Significance_of_Promotions_in_Marketing_and_for_Its_Objective

Table of Contents Abstract Page 2 Setting prices Page 2 Significance of promotions in marketing and for its objective Page 4 Extended mix Page 7 Extended marketing mix for dell computers Page 8 Recommended marketing mix for different segments within dell Page 9 Difference between B2B and B2C Page 10 Key differences’ between international and domestic marketing Page 11 Conclusion Page 13 References Page 15 Abstract In this report I aim to examine how an organisations objective can influence the process of setting their prices' I would be furthering my report by looking into various promotional activities available for organisations during marketing their product and I would move on to looking into the extended marketing mix and its significance to businesses. And to prove my point I would be recommending to how dell computers can use different marketing mix for two different segments in their consumer market. Furthering in my report i would be discussing the difference in marketing products and services to organisations rather than consumers, in this part I would discussing the key differences between B2B and B2C. Finally I would be outlining the key differences between international marketing and domestic marketing. At the end of this report I would be making my conclusion upon my findings. Setting Prices Pricing is the process of determining what a company will receive in exchange for its products. Pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. Pricing is also a key variable in microeconomic price allocation theory. Pricing is a fundamental aspect of financial modelling and is one of the four Ps of the marketing mix. The other three aspects are product, promotion, and place. Price is the only revenue generating element amongst the four Ps, the rest being centered. Internal Corporate objectives can be wide-ranging and include different objectives for different functional areas (e.g., objectives for production, human resources, etc). While pricing decisions are influenced by many types of objectives set up for the marketing functional area, there are four key objectives in which price plays a central role. In most situations only one of these objectives will be followed, though the marketer may have different objectives for different products. The four main marketing objectives affecting price include: * Return on Investment (ROI) * Cash Flow * Market Share * Maximize ProfitsIt should be noted that not all companies view price as a key selling feature. Some firms, for example those seeking to be viewed as market leaders in product quality, will deemphasize price and concentrate on a strategy that highlights non-price benefits (e.g., quality, durability, service, etc.). Such non-price competition can help the company avoid potential price wars that often break out between competitive firms that follow a market share objective and use price as a key selling feature. | For many for-profit companies, the starting point for setting a product’s price is to first determine how much it will cost to get the product to their customers. Obviously, whatever price customer’s pay must exceed the cost of producing a good or delivering a service otherwise the company will lose money. When analyzing cost, the marketer will consider all costs needed to get the product to market including those associated with production, marketing, distribution and company administration (e.g., office expense). These costs can be divided into two main categories: Fixed Costs - Also referred to as overhead costs, these represent costs the marketing organization incurs that are not affected by level of production or sales. For example, for a manufacturer of writing instruments that has just built a new production facility, whether they produce one pen or one million they will still need to pay the monthly mortgage for the building. From the marketing side, fixed costs may also exist in the form of expenditure for fielding a sales force, carrying out an advertising campaign and paying a service to host the company’s website. These costs are fixed because there is a level of commitment to spending that is largely not affected by production or sales levels. Variable Costs – These costs are directly associated with the production and sales of products and, consequently, may change as the level of production or sales changes. Typically variable costs are evaluated on a per-unit basis since the cost is directly associated with individual items. Most variable costs involve costs of items that are either components of the product (e.g., parts, packaging) or are directly associated with creating the product (e.g., electricity to run an assembly line). However, there are also marketing variable costs such as coupons, which are likely to cost the company more as sales increase (i.e., customers using the coupon). Variable costs, especially for tangible products, tend to decline as more units are produced. This is due to the producing company’s ability to purchase product components for lower prices since component suppliers often provide discounted pricing for large quantity purchases. Determining individual unit cost can be a complicated process. While variable costs are often determined on a per-unit basis, applying fixed costs to individual products is less straightforward. For example, if a company manufactures five different products in one manufacturing plant how would it distribute the plant’s fixed costs (e.g., mortgage, production workers’ cost) over the five products' In general, a company will assign fixed cost to individual products if the company can clearly associate the cost with the product, such as assigning the cost of operating production machines based on how much time it takes to produce each item. | External Possibly the most obvious external factors that influence price setting are expectations of customers and channel partners. As we discussed, when it comes to making a purchase decision customers assess the overall “value” of a product much more than they assess the price. When deciding on a price marketers need to conduct customer research to determine what “price points” are acceptable. Pricing beyond these price points could discourage customers from purchasing. | Marketers will undoubtedly look to market competitors for indications of how price should be set. For many marketers of consumer products researching competitive pricing is relatively easy, particularly when Internet search tools are used. Price analysis can be somewhat more complicated for products sold to the business market since final price may be affected by a number of factors including if competitors allow customers to negotiate their final price. Analysis of competition will include pricing by direct competitors and related products. Direct Competitor Pricing – Almost all marketing decisions, including pricing, will include an evaluation of competitors’ offerings. The impact of this information on the actual setting of price will depend on the competitive nature of the market. For instance, products that dominate markets and are viewed as market leaders may not be heavily influenced by competitor pricing since they are in a commanding position to set prices as they see fit. On the other hand in markets where a clear leader does not exist, the pricing of competitive products will be carefully considered. Marketers must not only research competitive prices but must also pay close attention to how these companies will respond to the marketer’s pricing decisions. For instance, in highly competitive industries, such as gas or airline travel, competitors may respond quickly to competitors’ price adjustments thus reducing the effect of such changes. Related Product Pricing - Products that offer new ways for solving customer needs may look to pricing of products that customers are currently using even though these other products may not appear to be direct competitors. For example, Significance of promotions in marketing and for its objective An objective represents targets that need to be reached to achieve the company’s aims. These objectives can affect the way businesses operate. Business organisations can achieve their set objectives in short periods or/and long periods. These are known as short-run objectives and long-run objectives. A short-run objective lasts up to one year, and it is used to achieve long-run objectives. A long-run objective last up to three or five years, and they are quite difficult to reach. Marketing objectives are objectives that can help to decide where share of the market- size and revenue is needed to achieve the company’s mission and objectives. Marketing objectives also decides how the elements of marketing mix can help achieve these in each customer segment. Here are some examples of marketing objectives: 1. To increase sales revenue 2. To maintain/improve product and brand image 3. To increase market share 4. To give quality assurance However, Promotional objectives are objectives that are used to draw customer’s attention to a product or service, or even a business. Here are some examples of promotional objectives: 1. To make consumers aware of a product or service 2. To remind existing customers of a product so, they might re-purchase the product 3. To reach a targeted audience which might be geologically dispersed 4. To develop or improve the image of the business The Promotional Mix The promotion mix, one of the four major components of the marketing mix, involves a careful blending of several elements to accomplish the organisation's specific promotion objectives. The four traditional elements are advertising, personal selling, sales promotion and public relations. Advertising The first element I will discuss is advertising, which can be defined as "any paid form of non-personal promotion transmitted through a mass-medium." "The purpose of an advertising plan is to provide the means by which appropriate messages are devised and delivered to target audiences who then act in appropriate ways." Any paid form of no personal communication through the mass media about a product or service by an identified sponsor is advertising. The mass media used include magazines, direct mail, radio, television, billboards, and newspapers. This is used when the sponsor wants to communicate with a number of people who cannot be reached economically and effectively through personal means. Personal Selling Personal, face-to-face contact between a staff's representative and those people with whom the staff wants to communicate is personal selling. Non-profit organisations, political candidates, companies, and individuals use personal selling to communicate with the public. Public Relations A further element of the promotional mix is public relations, which is defined by the Institute of Public Relations (1986) as "the deliberate, planned and sustained effort to establish and maintain mutual understanding between an organisation and its public." Communication to correct erroneous impressions, maintain the goodwill of the hotel's many publics, and explain the hotel's goals and purposes is called public relations (PR). Unlike the other promotional mix elements, public relations are concerned primarily with people outside the target market, although it may include them. Publicity is news carried in the mass media about a hotel - its products, policies, services, personnel, or actions - at no charge to the organisation for media time and space. Unlike the other tools in the promotional mix, public relations does not require the purchase of airtime and space in media vehicles, such as T.V or magazines. And compared to the other promotional tools, public relations have higher credibility because the decision whether or not a hotel's public relations messages are delivered is not down to the hotel, but those charged with managing the media resource. Another big advantage PR has over other tools is that it has such low absolute costs. Within the communications programme of a hotel, public relations have two major roles to play. These are the development and maintenance of corporate goodwill and the continuity necessary for good product support. The first task of PR is to provide a series of cues by which the stakeholders can recognise, understand and position the hotel in such a way that it builds a strong reputation. Sales Promotion Sales promotion communicates with targeted receivers in a way that is not feasible by using other elements of the promotion mix. It involves any activity that offers an incentive to induce a desired response by staffs, intermediaries, and/or final customers/guests. Sales promotion activities add value to the service because the incentives ordinarily do not accompany the service. According to the Institute of Sales Promotion, sales promotion is "...a range of tactical techniques designed within a strategic marketing frameworks to add value to a product or service in order to achieve specific sales and marketing objectives." This added value could be in the form of an inducement, (for example, price-offs, coupons, premiums, seasonal-offs) and is intended to encourage guests to act now rather than later. Extended marketing mix Physical evidence as part of the marketing mix Physical evidence is the material part of a service. Strictly speaking there are no physical attributes to a service, so a consumer tends to rely on material cues. There are many examples of physical evidence, including some of the following: * Packaging. * Internet/web pages. * Paperwork (such as invoices, tickets and despatch notes). * Brochures. * Furnishings. * Signage (such as those on aircraft and vehicles). * Uniforms. * Business cards. * The building itself (such as prestigious offices or scenic headquarters). * Mailboxes and many others . . . . . . People as part of the marketing mix People are the most important element of any service or experience. Services tend to be produced and consumed at the same moment, and aspects of the customer experience are altered to meet the 'individual needs' of the person consuming it. Most of us can think of a situation where the personal service offered by individuals has made or tainted a tour, vacation or restaurant meal. Remember, people buy from people that they like, so the attitude, skills and appearance of all staff need to be first class. Here are some ways in which people add value to an experience, as part of the marketing mix - training, personal selling and customer service. Process as part of the marketing mix Process is another element of the extended marketing mix, or 7P's.There are a number of perceptions of the concept of process within the business and marketing literature. Some see processes as a means to achieve an outcome, for example - to achieve a 30% market share a company implements a marketing planning process. Another view is that marketing has a number of processes that integrate together to create an overall marketing process, for example - telemarketing and Internet marketing can be integrated. A further view is that marketing processes are used to control the marketing mix, i.e. processes that measure the achievement marketing objectives. All views are understandable, but not particularly customer focused. Now let’s look at an example of the above at dell. Dell computers and their extended marketing mix Recent innovation in digital technologies and Internet has created many opportunities for firms to create value. Launched in 1984, Dell grew to become one of the world’s largest Personal Computer (PC) vendors. Unlike other traditional PC vendors such as Hewlett-Packard (HP), Dell strives to provide products directly from manufacture plants to end-user. Although, PC market is approaching to mature stage of PLC, there are already many brands exist in the market, for example, Apple, NEC, Sony, HP, IBM, Gateway and Acer. Also, PCs are considering as a specialty goods as people willing to do some researches before they buy and will be bought infrequently. Moreover, technology development is extremely fast so computers would consider as high involvement goods because it involves relatively high time risk. Dell’s objective is to be the most successful computer company in the world at delivering the best customer experience in markets. Process Although Dell has a very efficient distribution channel, it is not the only area that enables Dell to remain competitive in the marketplace. Dell also provides extremely streamlined purchase process. Since Dell has no physical store, it relies heavily on its Internet Web sites and telephone to offer pre-sale and post-sale services. Dell’s Web site allows customers research, purchase and customises their system as well as track their delivery status. Moreover, Dell has launched over 5000 customer-tailored Web Site to its large customers. This Web site allows them conveniently access to newest Dell's products and services which may relevant to them. Finding and researching are costs of products, minimize those cost could assist customers’ decision-making process. Therefore, purchase system integrated comprehensively into its business processes so as to minimize customers’ time, cognitive and behavioural effort. The best example to illustrate this is Dell.com which generating over $1 million per day in online sales. It could be seen that the whole purchase process improve customer satisfaction and experience which have been highlighted by Dell’s online marketing efforts. People In addition to reducing customers’ purchase effort, Dell is best at reading its customers’ mind and providing a personalised service. Customers at all level are encouraged to give feedback and Dell turns day-to-day feedback into better products and services. In addition, as previously discussed, larger customers have a customized Web site called Premier Page which automatically gather and display relevance information. All purchase information gathered from Premier Page will be sent to database. Personalised services are achieved by profiling the customer database which enables Dell to determine customer’s buying patterns. Followed by the findings, Dell provides personalized special package and offerings for them. Understanding consumer behaviour helps Dell to establish a strong brand name in different market segments. As a customer-oriented firm, Dell also understands that the relationship between producer and customer extends beyond the time of purchase to after-sales service.  Dell owns a highly skilled customer support team. In order to ensure consistence customer experience and high level of service quality, every employee is required to attend Dell Learning (DL) where culture of Dell and necessary skills will be taught. All customer support staffs are very knowledgeable. Therefore, Dell avoided the situation in retailers’ sector where sale forces have limited knowledge and so failed to solve customers’ problem. This is evidenced by receiving more than 25,000 technical support contacts daily, 90 percent of calls received are satisfied within 6 minutes. To summarize, Dell views service and support as an ultimate competitive strategy. Physical evidence There are many examples of physical evidence, including some of the following at dell: * Internet/web pages: This is one obvious area you could find dells presence. Dell spends a huge amount of their marketing budget on the internet. This helps because like other retailers dell doesn’t use a store or physical demographic area to sell their products. * Brochures: dell focuses on all businesses and educational institution by printing them a brochures showing their products well suited for that particular business. * Signage (such as those on aircraft and vehicles): This is an area which dell has just started to explore. They have realised the opportunity they were losing by not advertising in London underground and various other locations. * Mailboxes and many others: e-commerce is an area dell expertise on, so anything to do online; they are always one step forward. Some of their other marketing include such as sponsoring a local even such as a football game or a musical concert. Recommended marketing mix for different segments for dell computers As mentioned the market can be split into segments and then market products/services to suit each segment. The marketing mix is a standard toolkit that helps them do this. For example, looking into the wide range of products with the dell family and categorizing them into different groups, such as; 1. Optiplex Desktops  & Latitude Notebooks 2. Dimension Range of PC’s 3. Insprion range Dell could segment the market in three broad segments as seen below, 1. Includes educational institutions, Large Corporations & government’s uses. These are Customers who need highly reliable systems within networked   environments. Industry-wide compatibility contributes to the high dependability of OptiPlex systems. 2. Small Businesses & Home Users. These are Customers requiring fast technology turns and high-performance computing. The product line commonly features the latest relevant PC technology on an award-winning platform. 3. Individuals or Small to Medium size Business. These are customers who require high-performing computer systems at aggressive prices, along with industry-leading service and support & Optimum performance for their system investment. As seen above different segments targeting different parts of the market with the best available technology would benefit dell in long run. But only having a strategy alone does not help to market a product better, a product has to have some differentiation with its current competitors and some unique features as well. Difference between B2B and B2C The marketing concept holds that the key to achieving organizational goals consists of determining the needs and wants of target markets and delivering the desired satisfaction more effectively and efficiently than competitors (Kotler, 2003). Under the traditional consumer markets environment, company sells mass goods and services to reach and meet different needs of its target customers by means of various marketing channels and try to establish a superior brand image in the market through applying appropriate marketing mix. However, Business-to-business (B2B) market is relatively complicated and involves not just sell, it requires a special, unique set of marketing concepts and principles. Basically, it varies to its counterpart-B2C marketing in terms of organization’s structure, participants’ behaviours, and other influential factors in the buying decision process. Kotler differentiates B2B marketing by focusing on the characteristics of product complexity and buying process complexity. From a managerial perspective; marketing in the industrial world is more of a general management responsibility than in consumer firms, and Kotler it is clear B2B markets are characterized by functional interdependence and buyer-seller interdependence. Key practical implications between B2C and B2B market We can see their distinct variances from following perspectives respectively --- differences of participants in the buying process; different factors that influence both side’s buying decision; differences among each stage of buying decision process; differences under new economic environment and other distinct variances between B2B and B2C marketing. First of all, B2B marketers buy products or services with the ultimate aim of adding value in order that they can move the products down the value chain until they finally reach us, the general public. In contrast, B2C suppliers solely target at the ultimate users, it doesn’t involve the complex value chain. Secondly, B2B market generally has fewer and large buyers and it emphasizes the role of buying center as decision-making unit. The business marketers pay great efforts to target and attract participants of the center, whereas B2C relationship is very flexible, and basically, the suppliers mainly focus on the end users. Thirdly, the environmental factors, organizational factors, interpersonal and the buying center’s individual factors exert the broadest influence on B2B transaction while traditional consumer’s buying behavior is mostly influenced by some cultural, social, personal and psychological factors. Fourthly, many of the buying instruments, for example, request for quotation, proposals, and purchase contracts are not typical been found in B2C buying. For example, comparing the e-commerce, B2B market encompasses many other types of activities than simply placing orders between businesses. Companies participating in B2B commerce include close collaborative planning and forecasting, order fulfilment, payment execution and status tracking. For example, ChemConnect.com and Chemdex.org (which deal with chemicals) are B2B e-commerce initiatives, which bring two firms together on the virtual market place. The focus is on providing services such as product catalogs, ordering and payment and status checking. In contrast, B2C business supports communications via the Internet, phone, fax and e-mail. The typical example is Amazon, who sells books over the Internet, thereby get in touch with its consumers directly. This is equivalent to the direct selling concept popularized by company such as Amway, which deal with cosmetics and daily necessities and under most circumstances; they share the same characteristics that their buyers are mostly end users. The only difference is that the selling is done via the Net. Key differences between international and domestic marketing The difference between international and domestic marketing is best highlighted by Kotler as ‘mega marketing’ as opposed to simply ‘marketing’. It is perhaps easy to over simplify the vast number of variables to be managed within the marketing function, especially in the international arena. Where the marketing managers own knowledge of the foreign market is limited and so the number of variables on which we need information thereby increases dramatically. It overlooks many of the individual variables in return for making a simple point and providing a mnemonic for marketing managers. Domestic marketing involves one set of uncontrollable derived from the domestic market. International marketing is much more complex because a marketer faces two or more sets of uncontrollable variables originating from various countries. The marketer must cope with different cultural, legal political and monetary systems. Digital Microwave Corporation’s annual report makes this point very clearly when it states: “The Company is subject to the risks of doing business internationally, including unexpected changes in regulatory requirements, fluctuations in foreign currency exchange rates, imposition of tariffs and other barriers and restrictions, the burdens of complying with a variety of foreign laws and general economic and geopolitical conditions, including inflation and trade relationships.” Firms marketing mix is determined by the uncontrollable factors within each country’s environment as well as by the interaction between the sets. For optimum results, a firms marketing mix may have to be modified to confirm to a different environment, though wholesale modification is not always necessary. The degree of overlap of the sets of uncontrollable variables will dictate the extent to which the four P’s of marketing must change - the more the overlap, the less the modification. Differences in domestic and international marketing  Domestic Marketing | International Marketing | Main languageDominant cultureResearch straightforwardRelatively stable environmentSingle currencyBusiness conventions understood | Many languagesMulti-cultureResearch complexOften unstable environmentExchange rate problemsConventions diverse and unclear | The varying environments within which the marketing plan is implemented may often rule out uniform marketing strategies across countries. For e.g. McDonald’s, although world renowned for its American symbols and standardisation, has actually been flexible overseas. Recognizing the importance of foreign markets and local customs, the company customizes its menu by region. In fact, it has even excluded beef from its menu in India in deference to the country’s Hindu tradition. Factors differentiating domestic and international marketing  Factors | Domestic | International | Social and cultural | Relatively homogenous market‘Rule of the game’ understoodSimilar purchasing habits | Fragmented, diverse marketsRules diverse, changeable and unclearDiverse purchasing habits | Economic | National priceUniform financial climateStable business environment | Diverse national policiesVariety of financial climates, ranging from very conservative to highly inflationaryMultiple business environments, some unstable | Competitive | Competitors products, prices, costs and plans usually known | Many more competitors but little information about their strategies | Political/legal | Relative freedom from government interferencePolitical factors relatively unimportant | Involvement in national economic plansPolitical factors often significant | Technological | Use of standard production and measurement systems | Training of foreign personnel to operate and maintain equipment. | Conclusion Having examined different theories by various authors made on marketing it is easy to understand how prices are set to reflect any organisations objectives and the different factors that affect during this pricing process. Moving on, we looked into significance of promotional activity during marketing and how it is integrated to achieve the organisations marketing objective itself. Furthering in my report, we discussed the extended marketing mix and we looked into how this would help any organisation to meets its objective; to make it even simpler, we compared it to Dell computers. And using the same organisation I explained how an organisation could use different marketing mixes for two or more segments to the consumer markets. Finally, we looked into key the difference in B2B and B2C and we looked into the major differences between domestic marketing and international marketing; which should leave us with a sound understanding mostly about marketing and its objective with an organisation. | References Philip Kotler, principles of marketing, 1991. Peter Drucker, the Practice of Management, 1954. Olson, C. J & Peter, J.P, Understanding Consumer Behaviour. 1990 http://www.innovationreactor.com (marketing strategy) [accesses on 07/01/2011] http://www.tutor2u.net (targeting and segmentation) [accesses on 07/01/2011] Kotler Philip, Wong Veronica, Saunders John, Armstrong Gary, Principles of Marketing, Prentice Hall, Europe. (2005) http://books.google.co.uk (international marketing) [accesses on 07/01/2011] Dell Computer Co. “Annual Report FY 2000: Form 10-K.”, Securities and Exchange Commission, Washington, DC. Dell, M.S. “Making the right Choices for the New Consumer”,Managing Service Quality, (1993) Downey, G. “Dell adds services to enterprise menu”, Computing Canada. (2003). -------------------------------------------- [ 2 ]. Brassington & Petit, 2000, P.593 [ 3 ]. Fill, 2002, P.486 [ 4 ]. Institute of Public Relations [ 5 ]. Healey&Samtani, 2002 [ 6 ]. Kotler,P. (2003,11th edn) Marketing Management:International Edition, Upper Saddle River, New Jersey, USA: Pearson Education [ 7 ]. books.google.co.uk/books