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This document describes all subjects and theoretical background of the marketing simulation
MyMarketingExperience. It’s purpose is to inform lectures about these subjects in order to assist
lectures building their lecture material.
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Key subjects and theory MyMarketingExperience
Contents
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https://www.youtube.com/watch?v=a_dKl_933pw
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2. How to play
https://www.youtube.com/watch?v=kY8aalcqUIY
To play MyMarketingExperience successfully, teams must create and manage the marketing
strategy of a company selling their own brand of jeans in competition with others in their
own unique marketplace. The winners are the owners of the most successful company –
based on profit, market share and brand awareness - at the end of the simulation. As in the
real world, any competitive strategy can lead to success, depending on the decisions teams
make, and the actions of their competitors.
Made up of 8 rounds, each round represents one quarter of a financial year and is based
around one of the 7 Ps of marketing.
In addition to these core decisions, you will also be faced with a set of additional decisions, specific to
the theme of the quarter. The effects of these are automatically calculated by the simulation when
the quarter is ‘closed’ by the lecturer and are produced as results reports and team rankings. You
must examine and react to what your results show you from the previous quarter to tell you about
your team’s performance when making your next quarter decisions.
These will all have an impact on your results. You will also need to draw on your knowledge of
marketing theory to make sound decisions; in each quarter, you can access theory revision material to
help you think about your decisions.
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Market research data is available to purchase in each quarter and can provide extra
information and insights into market trends.
All the strategic decisions your team makes throughout the simulation are saved as a
marketing plan document, to be used to evaluate how successfully you have applied your
strategy.
Product - Quality
Quality improvements
Price
Promotion message
Place – Physical distribution channels
Place – Online distribution channels
Place – Set stock levels
People – Training budgets
Process – Set customer service level
Physical environment – Design and decorate shop window and interior
Physical environment – Digital technology usage within shopping environment
Market research
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f) Financial results
g) Market share
h) Scorecard (KPI’s)
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a) Strategic decisions
Company name
Market analysis
Customer analysis
Competitor analysis
Company analysis
Mission statement
Key Performance Indicators
j) Q1 Theory
Understanding the marketplace is key to business success. Easy to say but often more
difficult to achieve. There are many sources of information to analyse and various influences
which can determine business success (or failure). So as marketing director or manager,
where do you begin when designing a marketing plan for an existing jeanswear company? To
begin with there are two broad areas to tackle: 1) analysis of the market environment, which
helps with understanding; 2) setting marketing objectives – which helps define the direction
you wish to take the business.
Market analysis
Macro-environment analysis
Analysis of the macro-environment involves identifying the broad forces that might influence
a business’s actions and decisions. These areas of influence are external to the business,
which means they can affect marketing management practices and decisions but the
business is unlikely to be able to exert any direct influence over the force, e.g. economic
recession can significantly affect demand for products and services. More specifically, the
macro-environmental forces a marketing lead should consider are as follows:
Economic – these influences are likely to have a critical impact on business success.
The underlying influence is the condition of an economy as this affects supply and
demand. Simply, if an economy is growing, there is likely to be increased demand;
however, when there is a recession the opposite is likely to be true and the outcome
could be a fall in demand. Consequently there are a number of key economic
indicators a marketing team should monitor regularly:
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o economic growth
o employment levels
o interest rates
o exchange rates
o international markets
o natural resources
o recycling
o low-impact packaging
o climate change
o global warming
o pollution
World governments are concerned about the likely impact of climate change on economic
activity and global food and water production. As a consequence, there are many initiatives
designed to control the impact of human activity (as a whole) on the planet. Such initiatives
can influence business decision-making, e.g. controlling carbon emissions, reducing the use
of carrier bags, energy conservation, use of water in manufacturing processes.
Legal – the systems of rules by which a business should operate, e.g. the distance
selling regulations protect consumers when they shop online, allowing them a seven-
day review period post purchase. Businesses are affected by their own national and
European laws.
Political – the actions of the government, which can have significant influence on
businesses as politicians make decisions about rates of tax, social benefits, public
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spending and many more areas of activity which can affect the nation’s prosperity
and individual businesses and market areas.
Social and cultural – involves the structure of the population in terms of demographic
profile (e.g. population growth, age distribution, household structure), cultural
differences (traditions, individual and community values, sub-cultures) and
consumerism (e.g. actions against consumption, corporate and social responsibility
issues).
Other tools that can aid marketing decision-making and analysis are:
the Boston Consulting Matrix Growth share matrix, which can aid the management of
a mixed product portfolio. The matrix helps to classify products into one of four
types: Stars, Dogs, Cash cows and Problem children
Micro-environment analysis
Marketing audit
In addition, the marketing structures and marketing systems should be audited regularly to
monitor effectiveness and efficiency of these areas of the business. As marketing lead you
will need to be selective about which items to measure and the level of detail you require.
Trying to monitor everything in detail can become overwhelming and not aid decision-
making. As a result marketing managers need to take an organised and systematic approach
towards reviewing the market environment and their own internal operations. This is called a
marketing audit: a comprehensive, systematic, independent and periodic examination of the
marketing environment, objectives, strategies and activities with a view to determining
problem areas and opportunities and recommending a plan of action to improve the
company’s marketing performance (see the table below).
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Analysis of market
In terms of the strategic analysis, another way to study the market is to review choices:
3. Product development, which means developing new products for existing customers.
While this is important, there are also more detailed objectives which can be applied to
specific products in your company product portfolio:
build
hold
harvest
divest.
Marketing objectives
Ultimately, as marketing lead you will be responsible for setting objectives, which will drive
the marketing strategy. Remember, marketing objectives refer to the nature of the business
and are how a company’s mission statement is turned into detailed objectives to achieve the
profit and other objectives of the company. Businesses often pursue a mix of objectives,
including profitability, sales growth, market share improvements, brand image, reputation
and innovation.
Setting objectives should provide a clear direction for everyone in the business.
1. What are we aiming to do? Be as specific as possible, giving details of target markets
and products (or services).
2. How will we know when we have achieved our objective(s)? In other words, how are
you going to measure the activities you are going to engage in, e.g. the number of
new enquiries generated for your new brand of jeans in a given time period, from
specific target group of customers.
3. Is it possible to achieve the aim(s) set out in your answer to question 1? In other
words, how realistic are your objectives? For example, the jeans market is highly
competitive, with many well-established brands – Levi’s, Lee, Wrangler, Calvin Klein
and so on – accounting for a significant portion of the market. So it would be
unrealistic to set a goal for a completely new brand to quickly become market leader.
4. What is the time frame for achieving your aim(s)? In order to measure the success of
your activity against your marketing objectives it is important to have a timescale.
Achieve an annual growth rate of at least 10% within one year, with a profit increase
of 5%.
By the end of Year One, achieve 15% of sales through the internet or digital means.
1
Adapted from Kotler, P., Keller, K.L., Brady, M., Goodman, M. and Hansen, T. (2012)
Marketing Management, 2nd edition, Harlow: Pearson, pp. 903 – 905.
a) Strategic decisions
Company name
Analysis
Mission statement
Key Performance Indicators
Segmentation & Targeting
Brand positioning
Brand Profile
k) Q2 theory
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Identifying and targeting a particular market segment can deliver significant benefits and cost
savings. If a business develops a detailed understanding of its potential customers, there are
often opportunities to differentiate a brand, grow market share and generate profits. For
example, Levi Strauss & Co (Jeans) specifically targets certain types of consumers, with
particular sub-brands. Denizen are jeans made with premium-quality fabrics for the whole
family; Levi’s classic jeans are the quintessential American jeans, for the discerning
individual; Signature are an affordable jeans option, made for the price-conscious target
market1. Levi’s understands its customers very well and is able to develop strategies to access
and serve each of its selected target markets.
It is generally accepted that there are three basic steps to get from an undifferentiated mass
market to a specific target market.
Step 1: Develop an understanding of the consumers in the market. For example, in the UK,
the median age of the population is 40.2 years; 80 per cent of the population lives in an
urban location; under the age of 65 there are slightly more males than females but over 65
there are more females; over 22 per cent of adults are classed as obese 2. At this stage you
should gather a broad range of statistics to help you to consider the whole of the population
but also to build up a profile of the general characteristics of the broad groupings in the
population.
Step 2: Group the individuals in your population according to the requirements and
characteristics of the segments. At this stage it is important to consider your marketing
strategy as you are looking for segments to target that will enable you to fulfil your marketing
objectives. There are many different ways to segment a market. For example, you can use the
marketing segmentation variable demographic criteria such as age, family life cycle stages, or
behavioural segmentation variables like the benefits sought by the buyer and so on. There
are many different segmentation variables that can help you to identify and access your
target market – the table below provides a list of variables grouped under three headings.
Remember that you need to be able to use the variables to identify the groups of individuals
(segments) within the market before you decide on your particular target market(s). So
arguably, profile variables are the most straightforward variables to use, followed by
behavioural and then psychographic, but all provide a wealth of information on the
consumer segments available to you.
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Step 3: Select the target market. At step 2 you might have identified several potentially
interesting market segments but at this stage the aim is to select the most attractive and
potentially viable as your target market(s). The variables you use to choose your target
market should form the basis for your core understanding of that target market and thus
support you in the development of a suitable marketing mix.
Targeting
Applying the segmentation process should eventually lead to the identification of the target
market(s). A deep understanding and consideration of the characteristics of the individuals
within the target market has significant implications for the marketing mix and achieving
your marketing objectives. Evaluation of the market segment involves considering the
attractiveness of the particular market(s) and the company’s capabilities to serve the
different market segments available. Market attractiveness can be assessed using the factors
in the table below.
Market attractiveness
Market factors Competitive factors Political, social and environmental
factors
Segment growth rate Nature of the competition Political issues
Segment profitability Numbers of new entrants Social trends
Price sensitivity Differentiation between Environmental issues
competitors
Power of the
consumers
Power of the supplier
Barriers to market
entry
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Once a target market has been selected and evaluated for its potential, the final process
involves developing a marketing mix for the market. Marketing practice today usually does
not combine a mass marketing approach with a single marketing mix trying to engage with
the whole market. Marketing understands that each individual target market needs a
separate and agreed marketing mix, though companies can have several target markets and
thus several target mixes, as in the case of Levi Strauss & Co discussed above.
Rather than creating segments the task of the marketing lead is to identify them and to
decide which one(s) to target. Segment marketing offers benefits over the old-style mass
marketing (practised in the early 1900s by companies like Ford and Coca-Cola), allowing
companies to differentiate their offering from that of their competitors and provide the
customer with a value proposition matching or closely aligning to their needs.
1
Levi Strauss & Co (2013) ‘Our Brands’ http://www.levistrauss.com/brands, accessed 6
October 2013.
2
CIA World Facts Book, 2013.
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a) Strategic decisions
Company name
Analysis
Mission statement
Key Performance Indicators
Segmentation & Targeting
Brand positioning
Brand Profile
l) Q3 Theory
Positioning is central to a company’s advantage and determines where and how companies
compete. Marketers aim to define unique market positions for their offerings in order to
stand out in the eyes of the consumer. Branding refers to the processes which a company
undertakes to ensure that its products and services are different from competing brands but
also internally consistent so as to deliver value to customers. Arguably, positioning and
branding are inextricably linked. Positioning identifies the location in the customer’s mind
and branding is the processes which ensure the chosen market positioning is achieved.
Positioning
Once a target market is chosen the next significant task is to determine the positioning of a
company on a positioning map. The positioning strategy should complement the target
market decisions. Successful positioning can deliver many benefits for the business, e.g.
market share, competitiveness. But to benefit, a business needs to use the marketing mix to
differentiate itself from the competition and this is where the challenges lie.
The marketing mix decisions a marketing manager takes will shape and define the company’s
positioning and should reflect the benefits the target customers require. For example, Lidl,
positioned as a discount supermarket in many parts of Europe, has designed its market mix
to reflect this positioning strategy. Carrefour, meanwhile, the leading retailer in France’s
grocery sector, occupies a different market position by offering low prices, wide product
choice and emphasising quality. The supermarket brand is able to substantiate and support
this through its promotional messages of reliability and its product selection and pricing
strategies.
Clear positioning which the target customer can identify with, e.g. BMW, Mercedes,
Lexus are all positioned as luxury cars, whereas the Ford Fiesta, VW Polo, Kia Rio and
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Renault Clio are positioned as economical, practical and affordable small cars. Each
brand then occupies its own niche, which adds further definition.
Brand credibility – target customers should believe in the offering and the company’s
ability to deliver on its promises. For example, Apple, Google and Coca-Cola are
world-leading brands, which all have high levels of brand credibility as their
management teams are perceived in a strong, positive light and deemed to be
capable of delivering on their market promises.
Brands can be repositioned by changing target customer perceptions, which can be achieved
in different ways, e.g. by changing a product’s image, making changes to the product,
targeting a different market and so on, but usually includes all elements of the marketing mix
activities.
Branding
Branding is a powerful marketing concept which can make the difference between business
success and failure. The distinctive logos, names, packaging and product designs all
contribute to the ultimate success of a brand. Recently, Interbrand cited Apple as the number
one global brand, followed by Google, Coca-Cola, IBM, Microsoft and GE 1, and each of these
brands – and the others in the top 100 – are easy to identify. A brand is the idea or image of
a specific product or service that consumers connect with, by identifying with a combination
of the name, logo, jingle, slogan or design of the company. A brand is the total emotion that
the consumer feels when they hear the brand name, see the brand logo, see the product or
service, or hear the jingle and so on. Once a product or service is well branded, the outcome
is that it is immediately recognisable by more and more people, and these people all identify
with certain attributes of that brand.
A brand is the idea or image of a specific product or service that consumers connect with, by
identifying with a combination of the name, logo, jingle, slogan or design of the company. A
brand is the total emotion that the consumer feels when they hear the brand name, see the
brand logo, see the product or service, or hear the jingle and so on. Once a product or
service is well branded, the outcome is that it is immediately recognisable by more and more
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people, and these people all identify with certain attributes of that brand.
A brand differentiates a company from other companies offering the same or similar services
or products. In an era of ‘me too’ products and services, branding often makes the difference
as to why consumers purchase one product over another and is aligned with all elements of
the marketing mix that create the brand image and maintain the brand story. Think Apple
and the brand the company has created through its product, its pricing, its promotion, its
distribution, its physical environment, its process and its people – all its marketing mix
activities align with the brand image of innovativeness. The slogans below show the
development of the brand over the years and align to where Apple wants to position its
brand.
‘Switch’ (2002–2003)
The manufacturer of the product and these types of brands can confer particular
benefits, such as after-sales support, and strong brand equity, which can help to meet
and exceed customer expectations
The distributor of the product and these types of brands are usually referred to as
own-label brands as they are created and owned by the distributor, e.g. Tesco Finest,
Sainsbury’s Basics, ASDA Smart Price.
Developing a strong brand can bring benefits to the company owning the brand in terms of:
profitability
trust
legal protection.
the brand says something about the quality and consistency to be expected
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the brand should provide consistency to the customer so they know what they are
purchasing each time
Digital branding and branding in the physical world are now intertwined and the brand image
online and on social networking sites is as crucial as the offline brand.
1
Interbrand (2013) ‘Best global brands 2013’, www.interbrand.com/en/best-global-
brands/2013/Best-Global-Brands-2013.aspx (accessed 14 October 2013).
a) Strategic decisions
Product development
Price objective
Select pricing method
Determine demand
Estimating costs
Analysis competitors’ prices
m) Q4 Theory
Marketers need to infer how demand will respond to various levels of marketing mix
activities and to design an appropriate marketing mix of activities to achieve their objectives.
There are seven Ps within the marketing mix activities on which marketers must focus to a
greater or lesser extent. These are:
Product/service
Price
Promotion
Place
People
Process
Physical environment
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Marketers need to decide what elements within each to use to satisfy their target market at
a profit. For example, Zara, a leading European retailer, uses Product, Place, Process and
Physical environment predominantly and very little Promotion to maintain its €6 billion in
revenues and €2 billion in profit.
The elements of marketing mix are a tactical part of the marketing strategy and planning
process and the elements of the mix are combined to create differential advantage from the
competition and to manage demand.
Product
A product (or service) is more than it seems in so far as it is made up of several layers, which
have implications for marketing decision-makers. The innermost layer is the core product or
core value to the customer, which is the part that delivers the key functional or symbolic
benefit, e.g. a pair of trousers provides clothing and a symbol of what type of person the
wearer is; a car is a form of transportation but also a form of identity; a pizza provides
sustenance. The next layer consists of product features and capabilities that enhance the
product: the augmented product. These features might be the brand name, special design
features, and/or labelling and packaging. You should note there are many ways to augment a
product. The final layer consists of additional features such as after-sales service and other
post-purchase activities. All of the aspects of a product can be shaped and tailored to suit the
needs of the target market.
Product quality has a direct impact on how the product is perceived and is based on level
and consistency of performance. The quality level must support the product’s positioning
and can range from high quality to low quality, which can equate with high or low
performance quality. For example, a BMW provides a higher quality than a Honda in terms of
engineering and longevity.
Innovation is critical to the continuing success of companies and relates to bringing new
ideas to life within companies. Product innovation means using creativity and imagination to
be different and unique and to provide features, styles or designs that align with customer
needs and for which they are happy to pay and to become loyal to. Product modifications,
including features, style and design, are means to ensure that the product is distinctive
and/or innovative. Product features, and particularly new and innovative features, can
differentiate a product from its competitors. Marketers must assess which features are
valued by the customer and can be provided at reasonable cost by the company, and these
can range from basic to high value. Style can be basic or eye catching but is simply the
appearance of the product. Design goes to the core of the product – it relates to a deep
understanding of customers’ needs and links to the customer’s experience of the product.
Labels can range from simple tags attached to products to complex graphics that are part of
the packaging. They provide the following functions:
provide information about the product, such as country of origin and ingredients
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provide support for the market positioning and help promote the product.
New products and services should be trialled and tested. Many new designs fail to reach the
commercialisation stage due to lack of market demand, poorly conceived designs and
inability to meet the needs of the customer. A successful new product will have passed
through many stages of development and planning before reaching the market, e.g. idea
generation, screening, planning, development, test marketing and commercialisation.
Not all products or services are new but all go through a life cycle, which has implications for
marketing managers and decision-makers. There is an analytical tool called the product life
cycle (PLC), which can aid marketing decision-making in relation to the amount of investment
required at different stages of a product’s life: introduction, growth, maturity, decline. For
example, in the introduction phase of a product’s life, it is likely to require heavy investment
in its production, promotion and distribution but sales are likely to be low. As sales of the
product grow, costs can be streamlined and profitability begins to increase as the product
reaches maturity and the peak of its sales. Over time further investment will be required to
sustain the brand. The PLC tool predicts that eventually sales will decline, at which point it
might be a good time to cease production. The problem with this tool is that while it can help
with decisions about market growth, managing marketing objectives and product
termination, it does not accommodate very well the length of a product’s life and it is
important to monitor the real changes in demand.
A business should aim to have a mixed portfolio of products. Broadly speaking, there should
be a balance between new and existing products. Companies often have many products in
their portfolio, e.g. Heinz soups, ketchup and ready meals. A product line consists of a group
of closely related products, so at Heinz, Tomato Ketchup is available in many different forms,
from a 64-ounce top-down bottle to a 0.95-ounce Dip & Squeeze package, but all these
related products form a product line.
Price
Price is the driver of revenue. In the long term, the price of a product must cover all its costs.
Such practicalities of pricing can conflict with the other elements of the marketing mix but it
is important to ensure that the price of a product is not set in isolation from the rest of the
mix decisions. Price is inextricably linked to quality. A potential buyer will continually
consider the price in relation to the perceived quality of a product prior to making a purchase
decision. This evaluation of price and quality is how a buyer arrives at the notion of value.
There are many challenges in setting prices as there are numerous and interrelated
considerations to take into account – for example, how price will affect demand, the ratio
between revenue generation and price, cost and price, and the effects of raising and
lowering prices.
Factors to consider when setting the selling price include the customer’s perception of value,
price ceiling, product costs and price floor. There are other internal and external
considerations, including marketing strategy, objectives, other mix activities, the nature of
the market and demand and competitors’ pricing.
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There are many methods that can be used for setting prices, several of the main ones being:
1. Cost-orientated pricing, which involves considering all the associated production costs
and the required profit.
2. Demand-orientated pricing, which involves considering how much the buyers are
prepared to pay. Some companies offer different price points for similar products, e.g.
Tesco Everyday value baked beans are sold at £0.25 for a 420g tin, whereas Tesco
Baked Beans in Tomato Sauce are £1.40 for a pack of 4 × 420g tins.1
Ultimately, the price the customer will pay depends on the value of the product. There are
several ways to look at value and its impact on pricing:
trade-off analysis, which involves working out the trade-off between price and a
product’s other features
price–quality relationships
political factors
competitive behaviour.
Price discounts are rewards for customers for certain responses, such as paying at a certain
time, volume purchases and off-season buying. The form of discount can include cash
discounts or 3-for-2 for a quantity discount. Discounts are often used in the retail trade to
ensure that stock is not held out of season and that stocks are cleared at the end of each
month or trading period.
General pricing objectives include survival, profit maximisation, market share, leadership or
customer retention. At a more specific level the price can be set to retain existing customers,
attract new ones or prevent competition from entering a market, or can be reduced
temporarily to create excitement for the brand.
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mark-up pricing
target-return pricing
perceived-value pricing
value pricing
going-rate pricing
auction-type pricing.
The relationship between price and demand must be understood. Each price a company
charges will lead to different levels of demand. A demand curve shows the different units the
market will buy in a given time period at different prices.
Estimating costs takes two forms: direct and indirect or fixed and variable. Total costs must
be estimated as it is critical that a company covers its costs and makes a profit in order for
the company to survive and prosper.
1
Tesco.com (2013) Grocery search Baked Beans,
www.tesco.com/groceries/product/search/default.aspx?
searchBox=baked+beans&icid=tescohp_sws-1_baked+beans (accessed 15 October 2013).
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9. Q5 – Promotion
a) Strategic decisions
Decide promotion budget
Decide offline and online spend
Communicate objective
n) Q5 Theory
Q5 Promotion
Today, use of the word promotion belies the nature and extent of this element of the
marketing mix. Promotion, or communication, is an extensive subject area within the
marketing discipline. There are many communication tools, techniques, media and
implementation strategies to consider. With widespread uptake of the internet as a
communication channel, there are even more opportunities to develop communication
messages and greater opportunities to use non-conventional ways to interact with target
markets.
to raise awareness
to remind
to reinforce
to stimulate action.
Once the objectives are decided, consideration should be given to the creative agency, which
will produce the marketing messages, the media selection and the deliverables (in terms of
the creative messages and executions). Once a creative agency (or group of agencies) is
identified, the next action is to consider the mix of promotional tools. The tools a business
chooses to deliver its marketing messages will be determined by a number of factors: the
demographics of the target audience and its geographical distribution, the nature of the
message and the objectives of the communication as some tools are better suited to
delivering certain types of messages. For example, print media are often used for
information-based appeals, whereas broadcast media tend to carry emotional appeals.
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There are many different communication tools that come under the promotional mix
umbrella. For example:
Personal selling is highly interactive, adaptive and informative but is costly and has
limited scope for reaching a highly dispersed target market.
Digital promotions are relatively low cost, can have global reach, be interactive,
personalised and highly targeted. But there can be high costs at the early
development stage, especially if a website is required, and this form of
communication is easily ignored by the recipient.
Sales promotions are generally based on incentives which are specifically used to
stimulate action and encourage sales. But over-use of sales promotions can damage
brand image.
Public relations can deliver highly credible messages through third parties and can
stimulate high levels of engagement, but there is a loss of control over the message
and as a result messages can become distorted.
Each tool is different and offers different opportunities to communicate. But the choice of
tool is not the only consideration the marketing team has to make: they will also need to
consider the advertising or media channels. Media channel choice is equally important as it
will affect the opportunity people in the target market have to see the message. Media
channels include:
television
radio
cinema
outdoor
internet
mobile
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social media.
Deciding on the communication objective, promotional tools, media and the message should
enable the marketing team to devise a campaign that has the capacity to meet its objectives.
But it is important to consider the implementation of the campaign, the scheduling of
messages, and to determine how the success of the campaign will be measured.
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The spread of the internet and the widespread uptake of mobile communication devices
have significantly changed how, when and where individuals and companies communicate.
Social media is a revolutionary area where communications messages are spread between
individuals rather than emanating from companies. In this area of communications, the
emphasis is on dialogues, which engage and follow the target market, rather than
monologues sent from a company to a specific target market. The internet and social media
enable interaction with certain target groups and demographic profiles, but companies must
be aware that their interactions might be viewed as intrusions. Certain target markets and
profiles do not engage with the digital world, whether through lack of interest or inability to
gain access.
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10. Q6 – Place
a) Strategic decisions
Distribution strategy
Logistics management decisions
o) Q6 Theory
Q6 Place
Managing the logistics of aligning the raw material, manufacturers, company and resellers
right through to the customer involves planning, implementing and controlling the physical
flow of goods, services and information from points of origin to points of consumption to
meet customer needs at a profit to the company. This has also been called the customer
value delivery network, allowing all the focus of the supply network to be customer centric
rather than the traditional focus of efficiency.
Place involves not only the location of the sale of a product but also the distribution strategy,
which determines the flow of products along the supply network or even the global supply
network as many are now global – these were formerly called a supply chain and operate
from manufacturer to end consumer. How the products get to the point of sale is almost as
important as the location of the point of purchase.
In its simplest form the supply network is a network of companies, which handles the
manufacture, distribution and sometimes selling of specific products and services. Typically a
supply network can be traced from the production of raw materials to the final point of
consumption/use. Supply network management involves managing raw materials,
production, distribution of components and finished products and entails more than just
logistics and distribution. Consequently, producers have to consider not only the end
consumer but also the channel intermediaries.
Distribution channels
Distribution channels can take different forms and perform a very important function:
breaking bulk. Manufacturers generate products in very large quantities and batches and the
distribution channel works to reduce the bulk at each of the stages in the channel so that
each customer receives products in the quantity they require. In other words, by moving
items through a distribution channel the needs of the manufacturer and the consumer can
be met. For example, Coca-Cola sells more than 4 billion bottles and cans of Coke in Britain
each year1, while the average individual in this region drinks 210 portions2. Just imagine the
distribution network needed to make this happen.
Distribution channels for consumer products can involve different combinations of
intermediaries between the producer and the consumer: retailers, wholesalers and agents.
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Business-to-business distribution channels operate in the same way but they tend to be
shorter than consumer-driven channels.
Distribution channels for consumer products can involve different combinations of
intermediaries between the producer and the consumer: retailers, wholesalers and agents.
Business-to-business distribution channels operate in the same way but they tend to be
shorter than consumer-driven channels.
Channel strategy
The type of channel a business might engage with will depend on channel selection,
distribution intensity and the level of channel integration. The reasons for channel choices
vary. For example, Procter and Gamble, manufacturer of a large portfolio of household,
beauty and grooming products, chooses to distribute its products through retailers, whereas
Dell Computers sells many of the products it manufactures directly to the end user.
Choice of distribution channel will be determined by a number of factors: the type of buyer-
individual or business- the location of the buyer and their purchasing preferences, the
producer’s situation, the nature of the product and the competitiveness of the particular
industry sector. Distribution intensity is another strategic decision, which is likely to be made
by the marketing team. Broadly, this decision involves choosing from the following options:
Intensive distribution aims to saturate the whole of the marketplace and to stock the
product in as many outlets as possible. This is an approach that makes the product
available in myriad places where the consumer could possibly want it. Sweets, soft
drinks and many food products are sold in millions of outlets to provide maximum
brand exposure and consumer convenience.
Selective distribution lies between intensive and exclusive distribution and is the use
of more than one but fewer than all intermediaries who are willing to carry the
product. The aim is to identify key locations where the product will be available.
Televisions and home appliances are often distributed in this manner through dealer
networks and selected large retailers. This method gives companies good market
coverage, with more control but less cost than intensive distribution.
Exclusive distribution means severely limiting the number of locations where the
product is available and provides control over the service levels and other aspects of
distribution. It means that through exclusive dealing contracts a close partnership
exists between the distributor and the company. Rolex watches are available only
through exclusive distribution through stores like Harrods in London and Les Galeries
Lafayette in Paris.
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Logistics is the moving of the product from raw material through manufacture to the
ultimate consumer. Decisions must be made in the following areas:
Retailing
This is often referred to as a distributive trade. One of the key challenges for retailers is to
have the right products in the right place at the right time. Retailers have to work out how to
balance the costs of distribution against the demands of the consumer. Zara, the fast-fashion
retailer, has created competitive advantage by organising the manufacture and distribution
of products in such a way that the business is able to respond to very short lead times and
get highly fashionable items in its stores in less than three weeks. In a typical retail physical
distribution system there are several key components to consider: customer service, order
processing, storage, stock control, warehousing and transportation. Global retailers Walmart,
Tesco and Carrefour are leaders in the field of distribution.
Multi-channel strategies
Today’s successful companies typically employ multi-channel strategies to market and have a
number of channels through which the customer can engage with the product. Customers
nowadays expect channel integration and will use the internet to search for a product and
then use a retail outlet to try and buy; alternatively they can view the product in a retail store
and buy online. To respond to the diversity of needs and situations, marketers need to create
multiple points of presence, fully integrated to deliver a seamless customer experience. This
can include mobile, automation as in ATM and vending machines, augmented reality options,
self-service technologies and location-based applications.
Multi-channel distribution occurs when a single firm uses two or more distribution channels
to reach customers. HP has a sales force for large accounts, outbound telemarketing to sell to
medium-sized accounts, direct mail with an inbound number to sell to small accounts,
retailers to sell to smaller accounts, and the internet to distribute to a broad range of
customers.
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The internet is a rapidly growing channel of distribution for many products and services and
allows customers to shop and order from their homes with a 24-hour/7-days-a-week service.
European online retail sales will reach €191 billion by 2017, up from €112 billion in 2012. 3
1
Coca-Cola Enterprises Ltd (2013) ‘Great Britain’, www.cokecce.co.uk/ (accessed 14 October
2013).
2
Coca-Cola (2013) ‘Per capita consumption of company beverage products’, www.coca-
colacompany.com/annual-review/2011/pdf/2011-per-capita-consumption.pdf (accessed 14
October 2013).
3
http://blogs.forrester.com/martin_gill/13-03-13-
european_online_retail_forecast_2012_to_2017_online_growth_will_begin_to_polarize_acr
oss_europe
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a) Strategic decisions
Service process design
Website service process design
Write an employee promise
p) Q7 Theory
Businesses develop relationships with customers through service encounters and depending
on the particular activity area can provide highly tailored personalised services to self-service
or technology-managed service processes.
As services are becoming a central element of business activity, service encounters are
becoming more than just a single interaction between a customer and a service provider.
Service providers aim to ensure the interactions with their customers meet customer needs
and wants, but the service encounter goes beyond simply selling products or services and
can occur before, during and after the purchase occasion. The current consumer decision
journey (Edelman, 2010)1 shows clearly that the level of engagement before and after
purchase, whether online or offline and through multiple channels, has increased.
According to Bitner et al (2008)2, service blueprints are a useful way of planning the service
process. A typical blueprint consists of several dimensions: customer actions, visible contact
points (the customer sees), invisible contact points (the customer doesn’t see) and support
processes.
Service quality
Perhaps the first consideration is: what do customers want from retail service providers? The
second consideration is: what level of service should the retailer provide? Parasuraman et al
(1991)3 identified gaps between what the customer expects and the perceptions of the
service provided.
Marketers use the service process experience and layout of their stores to create the
atmosphere they wish their customers to have for the purchase or browsing experience.
Service design should make the shopping or browsing experience more inviting, more useful
and align with the profit performance needs of the company. Many service processes are co-
created with customers. Marketers need to design a service process blueprint that will
identify all the processes that the customer must engage with, decide on the sequencing of
the process, the visibility and timing and tolerance of the customer to demands on their time
and delays. The process design should align with positioning and also create a clear
experience advantage over the competition.
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People
Many companies understand their people can provide a competitive advantage and hire and
train their staff better than the competition. Using the people element requires that
companies hire well, pay well and train and retrain their staff to align with the positioning of
the brand. For example, Disney trains its staff to understand their importance to the
customer and to ensure that they ‘make people happy’.
The service encounter relies at some moment in time on interaction(s) with people. Services
and the people who deliver them are often part of a simultaneous production and
consumption process and the quality of the service encounter is frequently reliant on the
quality of this interaction. People are central and a business should ensure that the
workforce involved in delivering services is suitably trained, highly motivated and able to
meet the needs of the customer in an efficient and effective manner.
According to research, there are four dimensions of service quality beyond the physical,
which will be covered in ‘Physical environment’, aligned to people skills:
How staff are trained, how they are presented and their uniforms or other aspects of their
attire all contribute to the experience the customer will get during their engagement with
the firm, whether it is in a retail setting, by phone contact or online.
1
Edelman, D. C. (2010) ‘Branding in the Digital Age’, Harvard Business Review, 88(12), 62–68.
2
Bitner, M., Ostrom, A. and Morgan, F. (2008) ‘Service blueprinting: a practical technique for
service innovation’, Californian Management Review, 50(3), 66–94.
3
Parasuraman, A. L., Berry, L. and Zeithmal, V. A. (1991) ‘Understanding consumer
expectations of service’, Sloan Management Review, Spring, 39–48.
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Key subjects and theory MyMarketingExperience
a) Strategic decisions
Sound
Smell
Sight
Touch
q) Q8 Theory
Q8 Physical environment
The physical environment is where a service encounter takes place and where services are
delivered. The setting is sometimes referred to as the servicescape. From a marketing
perspective, the physical environment gives customers an indication of the kind of service
they might expect to receive and the type and quality of products available, aligned to target
market expectations. Physical evidence is included in this area and is anything tangible that
the consumer receives as part of the service encounter, e.g. carrier bags and tickets.
In a restaurant, hotel or spa, the décor, furnishings and building all give a potential customer
clues about the quality of the service encounter they are about to receive. Ultimately, the
ambience of a location can have a significant influence on the customer’s perception of the
service quality. Accor, the world’s leading hotel operator, offers more than 15 different hotel
formats to provide ‘a comprehensive range of options across the luxury to the economy
spectrum’1. The group’s hotel brands are distinctly different in appearance – for example,
Sofitel is an upscale, luxury hotel chain, designed to create a feeling of French class and style;
Novotel is a mid-range hotel, catering for families; and Ibis is a budget chain, which aims to
provide its guests with a ‘happy sleep’.2
The layout and physical organisation of a service business can also affect overall perceptions
of the service experience. This element of the service mix can be very tangible and help to
reassure and affirm customers’ quality expectations. The physicality of a location provides
many clues for a potential customer, e.g. from the cleanliness of the toilets and the tidiness
of the facility to the style of the décor.
For a hotel, restaurant, beauty salon and spa, aspects of physical evidence might include the
following:
parking areas
the building, its facilities and rooms where the service encounter takes place
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For a retailer, the physical evidence aspects are very important. For example, when Anita
Roddick, founder of The Body Shop, opened her first shop in Brighton in 1976, she painted
the store green and sprinkled fragrances on the pavement outside to attract customer
attention and draw people into the store. What Anita was doing was creating an atmosphere
that could position the store in consumers’ minds. According to research, retailers regularly
use atmospheric scent, e.g. coffee shops, bakeries, fragrance stores, and music to encourage
greater product engagement, to improve perceptions of the store’s image and to increase the
time a customer spends in a particular store.3
The important message for market managers is that if they are able to enhance the physical
environment through use of the five senses, customers will possibly behave in a more
favourable way towards the brand and smells, sounds and design can all be used to positively
enhance the experience and give target customers further assurances that they are making
the right purchase decisions.
1
Accor (2013) ‘Accor’s strategic vision’, www.accor.com/en/group/accors-strategic-
vision.html (accessed 14 October 2013).
2
Accor, Ibid.
3
Vaccaro, V., Yucetepe, V., Torres-Baumgarten, G. and Myung-Soo Lee, A. (2009) ‘The Impact
of Atmospheric Scent and Music-Retail Consistency on Consumers in a Retail or Service
Environment’, Journal of International Business and Economics, 9 (4), 185–196.
13. Contact us
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