The marketing orientation is perhaps the most common orientation used in marketing. It involves a firm essentially basing its marketing plans around the marketing concept and thus supplying products to suit new customer’s needs and changing customer trends. Business who recognise this “see the customer as the central driving force behind its activities, recognising that business only survive if they meet customers needs” Page 2 Liz Hill ; Terry O’Sullivan Foundation Marketing 3rd edition
Marketing is a management process which identifies, anticipates and satisfies customer requirements profitably and efficiently. There are many different aspects that combined, create the marketing orientation:
The marketing mix is one of these and is made up of four vital aspects, Place, Price, Product and Promotion. “The key marketing activity is the management of the company’s marketing mix” (D.Jobber And John Fahay, Foundation of marketing 658.8 JOB, Page 9) and so when marketing a product or service any business must try and link between the four to reach their desired target market. Depending on the product or service in question a company’s marketing strategy will be different and they will consequently strive to achieve.
The Four P’s
Product – This is the final product or service that a business sells to its customers. The product will vary depending on the target market i.e. the quality of a product will depend on who the target market is. Take Tesco for example, they offer their customers the choice of buying ‘Tesco Value’ foods which are a cheaper inferior good which act as alternative to branded normal goods. They are aimed at customers with a lower income and smaller budget. When designing a product or service a company must look to attract customers and try to offer something different, something that would make customers want to buy their goods as apposed to a similar company offering similar goods, they must try and find a unique selling point.
Price – Pricing your product or service is vital and one of the most important decisions to make; too high and customers may not be willing to pay that price, resulting in fewer sales and ultimately a lower profit. And too low could also prevent a company from making a profit. To ensure that you are breaking even then the price you sell your product at must be more then the total cost you have incurred manufacturing the product or delivering a service. To calculate total costs, businesses use the formula TC=FC+VC (Total Cost = Fixed cost + variable costs).
A business must find a balance between the two to ensure the customer is satisfied with the price, and to still generate substantial revenue. There are many approaches to pricing that a business could choose to use depending on the product or service. A few examples of this are: Penetration Pricing – Initially, the price charged for a product or service is set relatively low, and lower than many competitors to gain market share and establish a wide customer base.
Once this is achieved the price is then increased. An example of this is Sky. When they first began to enter into the market they used a penetration pricing method to attract customers which worked. Now Sky own a massive 31.5% of their market share (http://www.guardian.co.uk/media/2006/jun/19/broadcasting.bskyb 20/10/2009). Price skimming is also another common method of pricing. Companies such as Apple have done this with their Ipod as they can charge a high price because they already have the market share and people will want to purchase their products as they are popular and of a good quality. Apple can be said to have high inelasticity of demand, whereby they could and do charge expensive amounts for their products, however people still choose to buy them regardless.
Price skimming involves charging a high price because you have substantial competitive advantage. Physiological pricing is a further pricing method. It is used to encourage purchases by making is seem as if the product is a lot cheaper when in reality it is not. It is designed to encourage purchases on an emotional level rather than a conscious, rational level as in a way it almost tricks the buyer into believing that a product is a lot cheaper when in actual fact its not. For example a product may cost ï¿½19.99 which would make us think that even though in reality it is ï¿½20, we would want to buy it as it seems less.. A further method which relates to pricing are loyalty schemes that some companies offer, such as Tesco, in the form of points cards which can be used to purchase petrol or to save money on future purchases.
“Direct marketers can tie a price-based loyalty scheme to individual spend. Rewards can be in the form of a straight price discount or can be ‘points-based systems’. These are now widely known as ‘loyalty schemes’. Loyalty schemes are established, important weapon in the direct markets amoury … Loyalty schemes have for some time been criticised by a number of commentators (Dowling 2002;peppers and rogers,1993;O’Brien and jones;1995 Uncles, 1994). Peppers and rogets suggested that, when used as part of an overall strategy of creating value for existing customers, they make sense, but otherwise they are essentially just another costly marketing promotion. Page 191- Principles of direct and database marketing – alan tapp, third edition
Place- Place refers to how your product or service is distributed, or where it can be purchased by the customer. It involves not only how the sale is made but the distribution process. This can be rather expensive and can often be an costly aspect of the marketing process; “Although figures vary widely from product to product, roughly a fifth of the cost of a product goes on getting it to the customer”
(http://www.thetimes100.co.uk/theory/theory–marketing-mix-(price-place-promotion-product)–243.php 21/10/2009). The choice of the way a product or service is disrributed will vary from company to company and will depend on a variety of circumstances. Many product manufactures will sell first to wholesales who then sell onto retailers, or some companies may chose to sell straight to retailers themselves.
Promotion – Promotion is a vital aspect of the marketing mix and can be seen as one of the most important. Promotion is needed to educate the public about a product or service, to sell the good and to attract people to a specific company without promotion then people simply will not know and this will result in a reduction of sales and reduced profit margins. The right method of promoting a product will depend on a number of variables and is also a further key aspect; for example take a company who sell stair lifts to the elderly and disabled. Using television would be a good way of advertising as it reaches millions of people, however they must then look into the best times at which to advertise, the appropriate channels and inbetween which TV programmes.
Thorough market research must be carried out into which tv programmes the people in these categories watch. For example there would be no point advertising stair lifts to elderly and disabled people in-between children’s t-v programmes in the afternoon as elderly people will most likely be watching other channels or busy at this time. Like I said, research must be carried out to ensure money is not wasted and the promotional method works successfully.
As we can see by the table on the left (taken from
when marketing products or services a business must look to create a successful mix of the right product which is sold at the right place, in the right place using the most appropriate methods of promotion. They must look to interlink the four variables to reach their perfect target market.
Take BMW for example. They deal in manufacturing high quality luxury cars and target their products at the higher end of the market. BMW have identified their target market as high income earners and businesses that are looking for a classy and well rounded performing car. Over the years BMW have developed their cars and have made them more attractive to the market by incorporating new and advanced technology, whilst offering luxury and the promise of a long lasting high performance vehicle.
The product itself has been designed to aim at higher earning people and by doing this they automatically create a high class image as it is seen as more a luxury product and are not as common as cheaper more affordable and simple cars. By doing this, yes they are restricting their markets but they offer a range of vechicles ranging from ï¿½16,995 in the form of BWM 1 Series – 3 door (http://www.bmw.co.uk/bmwuk/modelselector_flash/0,,1156___sit-bmwuk,00.html 21/10/2009) to ï¿½50,000+ in the form of the M3 or M6 coupe for example.
According to ASHE, “mean” gross annual earnings across all employee jobs in 2008 came to ï¿½26,020, http://news.bbc.co.uk/1/hi/8151355.stm 21/10/09. So by looking at these figures it is clear that the average person cannot afford to buy expensive cars and so purchase cheaper, more affordable and more common vehicles. This is the market that BMW have chosen not to aim at, as they have chosen to be more exclusive and aim at a niche, higher earning market.
An idea to perhaps gain further market share and to reach this untapped market could possibly be to make a cheap, more basic, yet attractive model which could be sold at the high end of the low income earners. This would then attract more people to the company, generating more sales and thus a greater profit. However, this may impact on overall sales on other models as then, BMW car wouldn’t be seen as so exclusive as it is being sold as a normal good, so customers may go elsewhere and this could result in a loss of sales to the company.
A company like BMW is constantly developing new cars and with newer more advanced technology. The product element is the new product itself and obtaining the right price involves examining customer spending patters, rival car manufacture prices such as Audi who also develop business and high quality vehicles.
The SWOT analysis consists of 4 concepts:
A SWOT analysis is a tool used within a business to highlight four different key points at a specific moment in time. A SWOT consists of internal and external aspects; the analysis will allow a company to improve its internal status by finding its strengths and weakness and capitalise on its strengths and work on its weaknesses to help improve the efficiency of a company which will ultimately maximise profits. Opportunities and threats are external, and these are things which may affect that they cannot control.
The advantage of creating a swot analysis is that it allows a company to see their opportunities and work with them to help increase their profits. Carrying out a SWOT analysis is beneficial, “As a result of the analysis we now have as clear view of the likely opportunities and threats. This enables us to set objectives which realistically represent what the company can achieve over the next planning period. Page 118 Principles of direct and database marketing – alan tapp, third edition
Marketing principles – Macro and Micro
When marketing a product a business must look into both the macro and micro aspects of research. The microenvironment consists of aspects in a companies immediate environment that have a direct affect on them, which include for example suppliers and competitors. The macro environment however are more broader factors that affect not only the company but the micro environment too. And these can be grouped into Social, Legal, Economical, Political and Technological factors. “These shape the character of the opportunities and threats facing a company, and yet are largely uncontrollable”
SLEPT analysis is yet another key factor to consider and one that is used in many businesses marketing orientation. Before a company can put any action into process it is important to scan the external environment, which is where slept analysis comes into play. The analysis looks at Social, Legal, Economical, Political and Technological factors and investigates their affects and impacts on the business and on a particular product or service it is selling. Environmental scanning is vital and helps a business to grow and adapt to its changing customer needs. It is .. “The process of monitoring and analysing the marketing environment of a company’
(Jobber, D. Principles and Practice of Marketing. 2nd. edition. McGraw-Hill, 1998.)”
As we can see from the diagram to the left, (taken from Week 2 lecture slide, Alice cheeseman, Business and marketing) Business have to take into account what is happening in the world. And because the economy is ever changing and is in different states all over the world a company has to do the research and has to be able to adapt. In doing so this will mean their product or service will not suffer and sales will not be lost.
An example of how a business has used and facilitated the results from their own SLEPT analysis is McDonalds. Mcdonalds first opened in the 1940’s and begun selling the basics of a fast food restaurant, gradually the company expanded and other McDonalds restaurants were opened in several countries all over the world. Mcdonalds begun by targeting their foods towards the younger generation using Ronald Mcdonald, the children’s clown as a way of attracting customers and offering a unique experience.
Recently however, Mcdonalds begun a new campaign and have undergone a massive change in image, leaving behind their old look and adapting to the changing environment and economic climate, making their foods more healthy and trying to make their foods more appealing to a greater market, Through beautifully photographed images of fresh, quality ingredients, stainless steel kitchen utensils, and the clear, direct messaging, McDonald’s is building a modern tradition that challenges common misconceptions. http://www.aboutmcdonalds.com/mcd/students/amazing_stories/unwrapping_mcdonalds_newest_story.html (24/10/2009)
What Mcdonalds did was analyse the market and the current changing conditions and found that social trends were changing, people’s attitude towards eating had changed and people were wanting to eat healthier, and their current style needed to be changed. Not only did they campaign to attract customers through healthy eating, but they changed their imagine too, making their restaurants more appealing, and attractive, getting rid of the clowns and childrens drawings and making way for a more contemporary and 21st century outlook.
As we can see http://news.bbc.co.uk/1/hi/business/8321000.stm, (24/10/2009) the recent transformation has led to an increase in profits and is working for the business. Without using the SLEPT analysis McDonalds could have never developed its stores the way it has and created the new look it needed. Further ways in which McDonalds could perhaps expand on their success would be to perhaps include laptop docking stations. Many people in the UK, both workers and students own their own laptop and so doing this would offer them the chance to sit and work whilst eating, so it is offering them an attractive service for free as a kind of bonus for eating at their stores.
Overall, i believe a marketing oriented company is a company that will take into consideration all marketing principles and combine them to work together. A business should try and see the product or service through the customer’s eyes and try and try to put its customers first. Without a well though out market orientation and market structure then a business will not be satisfying the market and its customers and will ultimately be losing out on profit.