Marketing

V

Distributing the Product

Some products are marketed most effectively by direct sale from manufacturer to consumer. Among these are durable equipment—for example, computers, office equipment, and industrial machinery and supplies. However, many consumer goods are also sold directly to the public as well, through advertisements, telemarketing, “houseparties”, and the Internet.

The Internet has had a profound effect on distribution and how companies reach consumers. Many companies are now able to sell their goods direct to people around the world via the Internet and online ordering facilities. Company Web sites often provide detailed product information and answers to Frequently Asked Questions (FAQs). Credit cards have made it easy for people to purchase via the Internet, mail, or telephone. Through the Internet, consumers from anywhere in the world can shop and buy goods from a company, at any time that suits them. Comparison shopping has also been made easier by Web sites that check product details and prices across a range of retailers, with the result that price competition among companies has intensified.

Sales via the Internet are attractive to companies as the process is often automated, meaning that orders can be processed quicker and more cheaply than was previously possible.

The Internet also offers a more dynamic and direct means of reaching customers than through traditional retail outlets. It enables a two-way dialogue between the customer and the company to take place, and can help to resolve queries or problems more speedily. It therefore also helps in building and developing longer-term relationships, in a way that other outlets cannot.

Despite the phenomenal growth in direct sales via the Internet, most consumer products still move from the manufacturer through agents to wholesalers and then to retailers, before ultimately reaching the consumer. Determining how products should move through wholesale and retail organizations is a crucial marketing decision.

Wholesalers distribute goods in large quantities, usually to retailers, for resale. Some retail businesses have grown so large, however, that they have found it more profitable to bypass the wholesaler and deal directly with the manufacturers or their agents. Wholesalers first responded to this trend by adapting their operations so that they moved faster and called for a lower margin of profit. Small retailers fought back through cooperative wholesaling, the voluntary banding together of independent retailers to market a product. The result has been a trend towards a much closer, interlocking relationship between wholesaler and independent retailer.

Retailing has undergone even more change. Intensive pre-selling by manufacturers and the development of minimum-service operations—for example, self-service in department stores—have drastically changed the retailer’s way of doing business. Supermarkets have become commonplace not only for groceries but for products as diverse as books, medicines, clothes, and electronic equipment. Warehouse retailing has become a major means of retailing higher-priced consumer goods such as furniture, appliances, and electronic equipment. The emphasis is on generating shop traffic, speeding up the transaction, and rapidly expanding the sales volume. Chain stores—groups of shops owned by the same firm—and cooperative groups have also proliferated. Special types of retailing, for example, vending machines and convenience stores, have also developed to satisfy consumers’ needs more easily and cheaply.

Transporting and warehousing merchandise are also technically within the purview of marketing. Products are often moved several times as they go from producer to consumer. Products are carried by rail, lorry, ship, aeroplane, and pipeline. Efficient traffic management determines the best method and timetable of shipment for any particular product.

VI

Services and Marketing

Services are intangible goods, which can be sold despite not being actual objects. Consumers pay for a service as they would for manufactured goods. Already more people are employed in the developed economies in the provision of services than in the manufacture of products, and the service sector shows every indication of expanding even further. Services familiar to most consumers are in the fields of maintenance and repair, transport, travel, entertainment, education, and medical care. Business-oriented services include computer applications, management consulting, banking, accounting and legal services, stockbrokerage, and advertising.

Services, like products, require marketing. Those members of staff who are responsible for delivering the service are extremely important in marketing services, as they will to a large degree shape the customer’s experience of that service. Likewise service quality, the delivery of consistently good service, is also important if a company wants customers to use its services again.

As with products, services too must be planned and developed carefully to meet consumer demand. For example, in the field of temporary personnel, a service that continues to increase in monetary value, studies are made to determine the types of employee skills needed in various geographical locations and fields of business. Because intangibles are more difficult to sell than physical products, promotional campaigns for services often have to try harder to encourage trial and take up. Through extensive promotion, temporary-personnel agencies have convinced many companies that hiring on a temporary basis only in times of need is more economical than hiring permanent, full-time personnel.

VII

Market Research

Market research involves the use of surveys, tests, and statistical studies to analyse consumer trends and to forecast the size and location of markets for specific products or services. The social sciences are increasingly utilized in customer research. Psychology and sociology, anthropology, and even neurology can provide clues as to people’s activities, circumstances, wants, desires, and general motivation. They therefore play a key role in understanding the various behavioural patterns of consumers.

Coupled with applications from the social sciences has been the introduction of modern measuring methods when surveys are carried out to determine the extent of markets for a particular product. These methods include the use of statistics and the utilization of computer models to determine trends in consumers’ desires for various products. Scientific analysis is being used in such areas as product development, particularly in evaluating the sales potential of new product ideas. For example, use is made of mathematical models—that is, theory-based projections of social behaviour in a particular social relationship. Sales projections become the basis for many important marketing decisions, including those relating to the type and extent of advertising, the allocation of salespeople, and the number and location of warehouses.

VIII

Forces Affecting Modern Marketing

An important influence on marketing theory is the continuous and rapid change in consumer interests and desires. Consumers today are more sophisticated than ever before. They are in education for much longer; they are exposed to the Internet, newspapers, magazines, films, radio, television, and travel; and they have much greater interaction with other people. Their demands are more exacting, and their taste is more volatile. They are safeguarded against the blandishments of indiscriminate marketing by consumer protection schemes, and they are better informed, thanks to publications dedicated to evaluating the merits and faults of different products.

Markets tend to be segmented as each group calls for products suited to its particular tastes. Positioning the product—that is, determining the exact segment of the population that is likely to buy a product, and then developing a marketing campaign to enhance the product’s image to fit that particular segment—requires great care and planning.

The number of ways marketers can reach consumers has exploded over the past few decades, with countless magazines, publications, radio stations, digital and satellite channels, and soon broadband TV, available to people. This “media fragmentation” has meant that it is harder than ever for marketers to get their messages across to a large number of consumers, as the audience for each TV channel or publication steadily drops. At the same time, as consumers have become exposed to greater and greater amounts of advertising, so they have become more and more resistant to it. Many consumers now actively seek to avoid advertising if they can, for example by changing channels during the ad break, or skipping through the breaks on recorded programmes. In response, marketing has looked to develop on-going, longer-term relationships with customers, where their communications are welcomed rather than resented.

Competition has also sharply intensified, as the number of firms engaged in producing similar products has increased. The advent of the Internet has brought global competition to even the smallest business. In response, firms have tried to differentiate their products from those of their competitors. Profit margins—the percentage of profit made by a business per unit of sales—are constantly being cut. While costs continue to rise, competition tends to keep prices down. The result is a narrowing spread between costs and selling prices, and an increase in a business’s sales volume is necessary to maintain or increase profit.

Companies have also responded to greater competition by building stronger brands to which the consumers stay loyal. Brands have become increasingly important in marketing, as they help companies to generate goodwill, develop customer loyalty, and increase profits. Although intangible, brands can now be recorded on a company’s balance sheet, and in some cases can be worth more than the physical assets of a company.

The consumer movement—that is, the insistence on reputable products and services by consumer groups—is a strong influence on marketing techniques. Both consumer groups and government agencies have intensified their scrutiny of products, challenging such diverse elements as product design, length and legitimacy of warranty, and promotional tactics. Warranty and guarantee practices, in particular, have been closely examined. New legislation has generally defined and extended the manufacturer’s responsibility for product performance.

Environmental concerns have also affected product design and marketing, especially as the expense of product modification has increased the retail cost. Such forces, which have added to the friction between producer and consumer, must be understood by the marketer and integrated into a sound marketing programme. This is often accomplished by emphasizing the “environmental friendliness” of a product, or incorporating environmental considerations into initial marketing decisions prior to manufacture.

Even the way a firm handles itself in public life, that is, how it reacts to social and political issues, has become significant. Information about companies and their actions across the world is now easily accessible to consumers via the Internet, and this has led to increased calls for transparency. As a result, corporate social responsibility is becoming an increasingly important issue for many companies. No longer may a corporation cloak its internal decisions as private affairs. The public’s dissatisfaction with the actions and attitudes of a firm has sometimes led to a reduction in sales; conversely, consumer enthusiasm, generated by a firm’s intentional establishment of a good public image or public relations, has led to increased sales.

IX

Specialized Marketing Developments

The success of specialized marketing developments has caused many older organizations to revise their operating methods. In recent years, for example, franchising has become an important force in retailing. Under this plan, the retailer is given the right to sell, within a certain area, without competition from another retailer dealing in the same product.

Many consumers now find it more desirable to rent products than to purchase them outright. For example, a homeowner will often find it preferable to rent an electric floor polisher when needed, rather than purchase the appliance at the list price, use it only infrequently, and then have to provide storage space within the home. Another item that consumers have sometimes found easier and less expensive to rent in certain circumstances (when abroad, for instance) is the car. The renting of equipment also figures in large industry. Corporations are finding it to their economic advantage to rent computers and office and industrial machinery, thereby assuring themselves of product servicing and repair and allowing a changeover, without great expense, to newer equipment models as they become available.

The use of credit has had a great impact on marketing. Customers with credit cards can make purchases without the normal immediate presentation of cash, and sales are thus stimulated. Shops often further stimulate sales by the use of premium promotions whereby customers making purchases receive free goods or the opportunity to buy special merchandise at very low prices.

Businesses must strive daily to outdo competitors. The methods available to businesses for distinguishing their commodity from others in the market are subject only to their ingenuity. Such methods may include product improvement, a unique promotional campaign, a new twist in servicing, a change in distribution channels, or an enticing price adjustment.