Business Marketing brand manager was quoted as saying, “You may think you define your relevant market.” Comment.
Brand management, as a recognized organizational objective, is attributed to Neil McElroy in 1931, who was then a junior marketing manager assigned to advertising Camay soap, and who later become Procter & Gamble’s CEO. The intended purpose of brand management was to solve sales problems through the use of research to understand weakening sales in distinct markets, followed by the design and implementation of strategies to turn around these markets. Strategies used many marketing tools including advertising, pricing, promotion, packaging and displays (Aaker & Joachimsthaler, 2000). This desired objective of brand management has remained the primary role of brand managers since McElroy explicitly stated his intent in 1931. However organizations in general, and brand managers in particular, need to be aware that forces other than the strategies of brand managers will affect brands, including how target markets are defined.
The definition of target markets for specific brands is influenced by factors internal to organizations such as other products within an organization (new products, line extensions, brand extensions and co-brands), and other employees within an organization (such as sales staff and senior management). External factors can also influence how markets are defined, including competitors, the distribution channel (wholesalers and retailers), the media, and consumers including consumer preferences and brand loyalty. Each of these factors will be briefly explored in the remainder of this paper.
Within organizations, the assumption can be made that all products and employees work collectively toward market domination. However competition for markets occurs internally to organizations, as well as externally. Organizational teams can develop new products and extend brand or product lines. The impact is that markets for existing products can be displaced by new products, thereby reducing the ability of brand managers to solely define their markets. Other employees within an organization can supersede the brand manager’s authority to define markets. Senior managers have made decisions that place products in markets that were not previously the focus of brand managers. Sometimes these decisions are strategic and fulfill a larger organizational objective, but often these decisions are irrational and driven purely by personal motives. Sales staff can also play a key role in defining markets for any given brand. While sales staff generally work in cooperation with brand managers to develop and retain brand markets, sales staff may also circumvent the brand managers work by focusing on different markets or ignoring desired markets. The end result is that players within organizations other than brand managers alone can, and do, define relevant markets.
External to the organization, a variety of factors also affect how markets are defined. Competitors can directly influence market definition, particularly in direct-competition situations. A competitor may change its product’s image to appeal to a younger and cooler market, thereby implying in its advertisements that the old and uncool are left with the choice of adopting its product, or staying with the competition’s product. This type of competitive strategy directly affects how competitors’ markets are defined.
Parties within the distribution channel can also influence market definition through actions such as co-branding. The media can contribute to market definition by the coverage that is given to products – positive, negative or indifferent. Consumers also affect how markets are defined, through their response to advertising campaigns, or changes in price, packaging and displays. Consumers will determine their own level of brand loyalty, and will self-define if they fit within a given brand’s image, or switch to align personal values with alternate products. The ability of consumers to influence how markets are defined is significant, and must be recognized by brand managers as strategies are developed to match brands with markets.
In conclusion, brand managers play an important role in defining the relevant market (or markets) for their respective brand (or brands). However brand managers must be aware that other factors also influence the markets in which their product is placed. To ensure the ongoing successful placement of brands within these markets, brand managers must ensure that their brand strategies address both internal and external factors that influence their defined markets. By taking this approach, the brand strategy will remain strategic through the recognition and incorporation of factors beyond the brand managers’ direct control in the definition of markets.
What competitive factors would lead to different allocations of the promotion budget for advertising and sales promotion?
The purpose of a promotion budget within an organization is to generate and retain interest in the products and services being offered, with the ultimate goal of maintaining and expanding market share, sales revenue and profits. However promotions budgets, like most resources, are finite. Thus a need is created to establish clear objectives that will be achieved through the use of the promotion budget, along with specific actions that will support the implementation of the planned promotion budget. Several factors must be considered when setting promotions objectives and priorities; competitive factors must be factored in the decision-making process, which in turn will guide how finite resources are apportioned between various strategies including advertising and sales promotions.
A few possible competitive factors that must be considered include the overall state of the product (where the product falls in the product life-cycle, ranging from new, growing, maturing and declining), the nature of the industry (competitive, monopolistic, barriers to entry and exit), and the overall state of consumers (demographics, economic, environmental and political factors). Each of these factors must be dealt with differently, using advertising in some cases, sales promotions in other cases, and other strategies (publicity and personal selling) in yet other cases, to effectively mitigate these various competitive factors. When responding to these various competitive factors, marketing managers must bear in mind that the primary role of advertising is to inform, persuade and remind customers of the product’s virtues, while sales promotions serve to generate sales through consumer interest and incentives at the point of sale.
For new and declining products, a combination of advertising and sales promotions is desired, while products in the growth and mature stages of the product life-cycle can often be supported best by advertising. New products and products in decline share the same challenge of penetrating new markets through the creation of product awareness and desire. Often sales promotions can provide the incentive to make the purchase once awareness is created through advertising, thereby generating ongoing interest in these new and declining products. During difficult economic times and during periods of high competition, sales promotions can be very effective in persuading consumers to buy one product over another by influencing the decision-making process at the time the decision is being made.
Advertising can work effectively in monopolistic-type industries, to maintain interest in and support for the monopoly’s products. In highly competitive industries such as those catering to impulse purchases (fast food, snacks, beverages), sales promotions can effectively switch a consumer from an intended purchase to the one being promoted. For this reason, many companies offer product samples in stores, such as food and beverage samples in supermarkets.
Advertising can be extremely effective in addressing consumer preferences or trends. For example, the public’s interest in environmental and social issues has created the opportunity for companies to differentiate themselves by advertising an individual corporation’s environmental and social achievements. Sales promotions will not be nearly as effective in generating a feel-good sense about these issues as can a well-structured advertising campaign. However sales promotions can be used effectively to increase volumes of sales by offering quantity discounts.
Advertising can also be useful in creating awareness for products as consumers advance through their own life stages, from being young and single to married-with-children to retired-without-children to late-lifers. The need for new products arises as individuals progress through life stages; advertising can create awareness for new products that would otherwise remain unknown to persons as they age. Advertising can also create awareness of new uses for products that are currently being used, such as using baby lotion as make-up remover in mid-life and as a skin moisturizer in later life.
In conclusion, advertising works best when competitive factors create the need for information, persuasion and reminders for consumers, while sales promotions work best when competitive factors dictate the need for on-site sales incentives to generate consumer interest and action. Where resources permit, a combination of advertising and sales promotions will often be the most effective strategy, but the finite nature of resources generally requires the application of one strategy over another. By providing an analysis similar to the one presented in this paper, organizations will be able to make the most effective use of their limited resources based on the specific competitive factors being faced at any given point in time.
Discuss the concept that some information may be too expensive to obtain in relation to its value. Illustrate.
In the field of marketing, market research is an important source of information. Beckman, Kurtz and Boone (1997) define marketing research as “the systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services,” thereby connecting the client to the organization through the use of information. Beckman, Kurtz and Boone (1997) further note that market research provides information that identifies marketing problems and opportunities, allows marketing actions to be created, revised and assessed, monitors market performance and improves the overall effectiveness of marketing initiatives. Despite the numerous benefits of collecting, analyzing and applying data to the marketing process, marketers must realize that some data is unattainable due to the expense of collecting, analyzing, storing or retrieving it. Marketers must further realize that difficult decisions often need to be made when determining what data to collect, archive and analyze.
A plethora of information exists in the area of market data. Demographic information alone can yield significant useful data, including details on consumers’ age, income, race, education level, interests, occupation, residence and other similar data. However the expense involved in collecting demographic information from every consumer would be cost-prohibitive to any organization in relation to the benefits attained through the collection of this information. Organizations can overcome this limitation by relying on data collected by other organizations (such as census data collected by many national governments), using random samples to provide an overview of client attributes, or using technology to streamline the collection, storage and retrieval of client information that can be easily obtained (membership cards, electronic surveys).
Information on consumer trends can also be collected. Again the level of detail that is required to collect and project consumer trends is often limited to only the largest corporations such as multi-national organizations. Organizations are able to overcome this limitation by relying on other organizations that make this field their area of expertise such as advertising agencies and specialized consultants.
Competitor data can also be too expensive to obtain in relation to its value. Examples in this category of information include trade secrets, planned new products and strategies to reposition existing products. Often this type of data could be collected, but would involve actions bordering on espionage or other illegal, unethical or immoral actions, or would require complex laboratory procedures or intensive human interventions to uncover protected trade secrets. While some companies will go to these extremes if the stakes are high enough, most organizations settle for developing a similar competing product that is often close to the original, but still discernible by most consumers (Coke vs. Pepsi, seasonings and sauces used by KFC and McDonalds vs. competitors).
External data can also be expensive to collect, often with the costs of collection outweighing the benefits of the information gathered. For example, most organizations are unable to individually collect information relating to upcoming political or legislative changes, or to monitor changes in the overall economy. In these instances, organizations can rely on trade organizations, lobby groups or government organizations. Organizations also have the option of simply forecasting their own projections based on the level of information they can afford, and hope their projected future approximates reality.
Technology-based information is the final category of information that can be too expensive to obtain in relation to its value that will be explored. In some cases, the overall cost of implementing a technology-based information-gathering system such as a point-of-sale system prevents organizations from collecting the data that such systems can collect. Point-of-sale systems have complex capabilities, including monitoring inventory levels and stock-rotation schedules, just-in-time ordering, volume discounts, select client discounts, consumer information, and many other types of information. For small, independently owned businesses, the cost of purchasing and maintaining such systems far exceeds the benefits provided by such systems. For medium-sized organizations, compromises might need to be made in the capability of the technology for the type of information that can be collected, stored and retrieved. For large organizations, decisions need to be made concerning where to draw the line concerning data collection vs. no data collection.
In summary, information within a marketing context is extremely positive, because information can help identify opportunities and weaknesses, thereby leading to innovations that positively affect an organization’s well-being. However a cost is associated with collecting information, and organizations must constantly assess whether the value obtained by collecting any given data exceeds the cost of the data collection.
Compare and contrast the buying behavior of final consumer and organizational buyers. In what ways are they most similar and in what ways are they most different?
Buyers of products and services from organizations are often classified as either final consumers or organizational buyers. Final consumers are generally members of the general public who represent their own interests, the interests of their family or the interests of a social group. Organizational buyers, on the other hand, represent the interests of their organization, and are therefore influenced by different considerations in the purchasing process than are final consumers. The similarities and differences between these two distinct categories of buyers will be presented in the remainder of this paper.
The buying behavior of final consumers often falls in one of three categories: impulse buying, routine buying and one-time buying. Impulse buying often corresponds to items such as fashion, snacks and other small item/low cost items. Routine buying covers ongoing purchases that often represent brand loyalty such as groceries and other household staples (toilet paper, detergents, tissue paper, etc.). One-time buying includes items that are often well-researched and occur rarely throughout a person’s life, covering acquisitions such as televisions, furniture, homes and automobiles. Kotler, Cunningham and Turner (2001) note that final consumers, when making purchasing decisions, are often guided by factors such as social class (which determines resources available for both non-discretionary items and non-routine purchases), culture, family and social network influences, and a range of personal factors. These personal factors vary significantly, and are influenced by the stage in the life cycle (single, married, married with children, retired, widowed), lifestyle choices and personal values, occupation and income levels, personality and personal motivators (style, rebel, trendy, socially or environmentally aware), and personal beliefs. Many of these motivators are individually focused, and reflect who a person is through their personal purchasing decisions.
Organizational buyers, on the other hand, are generally smaller in overall numbers than final consumers, but represent significantly greater purchasing ability. Organizational buyers often rely on relationships that have been developed with suppliers, and remain loyal to sellers who nurture the relationship. Organizational buyers are often influenced by a greater variety of factors than final consumers, who tend to rely on personal choice and judgement. Organizational buyers must satisfy processes and procedures that are in place in their organization, such as purchasing specifications, dollar limits and time-frames. Committees and senior managers often direct the decisions of purchases within organizations, thereby reducing the individual authority and autonomy of the organizational buyer.
Industrial buyers are often exposed to ongoing sales calls, since industrial sales take a significantly larger investment in time to convert potential buyers to actual buyers. A wide variety of buying arrangements also exists for organizational buyers, ranging from outright purchase to leases to trade-ins. Organizational buyers must therefore be conversant in a wide range of purchasing options, to facilitate meeting organizational objectives through appropriate purchasing techniques. Environmental factors can also significantly affect organizational purchasing behaviors, with expected economic downturns reducing buying needs while economic upturns have the effect of increasing buying needs.
Organizational buyers are influenced by personal factors such as preferences and biases, much in the same way that final consumers are influenced by these factors. Preferences relating to style, durability, country-of-origin and other subjective factors play an important role for both final consumers and organizational buyers. Culture also influences both sets of buyers, and can be determined by the country, region or locality in which the buyer operates.
In conclusion, final consumers and organizational buyers share a range of similarities in their buying behaviors, such as individual preferences and the geographic area in which they are located. A range of differences also exist, ranging from flexibility for final consumers to established purchasing procedures for organizational buyers, the influence of economic forecasts (final consumers looking at the short-term while organizational buyers focus on the long-term), and the nature of the sales/buyer relationship (with final consumers being less reliant on relationships and organizational buyers being more reliant on relationships). Marketers must understand the differences and similarities between these two distinct types of clients if they want to truly capitalize on the opportunities presented by each category of customer.
Bibliography
Aaker, David and Erich Joachimsthaler. Brand Leadership. Brandweek. Feb. 21, 2000; 41, 8; pages 30-38.
Barton, Doug.
Customer Vs. Brand Management. Brandweek. Nov. 2, 1998; 39, 41; pages 32-33.
Beckman, M. Dale, David Kurtz and Louis Boone. Foundations of Marketing. Toronto; Harcourt Brace & Company Canada, Ltd.; 1997.
Kotler, Philip, Peggy Cunningham and Ronald Turner. Marketing Management. Toronto; Pearson Education Canada Inc.; 2001.
Moon, Junyean and Surinder Tikoo. Buying decision approaches of organizational buyers and users. Journal of Business Research 55 (2002); pages 293-299.
Tanner, John F. Jr. Organizational Buying Theories: A Bridge to Relationships Theory. Industrial Marketing Management; 28; 1999; pages 245-255.
Zeithaml, Valarie and Mary Jo Bitner. Services Marketing: Integrating Customer Focus Across The Firm. New York; The McGraw-Hill Companies, Inc.; 2003.
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