MGT301 - Principles of Marketing - Lecture Handout 05

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Lesson overview and learning objectives:

In last Lesson the focus of discussion was core concepts of the marketing and the increasingly important role of the marketing process in the ever-changing domestic and global business environment Today we will be covering following topics:

A. MARKETING CHALLENGES IN THE 21st CENTURY.

The marketing concept has changed dramatically over the last several decades, and recently the focus has increasingly moved to customers (versus products and selling) marketing globally and the various technology issues that impact the market. In addition, there is renewed emphasis in marketing on creating and innovating with new and better products and services rather than just competing against other firms and following the marketing patterns established by competitors.

A. Porter’s 5 Forces Model of Competition:

Marketing is facing different challenges in the 21st century to meet these Before entering the business Porter model can be used to analyze the environment both for new and existing business and can be used to overcome and meet the challenges.

Porter’s 5 Forces Model of Competition

  • Threat of New Entrants Ratio of new entrants in the industry greater the ratio greater will be intensity of competition
  • Bargaining Power of Buyers: When competition is intense and number of manufacturer is greater the buyer have more options for product switching over this will increase the buying power of buyer
  • Threat of Substitute: As obvious from the term greater the threat of new entrants will result in greater higher
    completion that in tern will result in increase in the number of substitutes
  • Bargaining Power of Suppliers: Greater number of the supplier will provide the stronger buying power to the manufacturer/customer and vice versa
  • Rivalry Among Competing Firms in Industry: Larger number of the manufacturers and greater number of product variety increases the rivalry among the competitors, which demands for more quality and customer satisfy9ng products in order to meet the competition.

A. The information technology revolution

The information age, particularly the advent of the Internet is having a major impact on the direction of marketing science and practice.
Digitalization and Connectivity: The flow of digital information requires connectivity Intranets, Extranets, and the Internet are key drivers of the “new economy
Technologies for Connecting

The major force behind the new connectedness is technology.

The boom in computer, telecommunications, and information technology, as well as the merging of these technologies, has had a major impact on the way businesses bring value to their customers.

  1. Using today’s powerful computers, marketers create detailed databases and use them to target individual customers with offers designed to meet their specific needs and buying patterns.
  2. Cell phones; fax machines, and CD-ROM to interactive TV are just a few of the tools being used to make connections.
    • Electronic commerce allows consumers to shop and buy without ever leaving home.
    • Virtual reality displays, virtual shopping, and virtual salespeople are just a few of the changes that consumers seem to be embracing. The Information Superhighway (and its backbone-- the Internet) will link customers to companies in ways that were unimagined only a few years ago. The Internet is a vast and burgeoning global web of computer networks, with no central management or ownership. The user-friendly World Wide Web has changed us all.

 

  1. The Internet has been hailed as the technology behind a new model for doing business.
  2. New applications include:
    • Internet--connecting with customers.
    • Intranets--connecting with others in the company.
    • Extranets--connecting with strategic partners, suppliers, and dealers.
  3. Marketplaces have now become market spaces.
  4. However, new opportunities abound.

Connections with Customers

Today, most marketers are realizing that they don’t want to connect with just any customers. Instead, most are targeting fewer, potentially more profitable customers.

  1. Greater diversity and new consumer connections have meant greater market fragmentation.
    • Marketers have responded by moving to more segmented marketing where they target carefully chosen sub markets or even individual buyers.
  2. At the same time, companies are analyzing the value of the customer to the firm. What value does the customer bring to the organization? Are they worth pursuing?
    • Connect with those that will be bring in profits.

Connect for a customer’s lifetime.

  1. Rather than always looking for new customers, the focus has now shifted to keeping current customers and building lasting relationships based on superior satisfaction and value.
  2. Long-term profits have superseded short-term gain.
  3. Companies are spending more time considering “share of customer” and less time worrying about “share of market.”
    • Employees are being trained in cross-selling.
    • Up-selling is now a common practice.
      Today, beyond connecting more deeply, many companies are also taking advantage of new technologies that let them connect more directly with their customers.

 

  1. Products are now available via telephone, mail-order catalogs, kiosks, and electronic commerce.
  2. Business-to-business purchasing over the Internet has increased even faster than online consumer buying.
  3. Some firms sell only via direct channels (Example: Dell Computer, Amazon.com).
  4. Other firms use a combination of traditional selling and direct selling methods.

Direct marketing is redefining the buyer’s role in connecting with sellers.

  1. Buyers are now active participants in shaping the marketing offer and process.
  2. Some companies allow buyers to design their own products online.
  3. Some marketers have hailed direct marketing as the “marketing model of the next millennium.”

Connections with Marketing’s Partners

Connecting inside the company--traditionally, marketers have played the role of intermediary, charged with understanding customer needs and representing the customer to different company departments, which then acted upon these needs.

  1. Marketing no longer has sole ownership of customer interactions.
    • Now, every employee must be customer-focused.
    • Companies are reorganizing their operations to align them better with customer needs.
    • Teams coordinate efforts toward the customer.

Connecting with outside partners--most companies today are networked companies, relying heavily on partnerships with other firms.

  1. Supply chain management--the supply chain describes a longer channel, stretching from raw materials to components to final products that are carried to final buyers. Each member of the supply chain creates and captures only a portion of the total value generated by the supply chain.
  2. Supply chain management allows all partners to strengthen relationships for mode of payment and delivery.
  3. Strategic alliances--companies need strategic partners.
    • Many strategic alliances take the form of marketing alliances--can be product or service oriented in which one company licenses another to produce its product, or two companies jointly market their complementary products.
    • Alliances could be promotional, logistical, or even pricing in nature.
    • Companies must be careful when choosing partners so as to complement strengths and offset weaknesses.

Connections with the World Around Us

Marketers are taking a fresh look at how they connect with the broader world around them.

  1. Global connections--geographical and cultural differences and distances have shrunk dramatically in the last decade.
  2. Today, almost every company, large or small, is touched in some way by global competition.
    • Firms are challenged by international competitors in their once safe domestic market.
    • Companies are not only exporting, but buying more components and supplies from abroad.
    • Domestically purchased goods and services are hybrids (with components coming from many international sources).
    • The secret for business success in the next century will be to build good global networks.

The New Connected World of Marketing

Smart marketers of all kinds are taking advantage of new opportunities for connecting with their customers, marketing partners, and the world around them.

  1. The old marketing thinking saw marketing as little more than selling or advertising. It emphasized:
    • Customer acquisition.
    • Short-term profit.
    • Goal--sell products.
  2. The new marketing thinking believes that improving customer knowledge and customer connections is a corporate goal.
    • Target profitable customers.
    • Find innovative ways to capture and keep these customers.
    • Form direct connections and build lasting customer relationships.

 

  • Use targeted media.
  • Integrate communications.
  • Use technologies to provide connections.
  • View suppliers and distributors as partners, not adversaries.
  • Deliver superior value.

B. Rapid Globalisation

Technological and economic developments continue to shrink the distances between countries. World is becoming global village due to advancement in the connecting technologies. The world is shrinking rapidly with the advent of faster communication, and transportation, and financial flows. In the Twenty-First century, firms can no longer afford to pay attention only to their domestic market, no matter how large it is. Many industries are global industries, and those firms that operate globally achieve lower costs and higher brand awareness. At the same time, global marketing is risky because of variable exchange rates, unstable governments, protectionist tariffs and trade barriers, and other prohibitive factors
Global Marketing into the Twenty-First Century:

  1. The world is shrinking rapidly with advent of faster communication, transportation, and financial flows.
  2. Domestic companies never thought about foreign competitors until they suddenly found them in their backyard. The firm that stays at home to play it safe might not only lose its chance to enter other markets but also risks losing its home market.
  3. Although some companies would like to stem the tide of foreign imports through protectionism, this response would be only a temporary solution and, in the long run, would raise the cost of living and protect inefficient firms.
  4. The longer that companies delay taking steps toward internationalizing; the more they risk being shut out of growing global markets.
  5. A global firm, is a firm that, by operating in more than one country, gains marketing, production, R&D, and financial advantages in its costs and reputation that are not available to purely domestic competitors.

C. The Changing World Economy

Even as new markets open to rising affluence in such countries as the "new industrialised" pacific rim, poverty in many areas and slowed economies in previously industrial nations has already changed the world economy. The New Economy presents many new challenges and opportunities for the marketer. The most important point is that the New Economy assuredly places the customer more firmly in the driver’s seat for decisions on her/his product and service choices (customization and customerization). In addition, there have been and will be many changes in business and marketing practices as both consumers and businesses have virtual and real-time access to literally millions of products, offers, options, prices, people, competitors, and sources of information that did not exist until recent years. As a result, the marketing mix will change as marketers and firms identify new uses for intangible assets and effective customer relationship management that is more than a marketing term. We can assume that this increasingly rapid
growth and rate of change will continue, and despite the dot-com bust, recession, and other major social, political, and economic adjustments, the Internet and the New Economy have changed marketers and marketing for the long-term future.

D. The Call for More Ethics and Social Responsibility

The greed of the 1980's and the problems caused by pollution in Eastern Europe and elsewhere has spurred a new interest in ethical conduct in business. Social and ethical issues in marketing: Connections with our values and social responsibilities--as the worldwide consumerism and environmentalism movements mature, today’s marketers are being called upon to take greater responsibility for the social and environmental impact of their actions. The social responsibility and environmental movements will place even stricter demands on companies in the future. Those that resist will be forced into compliance by legislation or consumer outcries.

  1. High Prices High Costs of Distribution can be misleading. Among other reasons, consumers want to know about products, it is expensive to advertise and promote, brands provide psychological benefits and quality standards, and distribution costs include delivering the product not just promoting it. High Advertising and Promotion Costs are determined in a competitive marketplace where consumers often have real choices. Excessive Markups are the exception rather than the rule and are more likely in uncompetitive industries. Ethics can influence strategic decisions on such pricing decisions as market penetration versus market skimming
  2. High costs of distribution. It is often argued that middlemen are greedy and mark up prices beyond the value of their services. A comprehensive implementation of marketing ethics should include policies and guidelines for defining the company's relationship with distributors
  3. High advertising and promotion costs. Modern marketing is also accused of pushing prices up to cover the costs of heavy advertising and sales promotion. When considered in light of increasing activism among consumer groups to regulate advertising, marketers have a unique opportunity to proactively address the needs for strong advertising ethical standards. While protecting free speech, marketers could adopt a statement on ethics in advertising that promotes accurate information exchange, encourages creative and innovative message generation.
  4. Excessive middlemen gross profit margins. Critics say that middlemens gross margins are excessive.
  5. Deceptive Practices Deceptive pricing includes practices such as falsely advertising "factory" or "wholesale" prices or a large price reduction from a phoney high list price. Deceptive promotion includes practices such as overstating the product's features or performance, luring the customer to the store for a bargain that is out of stock, or running rigged contests. Deceptive packaging includes exaggerating package contents through subtle design, not filling the package to the top, using misleading labeling, or describing size in misleading terms.
  6. High-Pressure Selling People are free to not respond to selling tactics. Moreover, most states have "cooling off" periods that allow buyers to return products or back out of a purchase for large ticket items.
  7. Unsafe Products Dangerous products are most often illegal. Corporate marketing policies can provide broad guidelines that everyone in the organization must follow
  8. Product Development. Product development may be influenced by ethical codes seeking more desirable products or changes is salutary product concepts to make them more desirable.

E. The New Marketing Landscape

The new marketing landscape is a dynamic, fast-paced and evolving function of all these changes and opportunities. More than ever there is no static formula for success. Customer is known as the king in the marketing and all efforts of the organization rate directed towards the customer satisfaction this provides new landscape to the marketing and development of the connecting technologies are playing primary role in this concern.

Related Content: MGT301 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of Principles of Marketing