178
MARKETING
Question 3
Describe three variables you think would be useful as a basis for segmenting the market for clothing sold by a large retail chain, and two variables for segmenting the market in paint sold to other businesses by a paint manufacturer. Explain your reasons for the choice of all
variables. (10 marks)
Question 4
Hubbles, a national high-street clothing retailer has recently appointed a new Chief Executive. The company is well established and relatively fi nancially secure. It has a repu-tation for stability and traditional, quality clothing at an affordable price. Lately, however, it has suffered from intense competition leading to a loss of market share and an erosion of customer loyalty.
Hubbles has all the major business functions provided by ‘in house’ departments, including fi nance, human resources, purchasing, strategy and marketing. The Strategy and Marketing department has identifi ed a need for comprehensive review of the company’s effectiveness. In response, the new Chief Executive has commissioned a review by manage-ment consultants.
Their initial fi ndings include the following:
● Hubbles has never moved from being sales-oriented to being marketing-oriented and this is why it has lost touch with its customers.
● Hubbles now needs to get closer to its customers and operate a more effective marketing mix.
● Additional investment in its purchasing department can add signifi cantly to improving Hubbles’ competitive position.
The Chief Executive feels that a presentation of interim fi ndings to senior managers would be helpful at this point. You are a member of the management consultancy team and have been asked to draft a PowerPoint slide presentation of some of the key points.
On a single sheet of paper prepare a slide outline and a few notes in response to follow-ing sub-questions:
(a) Describe the difference between a company that concentrates on ‘selling’ its products and one that has adopted a marketing approach. (5 marks) (b) Explain how Hubbles might develop itself into an organisation that is driven by
cus-tomer needs. (5 marks)
(c) Explain what is meant by the ‘marketing mix’. (5 marks) (d) Identify examples of ways in which the management in Hubbles could make use of the
marketing mix to help regain its competitive position. (5 marks)
Question 5
Q’s founder fi rst began producing breakfast food from a start-up unit on a small industrial estate. Now Q is the market leader in Europe and Oceania. Once established in Europe, the company made the breakthrough into Oceania thanks to demand from ex-pats and contacts with a family member who happened to be a director of a supermarket chain in Australia. The company’s founder is very ‘hands on’ and has made all the major strategic decisions to date based on intuition.
REVISION QUESTIONS E1
179 ENTERPRISE OPERATIONS
MARKETING
Q spends heavily on displaying most of their twenty products on television, normally before and after childrens’ programmes with high viewing fi gures. Research conducted 10 years ago shows that children love small gifts contained within packs and the association of certain of the products to cartoon characters. Q also manufactures its most popular lines and packages them as ‘own brand’ alternatives for some large supermarket chains. These sell more cheaply than Q branded products, are less costly to produce (they contain inex-pensive packaging and no gifts) but sales remains low.
Q fi nds itself at something of a ‘cross-roads’ as it currently faces increasing competition (from a North American fi rm), sales levels that seem to have ‘peaked’ and the prospect of the founder retiring very soon. Management consultants advising Q have identifi ed a need to develop a structured marketing strategic plan for the organisation and for greater involvement of other staff in future strategic decisions. As a further complication Q has recently received some adverse publicity from an international health ‘watchdog’ body that claims that Q’s products contain potentially harmful levels of both sugar and salt.
Requirements
(a) Evaluate Q’s situation making specifi c mention of marketing and ethical issues.
(10 marks) (b) Explain how Q might develop a marketing strategic plan. (10 marks)
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181
Solution 1
Companies have a number of alternatives as to where they will focus their marketing effort. They can adopt an undifferentiated marketing stance in which they make a product offering to the market as a whole. They can alternatively seek to cater for the needs of each individual customer, a bespoke approach, fi nally they can focus on particular segments of the market. The idea of dividing the market into segments is to identify groups of poten-tial consumers who have similar needs and will respond to a particular marketing mix in broadly similar ways.
The undifferentiated or mass marketing approach is ineffi cient in many ways because much of the marketing effort is wasted on consumers who have no interest in purchasing the product or service and are unlikely to do so whatever the efforts of the marketing staff.
The alternative of targeting and catering for the different needs of every individual cus-tomer is costly and impractical for most organisations. Resources in organisations are lim-ited and the task of dealing with each customer on a one-to-one basis is too costly for most companies to contemplate.
The advantage of market segmentation is that it allows a company to concentrate its resources on meeting the needs of consumers who have been identifi ed by market research as those who are most likely to purchase the product or service. This is, of course, if the product or service is of an appropriate quality and is offered at the right price, in the right place at the right time.
In addition to the advantage of being able to concentrate resources in a way that will bring the greatest return, segmentation has other advantages. These include easier analysis of cus-tomers, a better understanding of the competition and more effective market planning.
Segmentation allows a company to gain a better understanding of customer needs, wants and other characteristics because of the sharper focus it allows on the personal, situ-ational and behavioural factors that characterise customers in a particular segment of the market. This detailed knowledge allows marketers to respond quickly to any changes in what the target customers want.
Competitor analysis is also assisted by knowledge of market segmentation because it enables a company to develop an understanding of the nature of the competition they face. By focussing on particular segments, it is much easier for a company to identify its competitors and at which segments it is targeting its products. If the company observes that competition is severe in a particular segment, it may be that this knowledge of market segments will allow the company to focus on a different segment and so avoid head-on and costly competition.