Monday, January 18, 2010
Organizational Market
All the individuals and companies who purchase goods and services for some use other than personal consumption. Organizational markets usually have fewer buyers but purchase in far greater amounts than consumer markets, and are more geographically concentrated. Organizational markets are divided into four components: industrial market, which includes individuals and companies that buy goods and services in order to produce other goods and services; reseller market, which consists of individuals or companies that purchase goods and services produced by others for resale to consumers; government market, which consists of government agencies at all levels that purchase goods and services for carrying out the functions of government; institutional market, which consists of individuals and companies such as schools or hospitals that purchase goods and services for the benefit or use of persons cared for by the institution.
Consumer Behavior
Consumer behaviour is the study of when, why, how, and where people do or do not buy products. It blends elements from psychology, sociology, social anthropology and economics. It attempts to understand the buyer decision making process, both individually and in groups. It studies characteristics of individual consumers such as demographics and behavioural variables in an attempt to understand people's wants. It also tries to assess influences on the consumer from groups such as family, friends, reference groups, and society in general.
Customer behaviour study is based on consumer buying behaviour, with the customer playing the three distinct roles of user, payer and buyer. Relationship marketing is an influential asset for customer behaviour analysis as it has a keen interest in the re-discovery of the true meaning of marketing through the re-affirmation of the importance of the customer or buyer. A greater importance is also placed on consumer retention, customer relationship management, personalisation, customisation and one-to-one marketing. Social functions can be categorized into social choice and welfare functions.
Each method for vote counting is assumed as a social function but if Arrow’s possibility theorem is used for a social function, social welfare function is achieved. Some specifications of the social functions are decisiveness, neutrality, anonymity, monotonocity, unanimity, homogeneity and weak and strong Pareto optimality. No social choice function meets these requirements in an ordinal scale simultaneously. The most important characteristic of a social function is identification of the interactive effect of alternatives and creating a logical relation with the ranks. Marketing provides services in order to satisfy customers. With that in mind, the productive system is considered from its beginning at the production level, to the end of the cycle, the consumer. Belch and Belch define consumer behaviour as 'the process and activities people engage in when searching for, selecting, purchasing, using, evaluating, and disposing of products and services so as to satisfy their needs and desires'.'
Customer behaviour study is based on consumer buying behaviour, with the customer playing the three distinct roles of user, payer and buyer. Relationship marketing is an influential asset for customer behaviour analysis as it has a keen interest in the re-discovery of the true meaning of marketing through the re-affirmation of the importance of the customer or buyer. A greater importance is also placed on consumer retention, customer relationship management, personalisation, customisation and one-to-one marketing. Social functions can be categorized into social choice and welfare functions.
Each method for vote counting is assumed as a social function but if Arrow’s possibility theorem is used for a social function, social welfare function is achieved. Some specifications of the social functions are decisiveness, neutrality, anonymity, monotonocity, unanimity, homogeneity and weak and strong Pareto optimality. No social choice function meets these requirements in an ordinal scale simultaneously. The most important characteristic of a social function is identification of the interactive effect of alternatives and creating a logical relation with the ranks. Marketing provides services in order to satisfy customers. With that in mind, the productive system is considered from its beginning at the production level, to the end of the cycle, the consumer. Belch and Belch define consumer behaviour as 'the process and activities people engage in when searching for, selecting, purchasing, using, evaluating, and disposing of products and services so as to satisfy their needs and desires'.'
The Marketing Environment
We stated on this website that marketing was about meeting needs and providing benefits and the customer should be the central focus of the business. The companies marketing strategy should be focused around this concept, however, there are factors within the companies marketing environment which can constrain this activity. These factors are both controllable and uncontrollable and have to be carefully monitored by the organisation.
The companies marketing environment can be defined as the 'controllabe and uncontrollabe elements that influence the strategic direction of the company'. The companies marketing environment can be analysed in two broad levels.
The macro environment involves looking at uncontrollabe variables that influence company strategy. This is discussed further in PEST Analysis.
The micro environment involves analysing controllabe variables close to the company that the company does have an influence over. This usually involves undertaking a stakeholder analysis.
The companies marketing environment can be defined as the 'controllabe and uncontrollabe elements that influence the strategic direction of the company'. The companies marketing environment can be analysed in two broad levels.
The macro environment involves looking at uncontrollabe variables that influence company strategy. This is discussed further in PEST Analysis.
The micro environment involves analysing controllabe variables close to the company that the company does have an influence over. This usually involves undertaking a stakeholder analysis.
Marketing Mix
The marketing mix principles (also known as the 4 p’s.) are used by business as tools to assist them in pursuing their objectives. The marketing mix principles are controllable variables, which have to be carefully managed and must meet the needs of the defined target group. The marketing mix is apart of the organisations planning process and consists of analysing the defined:
How will you design, package and add value to the product?
What pricing strategy is appropiate to use?
Where will the firm locate?
How will the firm promote its product.
How will you design, package and add value to the product?
What pricing strategy is appropiate to use?
Where will the firm locate?
How will the firm promote its product.
Micro Environmental Factors
These are internal factors close to the company that have a direct impact on the organisations strategy. These factors include:
Customers
Organisations survive on the basis of meeting the needs, wants and providing benefits for their customers. Failure to do so will result in a failed business strategy.
Employees
Employing the correct staff and keeping these staff motivated is an essential part of the strategic planning process of an organisation. Training and development plays an essential role particular in service sector marketing in-order to gain a competitive edge. This is clearly apparent in the airline industry.
Suppliers
Increase in raw material prices will have a knock on affect on the marketing mix strategy of an organisation. Prices may be forced up as a result. Closer supplier relationships is one way of ensuring competitive and quality products for an organisation.
Shareholders
As organisation require greater inward investment for growth they face increasing pressure to move from private ownership to public. However this movement unleashes the forces of shareholder pressure on the strategy of organisations. Satisfying shareholder needs may result in a change in tactics employed by an organisation. Many internet companies who share prices rocketed in 1999 and early 2000 have seen the share price tumble as they face pressures from shareholders to turn in a profit. In a market which has very quickly become overcrowded many havel failed.
Media
Positive or adverse media attention on an organisations product or service can in some cases make or break an organisation.. Consumer programmes with a wider and more direct audience can also have a very powerful and positive impact, forcing organisations to change their tactics.
Competitors
The name of the game in marketing is differentiation. What benefit can the organisation offer which is better then their competitors. Can they sustain this differentiation over a period of time from their competitors?. Competitor anlaysis and monitoring is crucial if an organisation is to maintain its position within the market.
Customers
Organisations survive on the basis of meeting the needs, wants and providing benefits for their customers. Failure to do so will result in a failed business strategy.
Employees
Employing the correct staff and keeping these staff motivated is an essential part of the strategic planning process of an organisation. Training and development plays an essential role particular in service sector marketing in-order to gain a competitive edge. This is clearly apparent in the airline industry.
Suppliers
Increase in raw material prices will have a knock on affect on the marketing mix strategy of an organisation. Prices may be forced up as a result. Closer supplier relationships is one way of ensuring competitive and quality products for an organisation.
Shareholders
As organisation require greater inward investment for growth they face increasing pressure to move from private ownership to public. However this movement unleashes the forces of shareholder pressure on the strategy of organisations. Satisfying shareholder needs may result in a change in tactics employed by an organisation. Many internet companies who share prices rocketed in 1999 and early 2000 have seen the share price tumble as they face pressures from shareholders to turn in a profit. In a market which has very quickly become overcrowded many havel failed.
Media
Positive or adverse media attention on an organisations product or service can in some cases make or break an organisation.. Consumer programmes with a wider and more direct audience can also have a very powerful and positive impact, forcing organisations to change their tactics.
Competitors
The name of the game in marketing is differentiation. What benefit can the organisation offer which is better then their competitors. Can they sustain this differentiation over a period of time from their competitors?. Competitor anlaysis and monitoring is crucial if an organisation is to maintain its position within the market.
Price Discrimination
Where a monopoly exists, the price of a product is likely to be higher than in a competitive market and the quantity sold less, generating monopoly profits for the seller. These profits can be increased further if the market can be segmented with different prices charged to different segments (referred to as price discrimination), charging higher prices to those segments willing and able to pay more and charging less to those whose demand is price elastic. The price discriminator might need to create rate fences that will prevent members of a higher price segment from purchasing at the prices available to members of a lower price segment. This behaviour is rational on the part of the monopolist, but is often seen by competition authorities as an abuse of a monopoly position, whether or not the monopoly itself is sanctioned. Examples of this exist in the transport industry (a plane or train journey to a particular destination at a particular time is a practical monopoly) where Business Class customers who can afford to pay may be charged prices many times higher than Economy Class customers for essentially the same service. Microsoft and the Video industry generally also price very similar products at widely varying prices depending on the market they are selling to.
Using Segmentation in Customer Retention
Segmentation is commonly used by organizations to improve their customer retention programs and help ensure that they are:
Focused on retaining their most profitable customers
Employing those tactics most likely to retain these customers
The basic approach to retention-based segmentation is that a company tags each of its active customers with 3 values:
Tag #1: Is this customer at high risk of canceling the company's service? (Or becoming a non-user)One of the most common indicators of high-risk customers is a drop off in usage of the company's service. For example, in the credit card industry this could be signaled through a customer's decline in spending on his card.
Tag #2: Is this customer worth retaining?This determination boils down to whether the post-retention profit generated from the customer is predicted to be greater than the cost incurred to retain the customer.[1]
Tag #3: What retention tactics should be used to retain this customer?For customers who are deemed “save-worthy”, it’s essential for the company to know which save tactics are most likely to be successful. Tactics commonly used range from providing “special” customer discounts to sending customers communications that reinforce the value proposition of the given service.
Focused on retaining their most profitable customers
Employing those tactics most likely to retain these customers
The basic approach to retention-based segmentation is that a company tags each of its active customers with 3 values:
Tag #1: Is this customer at high risk of canceling the company's service? (Or becoming a non-user)One of the most common indicators of high-risk customers is a drop off in usage of the company's service. For example, in the credit card industry this could be signaled through a customer's decline in spending on his card.
Tag #2: Is this customer worth retaining?This determination boils down to whether the post-retention profit generated from the customer is predicted to be greater than the cost incurred to retain the customer.[1]
Tag #3: What retention tactics should be used to retain this customer?For customers who are deemed “save-worthy”, it’s essential for the company to know which save tactics are most likely to be successful. Tactics commonly used range from providing “special” customer discounts to sending customers communications that reinforce the value proposition of the given service.
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