V4 /OPPORTUNITY PA NA eee 1 | CONSUMER ANALYSIS This’ Unit! Thfroduces the students to the marketing environment and its Varidud “aspects to help ‘them effectively engage in marketing planning. ‘The microenvironment and maeroenvironment, as well os the internal and external forces that affect business firms and influence marketing strategies are discussed. The unit also focuses on marketing research and outlines the steps in conducting it. Marketing research is important in determining the state of the marketing environment. Marketers need information about customers, competitors, and other aspects of the énvironment which can influence marketing decisions. The nature of consumer and business markets are also analyzed, leading to a discussion on market segmentation, targeting, and positioning. These strategies are essential in identifying and targeting prospective customers. Positioning, meanwhile, determines how the product or service can leave a mark on the minds of consumers. 50At the end of this lesson, the students will be able to 1. differentiate between strategic Strategic and cee eae 2. discuss how strategic marketing 6 | tactical Marketing Pinna LET'S DISCOVER The Art of War The book The Art of War is an ancient Chinese treatise on warfare and military science. It is generally attributed to the military strategist Sun Tzu, who is believed to have lived sometime in the 6th to Sth centuries BCE. However, some scholars dispute this, saying the book is more likely to have been written during the Warring States period (475 to 221 BCE). Some even dispute over whether or not Sun Tzu is indeed a historical figure, due to the lack of accounts on his life, and inaccuracies in the accounts that exist. The influence of The Art of War spans thousands of years, and it has been used by military strategists the world over. The first copies of the book, as used by heads of military in ancient China, were sewn together in bamboo slats. Translations have been found in Japan, dating back to the 8th century CE. In the 18th century, Jesuit missionary Jean Joseph Marie Amiot translated it into French; in 1910, British scholar Lionel Giles published his English translation of the book. In recent history, military leaders such as Mao Zedong, Douglas MacArthur, and Vé Nguyén Gidp are said to have drawn inspiration from the book. The Art of War in Business Many of the strategies described in The Art of War involve outsmarting one's opponent to avoid physical battle, and so many of the lessons found in the book can be applied not only in the military but also in law, government, and business, It can also provide valuable lessons in marketing. It stresses the importance of understanding and adapting to the environment where one operates, and asserts. that the key to implementing strategies is through understanding the relationship between oneself and one's “enemy,” or in the case of marketing, between the company and the customers, and its competitors. Below are ten lessons which can be adapted to marketing.Lesson 1: “The supreme art of war is to subdue the enemy without fighting,” When a company is prepared and well-planned it does not have to fight or compete, or even if it does, it is as if the company is not competing becausé it is prepared for a variety of situations or scenarios. Therefore, the company can operate confidently with ease and without pressure. Lesson 2: “In the midst of chaos, there is olso opportunity.” Today, the wide array of selections available in the market may give customers option paralysis. It may be best to have differentiated products through unique features which may open up new opportunities for the product to be better known and become more attractive to customers. Lesson3: “Pretend inferiority and encourage his Grrogance.” Flaunting one’s strengths is not always a good strategy. A company should not show off all its capabilities, lest competitors learn from or even copy those capabilities. The company should work closely with customers and win their loyalty instead. Lesson 4: “Victorious warriors! win first and then go to war, while defeated warriors go to war first and then seek to win.” ‘As Stephen Covey said, “Begin with the end in mind”. The company should work backwards by visualizing its goal or target. Then, it can plan out what to do with a clear roadmap to where it wants to go. Lesson 5: “Supreme excellence consists in breaking the enemy's resistance without fighting.” Word-of-mouth selling is far less expensive than promoting a product through advertising and other forms of promotion. When customers are satisfied with a product, their positive feedback and recommendation of that product act as a form of free promotion.Lesson 6: “Opportunities multiply os they are seized.” As technology continues to evolve, so does consumer behavior. When technology and consumer behavior combine, a company can find many opportunities to target new markets and generate ideas for innovation. Lesson 7: “Earth gives birth to length. Length gives birth to volume. Volume gives bicth tg counting. Counting gives birth to weighing, Weighing gives birth to victory.” All the strategies and tactics should result in only one thing: profits. Therefore, marketers should keep track of every activity and measure how each leads to success. Lesson 8: “Ht ignorant both of your enemy and yourself, you are certain to be in peril.” Marketers should always be updated on customer needs and wants, They should also continuously upgrade and innovate to keep customers satisfied and loyal to the company. Lesson 9: “Put them in a spot where they have no place to go, and they will die before fleeing” A company should not only win customers today, but win them for life. Marketers should find ways to retain customers by always keeping them satisfied and happy with the company’s products and services. Lesson 10: “The general whe advances without coveting fame and retreats without fearing disgrace, whose only thoughts is to protect his country and do goad service for his sovereign, Is the jewel of the kingdom” Marketing has its own challenges. Marketers should not be afraid to fail, but be brave enough to stand up and take the challenge of leading the company to success. They should also not be afraid to point out a failing campaign when they see it. It is ultimately better for a company to pull out a bad campaign, rather than further incur financial losses, or even damage to its reputation. Discussion Questions 1. What significant lessons in marketing does The Art of War provide? 2. Which among the principles presented is most applicable to marketing? Explain. oi!LET'S LEARN People have used the terms “strategic marketing” and “tactical marketing” interchangeably, confusing their meanings. However, there is a clear difference between the two terms. Overall, strategic marketing expresses the goals of the organization that are achieved through marketing efforts, while tactical marketing expresses the specific activities that are needed to achieve the goals of the organization. Strategic Marketing Defined . Strategie marketing is defined as the general plan of action aligned with the company’s vision and goals. This is a carefully thought-out course of action developed for the purpose of achieving a desired result such as profitability and high productivity. It puts heavier. emphasis on external environmental scanning to develop strategies to respond to the environmental forces that confront the company. It is the thinking process that outlines the course of action towards the achievement of a goal. Strategic marketing has a longer time frame, usually three to five ears, One type of marketing strategy is to offer more expensive and branded products to a small number Of loyal customers as done in Rustan’s Department Stores. Another strategy is to offer different products, from cheap to more expensive ones, catering to different types of customers, as done in SM Stores. For strategic marketing to work, marketers should determine the objectives the company wants to achieve and how the outcomes will be measured. There must be a starting point to determine where the company is right now and where it wants to go. According to Lambin, the role of strategic marketing is “to lead the firm towards attractive economic opportunities, that is, opportunities that are adapted to its resources and know-how and offer a potential for growth and profitability.” Tactical Marketing Defined Tactical marketing refers to the actions a company undertakes in order to execute an organization's strategy. It also refers to a detailed action program covering a shorter period. In writing the marketing plan, one should indicate the marketing tactics needed to achieve the mafketing strategy. These tactics must cover the factors that address-consumer needs and wants: product, price, promotion, place, people, process, and physical evidence. Here are the following steps in describing marketing tactics in the marketing plan: 1, Prepare an action plan. List down the steps in delivering each tactic and note important details such as time frame, suppliers, requirements, issues, and persons in charge. BrHere is an example of an item in an action plan. Action Time Frame Team member | Requirements/issves to note | Post regular updates ‘March 1-30, Jone Post at least twice a week: about the product, 2017 (30 days asd rettl aeceiyd Sh ae cae contem, share also reviews company's social: media. | launching) GAG bIGg Bac UPORAAE Poges. Influencers about the product. 2. Name the necessary resources and monitor the allocated budget. Get quotations for all elements of the proposed tactics and make a detailed budget plan. Make sure that the budget can support the tactics because marketing costs can increase quickly. Also, assign a person to monitor the budget throughout the marketing campaign. 3. Identify how the success of the tactics will be measured. Outline how to evaluate the effectiveness of the tactics by setting goals and benchmarks: This will help in implementing changes or improvements on the tactics. For example, one of the tactics of a start-up shoe business is to participate in bazaars to introduce the brand to the market and generate leads. The measure of the tactic’s success may be a specific number of customers or pairs of shoes sold during the event. Applying Strategic Marketing and Tactical Marketing Strategic marketing will always come first because it shows where the company ‘wants to go in terms of growth and in relation to its competitors. Tactical marketing consists of the activities needed to implement the strategies. In short, strategic marketing is the idea and tactical marketing is the action. ‘To give'an example, we have four famous global brands which all have one unique goal: INCREASE GLOBAL PRESENCE. Each has used strategic marketing and tactical marketing to fulfill this goal. The four famous brands are Domino's Pizza, Nike, McDonald's, and Coca Cola. Domino's Pizza. Tom Monaghan founded Domino’s Pizza sometime in the 1960s. Itis the second largest pizza chain in the USA. ‘Strategic Marketing: To achieve global presence, Domino’s innovated its menu. Tactical Marketing: To implement this marketing strategy, Domino's employs the following tactics: a. The pizza has bread, sauce, and cheese in all countries except China.b. Half of the toppings are standard all over the world, while the other half is customized depending on the country in question. In Asia, the toppings aré usually seafood and fish. In India, it is curry. Nike. Initially operating ’as a distributor for the Japanese shoemaker Onitsuka Tiger, Nike was founded in 1964 as Blue Ribbon Sports. It later on became Nike, Inc. in 1971. Strategic Marketing: To increase global presence, Nike formed long-term partnerships with international companies for sponsorships. Tactical Marketing: Nike participated in championships and ‘tournaments with partners where Nike was exposed to a global audience. . Strategic Marketing: Another marketing strategy is the creation of the NikelD platform which caters to international markets. Tactical Marketing:. Creation and. delivery of customized products depending on the preferences of the customers McDonald's. Dubbed the world’s largest chain, of hamburger fast food restaurants, brothers Maurice and Richard McDonald started the business in 1940. In 1954, businessman Ray Kroc offered to franchise the McDonald brothers’ restaurant throughout America, but they were initially resistant to the idea. On April 15, 1955, Kroc opened his first McDonald’s in Des Plaines, Ilinois, creating the McDonald's Corporation as we know it today. In 1961, Kroc bought all rights to the company from the McDonald brothers, which later led to its expansion worldwide. Strategic Marketing: ‘To reach its goal of increased global presence, McDonald's marketing strategy is to adapt its menu by including a local flavor specific to each country where McDonald's is located. Tactical Marketing: Introduction of menu items exclusive to certain countries, such as Teriyaki Mac Burger in Japan; Pineapple Pie in Thailand; Traditional Brazilian cheese bread in Brazil; McToast in Croatia; and Crispy Veggie Burger in Finland. Coca Cola. In 1886, a pharmacist by the name of John S. Pemberton created a flavored syrup and mixed it with carbonated water. Those who first tasted it had a positive reaction to the distinct- tasting soft drink which was later.on sold at soda fountains. Pemberton and his bookkeeper, Frank Robinson, coined the name Coca-Cola. Strategic Marketing: Coca-Cola's marketing strategy is to focus on charitable programs that impact small communities around the world. Tactical Marketing: The following are the marketing tactics used: a. Coca-Cola put up The Coca-Cola Foundation which currently benefits around 300 organizations in more than 70 countries worldwide.b. Another tactic is to prioritize three areas which have impacted millions of lives. + Women: economic empowerment and entrepreneurship + — Water: access to clean water, water conservation, and recycling + Well-being: education, youth development,andothercommunity projects. ¢. Coca-Cola supports worthwhile projects such as strengthening arts and culture in the US, as well as HIV/AIDS awareness and prevention programs in Latin America and Africa. . >> SUMMARY << + Strategic marketing is a carefully thought-out course of action made for the purpose of achieving desired results such as profitability and high productivity. * Tactical marketing consists of the activities needed to implement an organization's business strategy. LEARNING TASKS MARKETING VOCABULARY Identify the following terms. 1. the actions a company undertakes in order to execute a strategy ~_ 2. activities that will inform customers of the features of a good or service and thereby induce them to buy said good or service 3. the general plan of action which is aligned with the vision and goals of a company 4. the starting point which marketers should first determine before coming up with marketing strategies‘At the end of this lesson, the students will be able to. 1. idemtfy and discuss the aspects ‘of the marketing environment, 2. describe the microenvironment ‘ond its internal factors, and The Marketing iceman: 7 \ Environment.” LET'S DISCOVER Kodak The Eastman Kodak Company was once aig name in the photographic film industry. It made photography, once a practice exclusive to professionals, available to ordinary American consumers. For decades, it dominated a market that was largely its own creation; at its peak, it was responsible for 90% of film sales and 85% of camera sales in the United States. However, the boom of digital photography in the 1990s and early 2000s undercut the photographic film market, eventually replacing it. In January 2012, Kodak filed for bankruptcy. The History of Eastman Kodak ACCT In 1880, George Eastman recognized a need for innovation in photography and began commercial production of dry plates, an improvement on the wet plates that were then the standard capture medium in the photography industry. He then established the Eastman Dry Plate Company. In 1888, Eastman released the Kodak, the world’s first easy-to-use camera, marketing it with the slogan “You press the button, we do the rest.” This was the birth of snapshot photography. The next year, Eastman and his company introduced the first commercial transparent roll film to the market. In 1900, they introduced the first Brownie camera, which sold for $1, and used film that cost 15 cents a roll. In 1923, the release of the Cine-Kodak Motion Picture Camera and Kodascope Projector made amateur motion pictures viable. In 1929, the company released a new type of film designed for motion pictures with sound—at the time a revolutionary innovation. % In the succeeding decades, the name “Kodak” became practically synonymous with photography, The term “Kodak moment” became a part of the culture of the English-speaking world, referring to moments that are worth capturing or documenting by taking a photograph.‘What Went Wrong? Digital photography was actually first developed by Kodak. Steve Sasson, one of Kodak's ‘engineers, experimented with spare parts from different devices, and the result of his work, first successfully tested in 1975, became known as the world’s first digital camera. Sasson's machine was an electronic system that captured an image and displayed it on a screen, and it achieved this without need for film. The images it produced were not of the same quality as those of film (in modern terms, its resolution was 0.1 megapixels), and it was bulky and not portable. Kodak recognized that one day, such technology might become a viable consumer product, but it chose not to invest in further research and development. The company refused to take a chance on an idea which could potentially endanger its core product—film. Decades later, digital photography proved to have even more disruptive power than they had imagined, and by the early 2000s, digital photography had already overtaken film. Other Strategic Slips While the rise of digital photography is generally acknowledged as being the biggest reason behind Kodak's downfall, there were a number of other factors which made a significant impact. In 1948, Edwin Land, inventor and co-founder of the Polaroid Corporation, invented the instant camera. This threatened Kodak’s film revenues. It developed its own line of instant cameras, and in 1976, Polaroid sued for damages. In 1990, Kodak lost the lawsuit, and was made to pay Polaroid $909 million. Inthe 1980s, Japanese company Fujifilm began selling mass-produced rolls of film to retailers like Wal-Mart at prices much lower than those of Kodak. This caused a significant shift in the film market—by the late 1990s, Fujifilm had captured a large chunk of Kodak's market share. In 1988, Kodak bought the American pharmaceutical company Sterling Drug for $5.1 billion in the hopes that they could use their existing chemical engineering expertise to develop pharmaceutical drugs and sell them at high margins. However, it failed to do so, and six years later, it sold off Sterling at a significant loss. New Focus In September 2013, Kodak announced that it had recovered from bankruptcy and was shifting its focus from goods, in the form of film and cameras, to services, in the form of digital imaging for businesses. While it has kept some of its legacy products alive—it has a deal with major Hollywood studios to continue producing movie film, courtesy of support from directors like Quentin Tarantino and J.J. Abrams—these are mostly for niche markets, rather than the huge market shares it enjoyed in its heyday. Jeff Clarke, the company’s new CEO, is also leading the charge in mining its remaining stock of 7,000 patents, conducting research and development in digital imaging and touch screens. In the third quarter of 2016, Kodak posted modest profits of $12 million. 61Discussion Questions 1. How did Kodak respond to the changes in the photography industry? Why did Kodak lose its former customers? 2. How did Kodak recover from bankruptcy? LET'S LEARN The Marketing Environment The marketing environments the sum of all the internal and external forces that affect the way a firm operates, particularly its ability to build and maintain relationships with its target customers. The internal forces are referred to as the microenvironment, while the external forces are called the macroenvironment.To be effective, an organization must proactively monitor these forces and their changing trends so that it can agapt to changes, keep up with the competition, and develop strategies to fulfill the present and future needs of consumers. Microenvironment The microenvironment consists of all the internal factors which have direct contact with and a direct influence on the company. The microenvironment has five components: the organization itself, the suppliers, the customers, marketing intermediaries, and competitors. Companies can exert some control or influence over these components. 1. The organization itself consists of the owners, investors, and employees who are all considered members of the organization. The company’s top management has the duty to develop the company’s mission, vision, goals, and policies which set the stage for the company’s marketing plans. Top management provides the direction and lays out the strategies and plans. An organization is composed of different departments with specialized functions, and these should all work together to achieve the company’s objectives. Marketing managers work hand in hand with these departments to ensure superior value to customers. 2. Suppliers provide the resources the organization needs to produce goods and services. A good relationship with suppliers enables the shite de ‘to ensure the availability of supplies for prompt operations. 3. Customers are the people who are willing and able to buy the organization's products and services. They are considered the lifeblood of the business, for without them the organization will cease to exist. Customers determine the demand for products and services. Their needs vyand wants vary and may change over time, therefore;,marketers should exert.efforts to monitor these needs and wants in order to continually satisfy them; Marketing intermediaries are entities that assist in the distribution and selling of goods to customers. They help in the free flow of goods from organizations to the different markets. They create marketing utilities of place, time, and. possession for organizations by ensuring that goods are accessible and will reach the final customers. promptly. There’are four types of marketing intermediaries: wholesalers, retailers, distributors, and agents and brokers: Wholesalers are entities that buy goods from manufacturers or producers and resell them to retailers and other organizations. Full-service wholesalers take charge of storage, order processing, and delivery of goods, while limited-service wholesalers do not usually carry all the functions of full-service wholesalers, but package and ship the goods after receiving the customer's order details from the retailers. Distributors are entities selected by manufacturers to buy goods for resale to retailers. They usually hold a narrower range of goods than wholesalers and cover a specific geographic qed... = Retailers carry a wide range of goods which are bought from wholesalers.or distributors and then sold directly to consumers. They’ have different brands of goods manufactured or produced by competing organizations. Agents and brokers sell products for a certain commission or percentage of sales. Agents are authorized by their respective companies to act and decide on their behalf. Examples are real estate agents and insurance agents. Competitors are rival firms that offer similar! goods ‘or services’as the organization. Competitors can be either direct or indirect. Direct competitors are brands competing in the same industry, offering essentially the same goods or services. For example, the direct competitor of Caca Cola is Pepsi Cola; while that of Colgate is Close Up. Indirect competitors offer products or services that differ slightly, but with the same benefits. For example, Coca Cola and Pepsi belong to the soft drink industry. All other brands of soft drink are their direct competitors. Their indirect competitors are fruit juices, bottled water, iced tea, sports drinks, and energy drinks. Macroenvironment ‘The macroenvironment of a firm consists of the various factors which affect not only the firm itself, but also the entire industry of the region or country. These factors are broader in nature than those of the microenvironment, and are out of the firm's control. The six factors of the macroenvironment are demographics, economics, sociocultural factors, technological factors, political forces, and ecological factors. core)1, Demographies refer to characteristics of a population such’ as age, gender, religion, educational attainment, civil ‘status, geographic location, lifestyle, race, and: others. Organizations can understand their target customers better by studying their demographics. For example, in a 2016 survey made by Pulse Asia, there is a marked change inthe lifestyle of Filipinos, with 62 percent of the respondents identified as being health-conscious. A survey made by Kantar in 2013 also’ revealed that many’ Filipinos have chosen to live a healthy lifestyle through their food choicés. There was a marked increase in the purchase of cereals (17%), yoghurt (9%), canned vegetables (6%), biscuits (6%), soy milk (20%), bottled water (12%), fruit and vegetable juices (7%), and powdered milk (6%). Because of this, marketers have included low-calorie choices in their product offerings. They also implemented other strategies, such as launching ad campaigns emphasizing the health benefits of their existing products, or creating new product lines with less sugar, less sodium, less trans fats, and so on. 2. Economics refers to the influence of the purchasing power of the peso on spending patterns, in the context of inflation and other economic forces that may affect the economy. A high inflation rate affects both producers and consumers. An increase in the prices of raw materials will mean that either the producers’ profit margins will decrease, or they must raise selling prices to compensate. As prices increase, purchasing power decreases, meaning that if income remains the same, consumers cam purchase fewer goods and. services than they were able to prior to inflation. Organizations and marketers, therefore must examine their goods and services. Are these goods and services needs or wants? Are they meant for specific income classes or the general public? On average, how much disposable income does the target market have? What are the best ways to market these goods and services to the target market, given their economicclass?- ri Deen cnThe sociocultural aspect refers to the beliefs, practices, norms, customs, and traditions that may affect business operations. Culture has a big impact on how goods and services may be marketed. Brands which found success in the Philippines are known to use traditional Filipino values such as hospitality, generosity, and religion in their promotional campaigns. For example, Jollibee, PLDT, and Vicks Vaporub have all used family values in their advertisements to considerable success. Upon the historic approval of marriage equality in the United States, many companies such as Coca Cola, Pepsi, Starbucks, Procter and Gamble, and Google came out in support of the LGBT (lesbian, gay, bisexual, and transgender) community. This was met with mixed reactions. While progressive sectors of American society lauded such stateménts of support, conservatives decried them, some even expressing intent to boycott the said companies. Such reactions should be taken into consideration by marketers. The technological factor refers to developments in technology which may affect consumers, businesses, and the society at large. For example, banks have made it more convenient to withdraw, pay bills, and check current balances through ATMs, (automated teller machines) and online banking, and these made telegraphic transfers obsolete. The Internet has made communication and access to information faster and more efficient, and expanded the ways in which brands can reach out to consumers. And although the speed at which technology evolves can sometimes be overwhelming, organizations should always strive to keep pace with technological developments. Political forces refer to groups of people or parties which may influence the stability of a country and affect the production, distribution, promotion, and selling of goods and services. Legal forces refer to limitations and restrictions that arise from the implementation of legislations and laws which may affect the conduct of business activities. ’ There are certain regulations which are enforced upon companies in the conduct of their business. Copyright and patent laws enable individuals and entities to protect their ideas and inventions and prevent others from making, using, or selling goods or services based on these ideas and inventions without their consent. The government sees to it that products and services undergo quality control to ensure that they meet certain standards. It also requires organizations to acquire operational permits, and abide by certain rules and regulations in the treatment of their workers. Taxes may place restrictions on certain goods and services and discourage certain behavior. For example, sin taxes, or tariffs on items such as alcohol and tobacco, discourage heavy use of such substances. Conversely, tax laws may errcourage other behaviors. For example, tax exemptions for married couples with children may result in some individuals to consider married life as cheaper than being single, thus encouraging them to marry and raise a family.The ‘ecological factors refer toall the processes oractivities necessary to protect the natural environment while maintaining efficiency of business operations: Organizations should’enstire that the scale and methods of sourcing their raw materials are sustainable. Rapid expaiision puts Hot only the future of the organization, but also the future of the natural environment at risk. Organizations should also properly monitor their operations to ensure that these are conducted properly, safely, and in an environmentally-friendly manner—while minimizing damage done to the environment. Governments may encourage such’ practices by implementing. laws and guidelines to protect the natural environment—providing incentives to those who abide by them, and imposing heavy sanctions on. violators, Among environmentally-conscious, consumers, adherence to environmental.laws can, be used as a selling point, and has even spawned its own movement: eco-capitalism. Making products from recycled ‘materials ‘atid’ tising’ reusable shopping bags instead of :plasti¢ ones, for example, have’ becomé popular trends, ind’ some’ constiniers ‘make’ conscious efforts to Support businesses that publicly emphasize their environmentally-friendly practices. >> SUMMARY<< ervocThe marketing environment is the; sum of all the internaland external forces: that affect the way a firmioperates, particularly its ability to build and:maintain » relationships’ with cits starget customers::iThe internal! :forcesyare*called the microenvironment, while the external forces are called the macroenvironment. » The microenvironment consists of alb ithe: interiak:factors: which have direct contact with-and directly influence an organization: ‘The microenvironment has five components=the organization itself, the suppliers;the customers;marketing, intermediaries, and competitors: Companies ican sometimes exert some:control or influence overithese components. * The macroenvironment of an organization consists of the various factors which affect not only the organization, but also the-entire industry of the region or country, These factors are broader than those of the microenvironment and out of the organization's control. The six factors of the macroenvironment are demographics, economics, sociocultural factors, technological factors, political forces, and ecological factors. _