Marketing: Functions and
Strategies
1. Identify and describe the marketing functions that
must be addressed by all new ventures.
2. Describe an expanded view of a company's
"product."
3. Explain how distribution is part of marketing
infrastructure.
4. Identify and discuss the categories of promotions,
5. Address the concept of pricing with respect to
new ventures.
6. Describe the primary growth strategies employed
by entrepreneurs.
7. Explain the major elements of a marketing plan.
Although market research often points the
way toward new opportunities, it is a strong
marketing strategy that leads to success.
Obviously, there are many other things to do
in a new venture, such as setting up the
business, acquiring inventory, staffing the
enterprise, and obtaining financial resources.
Marketing activities, however, mobilize an
enterprise, changing it from an elegant idea to
a viable business.
This change takes place through a conscious effort
to solidify an entrepreneur's ideas into a marketing
plan with a clear marketing strategy.
The plan must be in place prior to start‑ up, but it
is subject to change as competition occurs and the
company grows.
If market research is accomplished with care,
information will be at hand for making good
marketing decisions.
This part builds on marketing research, described in
the first part of this handout, to introduce marketing
responsibilities and marketing strategies specific to
new ventures.
Marketing consists of a multitude of activities that
include decisions about the company's products or
services, pricing policies, promotions, and methods of
distribution.
The ultimate goal is to facilitate exchanges between an
enterprise and its customers. This exchange
relationship exists as one party becomes willing to
"give something of value" to "receive something of
value" from the other party.
Marketing is the process of conceiving that exchange,
and then accomplishing the tasks necessary to deliver
the goods or services in a manner that satisfies
customers and meets business objectives.
Marketing is explained in terms of four general
activities, and although most business students
have studied these before, they are important
to emphasize because they capture the
essence of marketing.
The four activities concern decisions about
the firm's product, its price, methods of
promotion, and how products are distributed.
Brief definitions of these activities are as
follows:
Product: Used as a catchall term, product
includes physical objects or services being sold,
together with packaging, image, brand name,
and warranty.
In addition, a product includes physical
attributes that influence consumers'
perceptions, such as colors, shapes, sizes, and
materials.
A product can also relate to the "business
concept," such as fast‑ food franchising.
Price: From a consumer's viewpoint, price is the
monetary unit required for a purchase
from an entrepreneur's viewpoint, it is the unit of
income.
Prices communicate information about value,
image, and competition, and they influence
decisions about distribution, market
segmentation, product characteristics, and related
services. Pricing policies are key factors in
forecasting.
In turn, all these factors influence pricing
decisions. For example, prices convey something
about image, but the image a store has will
convey something about its prices.
The act of communication that provides
consumers with information about a
company's products, its services, or the
venture itself is promotion, and it is through
promotional activities that the venture
attracts consumers.
They include advertising, personal selling,
direct marketing, public relations, and other
creative methods of bringing buyers and
sellers together.
Often referred to as the placement function,
distribution is concerned with how products
or services are made available to customers.
Distribution can mean the physical channels of
transporting products from manufacturers to end
users, warehousing, wholesaling, and retailing.
It can also relate to marketing systems such as
catalogs, telemarketing, franchising, and computer-
based network markets.
A marketing strategy is a consciously
formulated plan that describes how the new
venture will compete.
It focuses the enterprise on a target market
to fill a gap or create a niche.
A well-articulated marketing strategy provides
guidelines for the entrepreneur concerning
expected results, allocation of resources,
responsibilities for marketing, and ways in
which the enterprise will be controlled.
Expected results are expressed in sales
forecasts and operating budgets, but more
important; they constitute the entrepreneur's
strategic marketing objectives.
An allocation of resources reflects what a firm
has to use and the tactics employed to achieve
results.
Responsibilities are those activities required to
implement a marketing plan.
Control issues concern methods of feedback
necessary to track performance. Feedback
provides planning information for future decisions.
A marketing plan solidifies the marketing
strategy by defining customers, sales forecasts,
and marketing objectives.
Consequently, the marketing plan synthesizes
market research and the entrepreneur's strategy
into a blueprint for action.
The plan is implemented through a marketing
program, which addresses the marketing
activities summarized earlier decisions regarding
product or service characteristics, pricing,
promotional activities, and methods of
distribution.
A product is anything tangible or intangible,
favorable or unfavorable, that a consumer
attributes to a purchase.
This includes the form, function, psychological
utility, and benefits, real or perceived, in
products and services.
Marketing niches are developed around these
"packages" of attributes.
It is important to recognize these attributes
and the ways, in which consumers perceive
them within two broad classifications:
consumer goods and industrial goods.
Consumer goods are bought by individuals for
personal use, and often consumers will be
encouraged by distribution methods that make
purchasing convenient and enjoyable.
They will want products packaged, formed,
colored, and priced to reinforce their individual
perceptions of value. Consumer behavior is
predicated primarily on the type of product being
sold, but the total package of product attributes
determines consumer perceptions.
It is useful to further differentiate of products as
convenience, shopping, or specialty goods. We
address each of these separately.
Well‑ understood items that most buyers
need little information about are known as
convenience products,
They are commodities in the sense that there
are many substitutes, prices are usually
undifferentiated, and little time is spent by
consumers to do comparison shopping.
Examples include soft drinks, gasoline, potato
chips, toothpaste, chewing gum, and cereals.
Brand recognition is often the only way to
differentiate commodities from one
another, so manufacturers such as Nestle,
Ghana Ltd will spend a great deal of
money on national advertising, hammering
home the brand image.
At the retail level, very little promotional
effort will be exerted, and prices among
competing brands will be similar.
Items that engage a consumer's mind in active
planning are called shopping products.
Consumers will consciously think about their
purchases. They will make comparisons,
consult consumer buying guides, and be
significantly influenced by promotions.
Shopping products include mobile phones
home appliances, microcomputers, furniture,
clothing, and sports equipment. Major
purchases such as automobiles and houses
also fall into this category.
Product features become extremely
important to consumers, but quite often
prices are not directly comparable to those
of substitutes.
Although there may be many choices, (e.g.,
many brands of mobile phones), most
consumers do not view shopping goods as
having undifferentiated substitutes.
Product quality, reliability, service after sale,
warranties, access to repair facilities,
reputation of retailers, credit availability,
packaging, and many other factors augment
the product's image in addition to its
function.
Shopping products tend to have larger margins
and are sold through fewer outlets than
convenience goods.
Larger margins help offset lower sales volumes
and heavier expenses for promotions, and it is in
this category of products that entrepreneurs
have been most successful because consumers
react to unusual products or those distributed
and promoted in unusual ways.
When the microcomputer market began to
"shake out," for example, it was because
consumers became interested in clones, PCs with
unusual attributes or software, and computers
with price advantages.
Items with unique characteristics that few consumers
consider buying - or that consumers consider buying
only rarely ‑ are considered specialty products.
A luxury car, a diamond jewelry set, or a private
airplane will be beyond most of our means, but when
consumers decide to buy one of these items, they
will search intensely to locate a satisfactory seller.
Consumers do not typically engage in comparative
shopping or scan advertisements for good prices.
They are concerned with quality. Substitutes will not
do, and consumers expect exquisite service. From
the entrepreneur's viewpoint, inventory is expensive
and sold with very high margins, and those who can
establish specialty niches do extremely well.
Top‑ notch restaurants, world-class vacation
resorts, prominent art and antique dealers,
luxury house developers, and investment
jewelers are among those in specialty
markets.
A specialty product, however, is often a
matter of perception; it is viewed relative to
consumer incomes and their patterns of
purchasing. A world-class vacation for
instance, may be a once‑ in‑ a‑ lifetime
event for most of us, but for the "rich and
famous," it is a seasonal getaway. Therefore,
one's target market only partially defines the
product.
Products not easily classified into one of the
three categories include those things that are
often essential but do not constitute a
motivated purchasing effort by consumers.
For example, eventually most of us will need
the services of mortuaries. We will buy
caskets, cemetery plots, or perhaps some
unusual program, such as a burial at sea. We
try to avoid these purchases, just as we avoid
purchasing insurance, emergency road repair
services, and estate planning services.
There are other products that may not be
essential, depending on one's viewpoint, yet fall
into a similar "avoidance" pattern for purchasing.
These include, for example, encyclopedias,
investment seminars, and preventive dentistry.
Some of these products or services are not
marketed; there is little price competition; and
their enterprises exist with little or no advertising.
Mortuary services are examples. At the other
extreme, some require aggressive promotion and
are price sensitive. Life insurance policies are
examples
Industrial products are sold to other
organizations as raw materials, equipment,
component parts, process materials, supplies,
and services.
Marketing of industrial products is called
institutional sales and there are five categories
of industrial products: direct materials, indirect
materials, capital equipment, contracted services,
and MRO supplies. (MRO stands for
maintenance, repair, and operating.)
Between 30 and 50 percent of a
manufacturer's total overhead consists of
direct materials, including raw materials, sub-
assemblies, and component parts used in
production.
When we think of raw materials, we think of
steel for cars, plastic resins for toys, aluminum
alloys for aircraft, and grains for cereals. These
materials offer few opportunities for
entrepreneurs, yet there are thousands of
subassemblies and components essential for
manufacturing that do offer opportunities.
Consider a product with very simple
materials, such as a textbook.
The printing company that actually creates
the book must have huge rolls of paper,
cover materials, special inks, materials for
printing plates, and various art materials
used directly in the production of the text
and cover.
Over the years there have been hundreds of
innovations in papers, treatments, inks and
coloring agents, photographic processes,
binding materials, glues, and art materials.
When technologies are in rapid change - whether in
printing or space robotics opportunities rise exponentially.
For example, after the Challenger disaster, NASA decided
that space work would eventually have to be done with
robots. Bids went out for designs, and one of the winners
was an entrepreneurial venture with four creative partners
in their early 30s.
The company, called Honeybee, developed a Flight
Telerobotic Servicer (FIS) that looks like the Star Wars
C‑ 3PO. It works much the same way, without the movie
fantasy features, and is designed for construction work on
the space station Freedom, a NASA project slated for the
late 1990s.
The Honeybee FTS project will require more than 400 new
parts and assemblies, and only half of these have been
developed since the FTS was designed. A majority of those
have come from other entrepreneurs and small research
companies.
Selling to industrial markets is at once an art form
and a technical specialty. Sales representatives
cannot approach a purchasing manager armed only
with enthusiasm. They have to be extremely well
informed about the technical attributes of their
materials, their competitors' materials, and
state‑ of‑ the‑ art technology.
Many sales representatives come from engineering
disciplines and train for marketing roles.
Promotional activities are more attuned to
technical specifications than to emotional ploys.
Attractive brochures and technical manuals are
common sales tools, and advertising is positioned in
trade magazines. Entrepreneurs must have excellent
distribution systems to assure on-time deliveries of
high-quality materials.
Supplies used in manufacturing and "process" materials
used in conversion methods to create products
constitute indirect materials.
Book publishers, for example, need editing pencils, art
pens, camera film, ink filters, imprinting materials, and
similar supplies. Since these are consumed in actual
production processes, they are classified as "materials"
rather than "overhead," and purchasing managers make
decisions about indirect materials similar to those for
direct materials.Vendors also follow similar guidelines
in selling these items.
Entrepreneurs are less likely to have opportunities in
indirect materials because, like consumer commodities,
indirect materials have many substitutes, low margins,
and well-established vendors.
Entrepreneurs make significant strides in institutional
markets when they can address growth markets.
Usually, capital assets are not procured in the same manner as
materials. Equipment purchases typically require capital
budgeting, executive involvement, and intricate contracts
between vendors and buyers.
Major equipment includes production machinery, inventory-
handling equipment, telecommunications equipment,
computers and similar assets.
Industrial marketing requires extensive technical capabilities,
often team efforts by vendors, and months of negotiation.
Major equipment purchases seldom end with the
consummation of a sale. Instead, they include an ongoing
commitment for installation, technical assistance, warranty
programs, and equipment updates and modifications.
Although major equipment is seldom offered by
start‑ up ventures, there are outstanding examples‑ of
enterprises that succeeded because they fought to
establish industrial markets. Digital Equipment
Corporation, MCI, Sun Systems, Lotus Development
Corporation, and Microsoft Corporation are just a few
that began small but grew rapidly by concentrating on
institutional sales.
There is a more lucrative niche for entrepreneurial firms
in accessory equipment. Accessories are capital assets, but
this category includes smaller ‑ ticket items such as
small electrical tools, drafting tables, engineering
instruments, computer peripheral equipment, and so on.
This list can be quite extensive, and there are always new
products coming to market that enhance productivity.
Training officers, for example, have progressed
from school ‑ type blackboards to graphic
displays to video training aids to interactive
simulation systems. Someone had to create
these innovations and then convince
institutional buyers of their benefits.
Institutional marketing involves well ‑ placed
advertisements in publications that are
frequently read by managers and purchasing
officers, presentations and demonstrations by
technical experts, and a strong service ‑
support profile by the venture.
A broad range of professional consulting activities are contracted
services, including engineering design work, marketing research,
advertising, management systems consulting, legal services,
accounting, and labor relations services.
There are many opportunities to carve out niches through
service contracts, and industrial firms often make use of
contracted services rather than full‑ time departments. Janitorial
services, constitute one of the fastest growing service industries
in Ghana with significant growth in corporate accounts.
Industrial facilities and commercial buildings are also maintained
through contracted landscape and lawn service firms.
Software development is an enormous field, and corporations
spend an estimated $60 billion annually on educational programs
and training.
The marketing effort required for services is
substantially the same as for direct materials or capital
assets. Purchasing managers may be involved in buying
these services, but usually corporate executives will
make a collective decision.
Entrepreneurs must have solid promotional programs
to supplement personal presentations. The reputation
of the entrepreneur and his or her firm will often
weigh more than the perceived intrinsic value of the
service because the entrepreneur is selling "intangibles.
“
Executives will be sensitive to service prices because
it is difficult to measure the value of results or to
compare the exchange value of money for services.
Most corporate buyers, however, will have a good
idea of market prices. Consequently, there are
major players in service fields who can demand
"luxury prices," and corporate executives who
want those services do not question price.
Major public accounting firms, for instance, have
differentiated their services to the extent that
price is a minor issue.
Well known advertising agencies, media
specialists, safety experts, quality control firms,
and labor relations interventionists have become
the "BMWs" of institutional contract services.
Maintenance, repair, and operating (MRO)
supplies constitute a significant market. These
products include light bulbs, paper towels, toilet
paper, computerized billing forms, and hundreds
of similar items.
These are vital supplies that no company can do
without. A temporary shortage of pencils might
not stop work, but the firm that runs out of
toilet paper is asking for a riot.
Production can stop when a company lacks
essential supplies. For example, a company that
manufactures wooden desks requires a significant
amount of sandpaper, cleaning solvents, and rags.
If the firm runs out of any of these items, the
entire assembly process can shut down.
Most MRO products are commodities in the sense of
having many substitutes; and there are usually many
suppliers competing for limited sales.
Purchasing managers will spend little time selecting
items or negotiating prices, but instead, they will put a
premium on convenience and hassle free purchasing.
They do not want to be bothered by purchasing
decisions, but they also do not want to risk running
out of toilet paper.
Frequently, MRO purchases are based on standing
orders, such as monthly supplies of rags and uniforms,
delivered at regular intervals. Landing these contracts
can be lucrative, especially if a venture can establish a
reputation for reliable service.
Classification and market niche of products
will determine packaging and labeling
requirements.
Often packaging is more critical and expensive
than the product itself, and depending on the
intended customer, product labeling can be
extremely detailed.
Packaging consumer goods, for instance,
establishes brand awareness and product
image. Laundry detergents are differentiated
visually by their packages and canned soups by
their color schemes.
Consumer labels provide distinctive names and brand
identification. Packaging and labeling must also comply with Ghana
Standard Board regulations, safety codes established by the
Consumer Product Safety Commission, and specific packaging
methods and information disclosure for hazardous materials,
foods, medications, and protection against tampering.
Methods of distribution will also affect packaging and labeling.
Individual light bulbs packaged for retail sales will have brightly
colored protective containers with one to four bulbs to a pack,
and packaging is often more costly than the products.
The same light bulbs sold as MRO products may be bulk packed in
dozens and boxed by the gross. These containers will have
minimum product information, simple labels, and protective but
colorless boxes. Usually bulk packaging is relatively inexpensive
compared with retail packaging requirements.
If entrepreneurs have defined their products and
services clearly, and if they have identified their target
customers well, their methods of distribution should
be equally clear.
A luxury consumer item intended for specialty
markets and high‑ income consumers will not be
offered through a discount channel; Cartier jewelry
does not go on sale.
Shopping products that compete on price will have to
be placed in stores or catalogs that can attract
appropriate customers. Commodities vie for high
visualization, such as retail shelf space or low‑ cost
mass markets.
Consequently, entrepreneurs must select channels of
distribution that reflect the appropriate quality and
image of their products or services.
The role of promotion is to facilitate exchanges
between organizations and their customers.
Commercial enterprises are concerned with
attracting customers;
Professional services are concerned with
informing clients about their services; and
Not-for-profit organizations must let their
constituents know what they do.
Different types of enterprises will have distinct
promotional mixes utilizing a variety of
promotional methods.
Advertising is a form of impersonal
broadcasting through commercial mass
media.
The pervasive type of promotion is
advertising because it is the one form that
punctuates our daily lives.
Advertising is like a shotgun blast aimed at a
flock of geese; there is no guarantee you will
hit anything, but if you fire enough shots, you
will certainly get their attention.
A promotional mix is the result of a conscious effort to
select promotional methods that reinforce a marketing
strategy.
Advertising alone will not attract long lines of customers.
Sales promotions alone will not communicate to customers
who you are and what you have to sell.
Publicity can be important but irregular, and it will not
sufficiently inform the public about your enterprise, your
products, or your services.
Personal selling clearly focuses on the intensity of human
effort and links buyers and sellers, but salespersons cannot
fashion sales from thin air; they need support systems or
other promotional means to prospect for customers and
to reinforce the image of the firm they represent.
