Marketing Planning Ignorance 296How to Prepare a Marketing Plan 298International Marketing Planning 303International Product Planning 304Can Marketing Planning Fail? 309Summary 309

21 Organisation and Control of Marketing 312Organisation 312Control 317Setting the Market Budget 318Budgets as Managerial Tools 321Summary 324

Further Reading 326

Index 327

I List of Figures and Tables

Figures

1.1 Matching customer needs with corporate resources 51.2 Added values enhance basic features 61.3 The sources of long-run profit improvements 91.4 Consumerism's way to better marketing 202.1 S-curves and technology change 302.2 The change in consumer markets 322.3 Shorter life-cycles make timing crucial 373.1a Marketing as a functional activity 413.1b Marketing as a cross-functional activity 413.2 Employee satisfaction leads to customer loyalty 453.3 The six markets model 463.4 The move towards trade marketing 504.1 Influences on consumer behaviour 574.2 The process of motivation 594.3 Maslow's hierarchy of needs 604.4 Unmet needs in developed markets 614.5 The adoption and diffusion process 634.6 Elements of attitude 644.7 The family 'life-cycle' 675.1 Market segmentation 826.1 A framework for marketing research 896.2 Forms of reactive marketing research 906.3 Forms of non-reactive marketing research 927.1 Marketing and the three 'C's 1007.2 The experience curve 1027.3 The sources of competitive advantage 1037.4 The dangers of the middle ground 1047.5 Forces driving industry competition 1067.6 Competitive benchmarking 1118.1 Internal and external marketing variables 1158.2 Business functions and the marketing environment 1178.3 The marketing audit in context 1178.4 Initial format for a SWOT analysis 1239.1 Linking customer needs with corporate goals 1279.2 Benefit analysis worksheet 1309.3 Benefit analysis worksheet results 131

x

List of Figures and Tables XI

904 Product/service life-cycle 1329.5 Product/market strategy and the product life-cycle (1) 1339.6 Product/market strategy and the product life-cycle (2) 1349.7 Product/market strategy and the product life-cycle (3) 1349.8 The 'Ansoff' matrix 138

10.1 A portfolio of several product life-cycles 14210.2 Ideal product introduction pattern over time 14310.3 The Boston matrix 144lOA Product portfolio: current and projected 14510.5 Market attractiveness and business strengths 14610.6 Portfolio matrix for Sealitt Ltd 14810.7 Directional policy analysis for Sealitt Ltd 14910.8 Portfolio matrix showing current and forecast positions 15010.9 Risk /reward continuing 15210.10 Screening procedure for ideas for new products 15510.11 Stages of new product development 15610.12 Market potential curve 16011.1 Added values enhance basic features 16711.2 Added values and the brand 16811.3 The profit impact of market share and quantity 16911.4 From brand to commodity 17111.5 A brand position map 17511.6 Bipolar map for detergents 17611.7 Brand functionality and personality 17711.8 Corporate brand positioning 17911.9 Global versus local brands 18112.1 The components of price 18512.2 The demand curve 18612.3 Consumer and supplier surplus 1911204 Graphical output of conjoint analysis 19212.5 The effect of perceived added-values on the demand curve 19412.6 Appropriate pricing strategies 19412.7 Price and the experience curve 19613.1 Communication relationships of an organisation 20113.2 The communication process 20613.3 The purchase decision and marketing communications 2081304 Some communication objectives 20913.5 The communications plan 21013.6 Steps in the process of putting together an advertising plan 21215.1 Breakdown of a salesman's total daily activity 23715.2 'Philes, Promiscuous and Phobes' 24115.3 The link between corporate markets and sales objectives 24716.1 Alternative channels of distribution 25016.2 Direct and indirect modes of shipments 25317.1 The cost of availability 264

Xli List of Figures and Tabies

17.2 The market response to service 26617.3 The cost /benefit of service 26717.4 The logistics systems concept 26718.1 Customer profit contribution over time 27018.2 Impact of customer retention rate on customer lifetime 27118.3 The ladder of loyalty 27218.4 Developing a customer retention programme 27520.1 The marketing planning process 29520.2 Product characteristics in respect of foreign markets 30520.3 Specifications implications analysis 30720.4 The key questions in international marketing 30821.1 Alternative marketing/sales organisations 31421.2 Wessol's product/market management structure 31521.3 A matrix organisation 316

Tables

119

248

118

299306

40The shift to relat ionship marketingIndustrial buying process 70Decision-making unit 70Bases for market segmentation 81Sources of competitor information 109The marketing audit: the business environmentMarketing operation variables 118The marketing audit: external and internal variables combinedLife-cycle stages: characteristics and responses 136Attribute levels 189Sales promotions 233Setting objectives for an individual sales representativeIntermediary selection criteria 254Steps in the corporate planning processUnderstanding marketing characteristicsCustomer profitability model 320

3.14.14.25.17.18.18.28.39.1

12.114.115.116.120.120.221.1

I Preface

There has probably never been a time when effective marketing has been morecrucial than at the present. The search for competitive advantage has taken onthe equivalence of the search for the Holy Grail in the turbulent businessenvironment of the 1990s. The role that marketing plays in guiding corporatestrategy is crucial and yet it is still the weak link for so many companies in theprocess that binds the customer to the organisation.

Marketing in the past has often been misinterpreted and over-simplified. Ithas been confused with selling - itself a crucial activity - or with a naiveconcept of 'giving the customers what they want' .

Through our work as teachers and consultants we have come to the stronglyheld view that marketing's role in the business is to find opportunities thatallow the organisation to reap a greater return on its assets, in particular itsmarketing assets . The marketing assets of a business include such things ascorporate image, brand names, sales and distribution networks, supplier andcustomer relations and, of course, its people. Incorporated as part of totalcorporate strategy, marketing becomes a powerful machine for building anddeveloping these crucial assets.

This book is designed to explore these ideas in a simple-to-read format .Whether you are an experienced marketing professional or entering marketingfor the first time, or if your work is in a non-marketing function but you need toknow more about marketing, we believe you will find this book helpful.

Whilst we have sought to put our own interpretation on the marketingconcept and techniques described in this book we owe a large debt to manymarketing professionals and teachers, including our past and present colleaguesat the Cranfield University School of Management, for their pioneering work indeveloping the large body of knowledge that now exists in the area. An equaldebt is owed to Dorothy Hendry, Lee Smith and Kate Brazier for typing themanuscript.

Cranfield University School of Management

XlII

MARTIN CHRISTOPHER

MALCOLM McDONALD