So what are the main challenges of conducting marketing research in international markets?
In terms of market research tools and techniques, the approaches are generally similar, with the same intention of gathering and analyzing information for input into key marketing decisions. However, there are a number of additional challenges to consider when undertaking research in international markets, including:
When thinking about designing marketing research for international markets, given the above challenges, it will be necessary to:
A brand’s ability to measure consumer attitudes provides a very helpful insight into what is driving consumer behavior. Generally a consumer’s attitude towards the various brands in the marketplace has a significant influence over their purchase and word-of-mouth actions. Positive attitudes will lead to positive behavior.
But attitudes are quite complex and have been formed possibly over many years of the consumer’s journey – based upon various brand exposures (touch-points), media and word-of-mouth communication, and possibly direct purchasing experience.
While it can be a challenging task to determine the various possible journey paths and range of brand touch-points – it is possible (via a market research survey) to get detailed information on the consumer’s attitude and build a multi-attribute attitude model.
Please scroll down for the link to the free multi-attribute attitude Excel spreadsheet template
As suggested by the name, this model breaks down the consumer’s overall attitude (that is, view of each brand) into smaller components. These components are the individual product features, functions and perceived benefits – which are collectively known as product attributes.
The structure of the market research questionnaire necessary to obtain the data to construct a multi-attribute attitude model would be:
Here is a graph output for a multi-attribute attitude model:
The goal is to try and improve the consumer’s attitude towards our brand by concentrating upon the attributes where our brand is perceived weaker than key competitors AND for attributes that are ALSO important to the consumer.
Let’s assume that we are Brand A (first blue column) in this food market. Our better performing attributes (relative to competitors) are “for kids” (we are equal 2nd) and “good snack” (also equal 2nd) – BUT both of these are generally of lower importance to consumers in their purchase decision.
The consumer’s most important attribute is “tasty”, but Brand A is a lower relative performer – therefore, this is a potential attribute to improve (or improve the perception of) to improve the brand’s over score (see next section).
Because we have scores for each attribute for each brand and the level of importance in the purchase decision, we are able to calculate an overall score for the consumer’s attitude towards the brand. This score is then used as a point of comparison between the brands. A graphical example – using the same data as above – is shown below:
As we can see, Brand A has the lowest overall attitude score – which we should look to improve. Therefore, we use the first graph showing the breakdown of the consumer’s attitude by product attribute and by importance in order to identify which areas that the brand/product should look to improve.
Here is the download link for the free Excel template: multi-attribute attitude model
When you open the spreadsheet it should look like the image below. Please note that there is example data in the template that you should delete.
The internal environment in marketing refers to components INSIDE the firm that are unique to the firm. An analysis of the internal environment is critical in the development of marketing strategy to ensure to ensure that the firm’s strategy is based upon its situation, resources and goals.
Firms that do not consider the internal environment when structuring their marketing strategy will end up with a very generic strategy – one that is similar to other organizations in the same market – and will not draw upon their unique strengths and competitive advantages.
The main factors to consider when analyzing the internal environment in marketing are:
Resources is a broad term that refers to what the organization has. In marketing terms, we are particularly interested in: product range, brand equity, financial position, customer loyalty, customer base size, retailer relationships retailer relationships, access to technology, manufacturing skills and innovation, and so on.
In other words, it should be a list and review of what the firm has to work with.
This is related to resources above, but is a closer focus on human resources. It is particularly valuable in service firms that rely on customer – employee interaction and in organizations that rely upon innovation and improved operations being delivered by key staff.
This relates to skill sets and abilities and processes that the firm has AND is really good at. This should be a fundamental building block of the firm’s marketing strategy – as it will create opportunities for sustainable competitive advantage in the marketplace.
Examples of capabilities would include: innovation skills, speed to market, brand building expertise, data/marketing insights, cost efficiencies and processes, customer relationships, use of new technologies, and so on.
Management values refers to the top management/executive of the organization and how they view strategy and what is important to the organization. For example, some key people in management might see innovation and change as critical to success, but top level management in other organizations may be quite conservative and risk adverse.
What is important to management needs to be taken into consideration, as they are the ultimate approvers of competitive marketing strategy.
Top management values are evident by the overall corporate culture of the organization, which is influenced and guided by management views.
In terms of stakeholder goals, we need to consider the owners/shareholders of the business and what they trying to achieve. Sometimes it is very profit and growth driven, but for some organizations there could be a social goals aspect as well.
Other stakeholders to consider would include employees and what is important to them – which needs to be understood, particularly for a service firm.
The current marketing strategy and its degree of success needs to be evaluated. How well is the current strategy working given the firm’s internal and external environments?
Obviously, successful strategies primarily need a fine-tuning only, whereas unsuccessful or weakening strategy positions would need substantial revision.
The most appropriate marketing strategy for an organization will depend upon the marketing environment in which it operates. There are three broad categories of the marketing environment, which are:
The internal environment refers to the organization/the firm itself. Using the strategic 4C’s – the internal environment relates to the corporation.
In particular, we are concerned with resources, capabilities, corporate culture, management style and leadership, track record of success, current strategy, stakeholder goals and values, and so on. Based upon these internal factors we are better placed to construct an appropriate marketing strategy.
The internal environment should be the centerpiece of strategy development. That is, marketing strategy should be based upon the strengths and position of the organization. The goal is to leverage the strengths of the organization against the opportunities presented by the marketplace.
The micro environment refers to the industry in which the firm operates. In terms of the strategic 4C’s, the micro environment relates to competitors and customers.
When examining the micro environment we are particularly interested in target markets (consumers), direct and indirect competitors, suppliers (and their bargaining power) and our distribution channels (wholesalers and retailers).
The micro environment requires significant analysis and much of the firm’s market research efforts will be focused on understanding consumers in particular, but also monitoring and predicting competitor activity.
The various factors and opportunities within the micro environment need to be overlaid against the strengths and capabilities of the firm as identified in the internal environment in order to design a successful competitive marketing strategy.
The third marketing environment of interest is referred to as the macro environment. When the word “environment” is used in strategic discussions it is generally referring to the macro environment. In regards to the strategic 4C’s, the macroenvironment refers to context.
The macro environment consists of trends and factors that may influence the firm that are outside of their direct industry relationships.
It is common to structure/summarize the macro environment using the letters PEST or PESTLE. Where P = political, E = economic, S = social/cultural, T= technology, L= legislation, and E = environmental concerns.
The macro environment is more useful for longer term marketing strategies, with the goal of identifying long-term trends and opportunities.
We often come across the term price; it’s a common term in everyday life.
In general terms, price can be considered as a monetary amount that is charged in order to get something desired from the market (that is, to obtain a product). If consumers perceive value (enough benefits or a good solution for their needs) for the product at that price, then they are more likely to become customers.
Price is a significant factor in determining the perceived value of the product (or brand) to the consumer. Many consumers equate price with overall product quality – and a more expensive product is generally perceived to be better.
Price – along with an appropriate unit margin – are fundamental to delivering the firm’s overall profitability. Price decisions are very important and need to be made in conjunction with the expected sales volume in order to get a good unit margin/sales turnover position.
If the price is too high, then sales will reduce – resulting in less revenue. If prices are too low, there may not be enough margin to contribute significant profits.
Consumers become customers if they perceive good value from a potential purchase. Consumers will weigh up the potential benefits against the various costs of acquiring the product. As price is the most significant cost that consumers will consider, then the setting of price at a certain level will influence the perception of value.
For example, if a shop offers small pizzas for sale at $5, then many consumers may perceive value and buy one. But if the shop was to price the same small pizzas at $20, then most consumers would not perceive value and would probably not make a purchase.
What are the steps in the basic marketing process? As you probably know, the purpose of marketing activities is to create value for consumers and to deliver ongoing profitability (or other success metric) for the firm as a result. Marketing should be a win-win situation for both the firm (or organization) and its customers.
The overall marketing process can be summarized into five main steps, namely:
Marketing is based upon an understanding of the firm’s potential customers (its target market), as well as its key competitors and the main trends in the market.
By having a good understanding of what consumers want and how they buy, a firm will be in a better position to design and execute its marketing programs.
In line with this point, is the need to also understand competitive offerings. This is important because not only does the firm need to meet consumer needs, but they need to do so in a way that is different to their main competitors.
After the firm has a good understanding of the marketplace, they are then in a good position to design their overall marketing strategy. As suggested by the heading, their marketing strategy should be “customer-driven” – which means that it should be designed to meet consumer needs and to provide value.
Step three is the detailed execution of the firm’s marketing strategy. For example, in Step Two they might decide that a key part of their marketing strategy is to build a strong brand. Therefore, in Step Three they would create that brand through advertising, social media, celebrity endorsements, sponsorships, events and so on.
As you can see, the marketing program is the actual tasks (which are called tactics in marketing) required to implement the firm’s overall marketing strategy.
Once the strategy and tactics are in place, the fourth step involves “making it happen” and going to the marketplace. Step One was research and analysis, Steps Two and Three were planning and documenting, while Step Four is in the market.
During this ongoing stage, the firm attempts to win customers and build repeat sales and loyalty. This is achieved if the firm delivers value and meets customer needs better than its competitors (as they first identified in Step One).
Step Five of the marketing process is actually more of an outcome than a step. If the firm has undertaken its first four steps well, then the outcomes should be the win-win situation, where the customers are satisfied and the firm will make ongoing profits as a result.
Marketing is the delivery of customer value and satisfaction at a profit
When you first start learning about marketing, you will notice that there are lots of different definitions. The above definition is a nice and simple one to start with – and it’s quite applicable for most profit-driven firms.
From this marketing definition you can see that the purpose of marketing is to balance the needs of:
The clear intention of marketing is to create a win-win situation for both the firm/organization and its customer base.
It’s fairly clear what profit is, so let’s quickly look at value and customer satisfaction. (Please see the article on the difference between value and satisfaction for more information.)
Customer value occurs when the benefits to the consumer exceed the costs of the product. If a consumer is hungry and they see value in a $3 slice of pizza, then they will buy it. But if the pizza slice is $20, then the consumer will probably not see value and then either buy something else or stay hungry.
Customer satisfaction happens AFTER the purchase – and it can be simplified as “did the product deliver the value as expected?”
If a consumer does buy the $3 pizza slice and it’s tasty and filling, then the customer will be satisfied and is likely to become a repeat customer. But if the pizza is dry and does not taste good, then the customer will be dissatisfied with their purchase and will not re-buy.
Therefore, the firm needs to provide both good value (to attract new customers) and deliver customer satisfaction (to retain existing customers).
Firms will often have the goal of increasing market share. Increased market share is primarily delivered through winning a greater proportion of the market’s business. In particular, one or more of the following situations must occur for a firm/brand to increase its market share:
In many cases, the brand/firm tends to pursue an aggressive market share goal primarily through the acquisition of first-time customers – that is, providing existing consumers with an incentive to purchase the brand. This incentive is typically structured around a sales promotion, a product line extension, increased availability, or is generated by a cut through marketing communications campaign.
When setting market share goals, it is important to consider the proportion of consumers who are either willing or in a position to switch brands. In some circumstances, such as the fast-moving consumer goods industry, brand switching is relatively easy. But in service firms where there may be contractual arrangements, such as a mobile phone contract, switching is more difficult and less frequent.
If we look at the overall diagram of the market we can initially classify consumers into the two broad groups of active/current consumers and non-consumers.
Active/current consumers are those consumers who are purchasers of the product category either on a frequent or occasional basis. And non-consumers are consumers who are within the target market but do not purchase the product category. For example, young adults are typically a prime target market for fast food chains, but a proportion of this target market would not make any fast food purchases – therefore these potential consumers would be classified as non-consumers.
Within the growth phase of the product life-cycle (PLC), it is common for non-consumers to buy the product category for the first time and become active consumers. In essence, this is what drives the market during its growth phase – it is the reason the market grows so quickly in this stage of the PLC.
However, in a mature market, the activation of non-consumers is relatively small, as these consumers have generally decided that this is not a product category that they are only interested in.
Referring again to the diagram, active/current consumers can then be classified into four categories:
As you can see, those consumers who are highly/emotionally loyal or locked in by switching barriers (contracts, time/effort) will be generally unavailable and cannot be considered as a growth opportunity when trying to expand a brand’s market share.
This leaves just two categories of available active consumers which are:
A firm/brand will need to put the appropriate marketing tactics in place in order to win a greater proportion of these consumers.
Various forms of market research – typically surveys – can be used to measure the size of the available and unavailable marketplace. Size of the overall available market will give some guidance to the organization to what extent an increase in market share is possible.
There should be clear steps to follow when developing a marketing strategy.
If the strategy is being developed for large organization, then they should be a corporate strategy document – known as a strategic plan – that should be the starting point for the development of marketing strategy and subsequent documentation in a marketing plan.
In smaller companies, new businesses, or other organizations that do not have an established strategic plan, then it will be necessary to follow these key steps:
This requires an internal and external analysis of what the firm has to work with, and how it is placed and positioned with consumers, and how it compares to its competition, as well as some evaluation of current key trends in the marketplace.
At the conclusion of this analytical exercise, a summary SWOT analysis can be prepared. This SWOT analysis should be based upon detailed analysis, rather than being brainstormed. This is because the SWOT is designed as a summary document.
Using the SWOT analysis, identify the strengths that can be leveraged into the opportunities for the firm. This needs to be the foundation of any strategic marketing plan. This is because the firm is utilizing its strengths/advantages and targeting them directly at perceived market opportunities.
This approach is more likely to generate positive and successful results, as opposed to chasing market opportunities where the firm does not have any apparent competitive advantage (that is, no real strengths to leverage).
Most organizations will tend to have financial and marketing goals that they want to achieve. These need to be clearly articulated and structured correctly. Usually you would expect to have financial goals of profitability levels and probably some form of growth target as well. It would be unusual – except for a non-profit organization – NOT to have a profit objective included in their plan.
Marketing focus goals should also be included and clarified – these typically relate to market share, brand awareness levels, retailer penetration, product quality, product range – as you can see, typically structured around the various marketing mix elements.
At this stage of your strategic marketing planning process, you should have two key pieces of information:
Obviously the ideal approach would be to work out which strengths/opportunities combinations are needed to achieve the desired financial and marketing objectives. Sometimes this requires a considerable amount of consideration, as often goals are quite challenging and there are sometimes no obvious strengths/opportunities combinations that easily achieve these goals. Therefore, considerable thought needs to be given to how to best get to the desired financial and marketing position.
It is a good idea to develop a straightforward strategy statement that clearly articulates how the firm or brand is going to be successful in achieving its goals. This is somewhat similar to the “30 second elevator speech”, where individual would describe their skills and talents.
In much the same way, it is necessary for a firm to them to quickly describe its overall strategy. This creates significant consistency in the organization and makes it easy to remember and easy to communicate throughout the organization to all staff.
At this stage of the strategic marketing planning process we have clearly defined the firm’s/brand’s strategy and we have simplified it down to one or two paragraphs.
Therefore, the selection of marketing tactics – the various marketing mix elements to be utilized – should become more apparent and obvious. Obviously we need to be considerate of the overall budget, available resources, and time to execute and implement the various marketing mix elements required to deliver on the plan’s goals and strategy.
At this stage we’re now ready to document the marketing plan – we should not attempt this task until we have completed the above steps. It is usually a mistake to rush into documentation prior to significant analysis, evaluation, and review of strategic options.
The only additional components of the marketing plan we require in this step is the identification of the timetable for the implementation and the selection of key targets that would be used for control objectives in the marketing plan.
There is generally a clear sequence of steps to follow when developing marketing strategy. Marketing strategy should be highly interrelated to the firm’s overall corporate strategy.
At the starting point of a corporate strategy is the firm’s vision and mission. The mission statement is the firm’s reason for being. It is what the organization is all about – why does exist? What value does it add? What is its scope and purpose?
Some organizations also have a vision statement – a vision statement is a loftier goal/direction for the organization could be one day – it’s like a personal dream or ambition.
Please note that the firm’s vision and mission is set at a corporate level – and is not the responsibility of the marketing area (although the marketing area may be involved in crafting the actual words that are used in the vision and mission statements).
The next step in the strategic planning process is to identify goals for the organization overall – what is the organization want to achieve over the next 3 to 5 years? Corporate goals typically structured around high level competitive positions – such as, become the market leader, increase market shares, enhanced technology, greater profitability, product range, expand the operations, and so on.
In order to achieve the defined corporate goals, the overall organization will need to contribute. For example, if we take the goal of having advanced/enhanced technology – then that would need to be executed through the appropriate IT/manufacturing areas, as well as implemented through operations, and even human resources would have a role to play in training and skilling the organization’s staff to effectively develop and implement the technology improvements.
As suggested above, the overall corporate strategy needs to be allocated to functional areas. Each functional area would then develop its own plan to assist the organization in executing and achieving the strategy, which in turns delivers the corporate goals, which in turn allows the firm to “live” is mission and progress towards its long-term vision.
Marketing strategy development will take its structure and guidance from the overall corporate plan. What are the corporate goals and what are marketing’s responsibilities to help deliver them. These are typically top level goals often centered around product range, product innovation, brand equity, market expansion, and competitive strengths.
There is a direct relationship between the firm/brand’s marketing strategy and its marketing mix design. A marketing mix should be the execution of the firm’s marketing strategy.
In other words, marketing strategy is implemented through the combination and design of the marketing mix elements to meet the identified needs of a selected target market.
Please note that there are two considerations in the above approach to implementing marketing strategy:
We should start with the blending of the brand’s marketing mix. Depending upon whether the firm is a service firm (and then would use the 7P’s marketing mix) or some form of manufacturer (then they would use the 4P’s marketing mix). And then we should consider how to align the marketing mix to the particular needs of the target market.
This approach to marketing strategy implies a very customer-centric approach, which is consistent with the marketing concept. This means that the strategy is built around customer needs, rather than existing operations of the business. This strategic marketing thinking should provide the firm/brand with a greater opportunity of success in the marketplace.
It is generally a significant mistake to look at the marketing mix elements in isolation, without consideration to an overall strategy. Which products should we have? – is a fundamental question and any business, but we need to consider what sort of organization we are and how have we chosen to compete on a competitive basis in the marketplace?
Unfortunately, this becomes somewhat of a common situation in some firms of lack clear agreement on a competitive marketing strategy.
Components of the marketing mix – such as product mix, pricing, forms of communication and so on – are looked at on individual basis – rather than on a holistic approach in order to execute the overall marketing plan and strategic goals.
One of the very common analytical approaches in strategic planning is SWOT analysis. The first letter stands for “strengths” and the first letter stands for “opportunities”. These two letters, or parts of the SWOT analysis, are designed to work together.
In other words, we identify the corporate strengths and then try to match them to opportunities in the marketplace. Keep in mind that the SWOT analysis is individualized for the firm/brand, not a generic industry view – which means that the opportunities listed in the SWOT analysis are only relevant to our firm/brand.
Core competencies are special skills and capabilities of the firm that provides some competitive advantage in the marketplace. We are primarily interested in those skills and capabilities that allow the firm/brand to deliver superior customer value.
You should note that core competencies are skill sets that reside in the people and processes within the organization. They are ways that the organization operates, rather than the physical resources that the firm. You should use the words “expertise”, “abilities”, “skills”, “know-how”, and so on.
Probably the best way to understand a core competency is to review the article on core competency examples.
To demonstrate the value of core competencies versus physical assets/resources let’s consider Apple’s skill sets – what are they really good at doing?
Apple has superior innovation expertise – they are very good at enhancing existing technology and improving its capability and making it easy and enjoyable to use. They are also quite good at growing markets and attracting large numbers of consumers to new technology.
This skill set means that they will have ongoing success in the marketplace because they are able to KEEP delivering exciting and interesting new products and generating large scale demand.
Compare this position to Nokia – that not that long ago was a leading mobile phone provider. They had the resource advantage of a larger market share, a larger selection of mobile phone products, and a strong established brand in the mobile phone market. But along comes
Apple who leverages this skill set for innovation into the mobile phone market – the results have been spectacular, with Apple becoming a dominant player in the market and extremely profitable.
Let’s look at another example of core competencies – this time using McDonald’s – so what are they really good at doing?
McDonald’s skill sets are in their system/process of preparing and delivering food in a very fast and consistent manner. Much of their success has been due to its ability in this area. In the fast food sector, consumers expect the food to be “fast” but also to be delivered with a consistent quality and with good value.
McDonald’s expertise in the speed of the process, along with their efficiency of costs, along with their customer service skills – all add up to a competitive advantage in the marketplace.
Core competencies are attractive to firms because they allow the firm to have a relatively unique advantage in the marketplace – again think of the Apple example above – that skill set of innovation is very difficult (or very expensive) for competitors to duplicate, if not impossible?
Here is a link to a Harvard Business Review article that is worthwhile reading on this topic.
You will note that it is suggested that there are three evaluation factors that firms should use to identify the strength of the core competencies in the business. These include:
We can consider these three questions as “tests” of the degree of value of the core competencies.
The first point of ability to leverage has been demonstrated by Apple who has been able to take the innovation expertise into multiple technology markets – such as, mobile phones, tablets, watches, computers, and even retailing.
It is also clear that Apple’s expertise in innovation provide significant customer value – as their customers are most appreciative of features and designs of the Apple products. And as highlighted previously above, the ability for competitors to duplicate Apple’s expertise is highly unlikely.
Core competencies are special skills and capabilities of the firm that provides some competitive advantage in the marketplace. We are primarily interested in those skills and capabilities that allow the firm/brand to deliver superior customer value.
You should note that core competencies are skill sets that reside in the people and processes within the organization. They are ways that the organization operates, rather than the physical resources that the firm. You should use the words “expertise”, “abilities”, “skills”, “know-how”, “processes” and so on.
Probably the best way to understand a core competency is to consider some examples. Here is a list of some potential core competencies that a firm may have.
You should note from the above list, that there are no physical resources or assets listed – they are some form of a skill set. So why is that important? It is important because core competencies are more likely to be unique in the marketplace and more likely to deliver ongoing competitive advantage.
Core competencies are the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies.
Any organization/brand is faced with an almost unlimited selection of choices and opportunities in the marketplace. For example, there are literally thousands of different ways that firms can choose to promote their activities. There are millions of different products available in the marketplace that firms can choose to produce and market.
So how does a firm/brand choose which is the best options for its competitive market success? The answer is through the development of an appropriate marketing strategy.
The goal of marketing strategy is to consider the best top level approach to acquiring and retaining profitable customers in the marketplace. It is often referred to as the firm’s “game plan”. In other words, how are we going to be successful in the marketplace against competitors?
Marketing strategy is often built around the elements of existing corporate/brand strengths, customer needs, competitive offerings, and changing/emerging environmental issues/trends. The firm endeavors to find the best approach considering all of these factors.
If the firm/brand is able to generate a clear marketing strategy – then the unlimited choices, as described above, become much clearer in the implementation of the marketing program becomes more apparent and even more obvious.
Let’s assume there is a fast food chain that does not have a clear market strategy and are just looking to grow their business. In this case, every opportunity and consideration looks attractive. Should we offer a broad range of foods such as hamburgers, pizza, hot dogs and even sushi? How do we design our stores? What type of staff should we hire and how do we want them to interact with customers?
Without a clear marketing strategy, this fast food chain cannot really answer any of those questions with certainty. As a result, this business would be to look at each question/decision on individual basis. Long term approach of this would be a very inconsistent offering and positioning in the marketplace – leading to reduced competitive success.
If this fast food chain had a clear competitive strategy these above questions become very straightforward. For example, let’s assume that they structured their marketing strategy as something like “a specialist hamburger chain, offering make your own hamburger options, in a fun and lively atmosphere with energetic staff”.
This strategy statement would quickly answer those above questions – such as, “Which foods should we have?” The clear and obvious answer would be “a broad range of flexible hamburgers only”.
Once a very clear marketing strategy has been put in place, then the marketing mix elements become easier to define and design. The challenge for the firm and becomes the execution and implementation of the overall marketing mix elements – not continuous choices about which opportunities should be pursued?
When studying marketing it is important to understand the concept of a market and the exchange process.
When we use the term “market” in a marketing sense, there are actually three possible views that we are considering – the overall market, any sub-markets and the brand’s target market/s.
The overall market consists of all potential buyers and sellers for a particular product.
As shown here, the overall banking market would consist of individuals, businesses, organizations – as potential consumers – and various providers of banking/financial services as the sellers.
We can further define a market into sub-markets. Sub-markets are smaller parts of an overall market that are likely to have different competitors, different channels, and different approaches of consumer behavior. In our banking example, we can see that some of the sub-markets would include the credit card market, the mortgage market and so on.
A fundamental concept in marketing is the identification and selection of appropriate consumer or business segments to actively pursue. In the above diagram, three potential market segments are shown – but there would be many more possible ways of segmenting these markets.
When a firm selects one or more of these segments (related groups of buyers) in order to develop an appropriate marketing mix, then the segments become the target market for the firm/brand. The firm strategies are then built around the needs of the consumers/businesses within this target market – such as, product range, product design, pricing, channels, in marketing communications (the marketing mix).
The intent of the market situation is to bring buyers and sellers together. In modern-day marketing terms, we call buyers “consumers”. Consumers may be individuals/households or they may be businesses, organizations or even governments.
We would refer to marketing activities targeting individuals or households as B2C – which is business to consumer. And we would refer to the marketing activities targeting businesses as B2B – business-to-business.
The goal of bringing consumers and businesses together is to trigger an exchange process. Essentially, end consumers would generally exchange money/payment for products and services that meet their needs. Without an exchange process, sales do not occur, which is a prime goal of marketing.
Businesses develop products in order to the consumer needs or solve their problems. When we talk about solving problems for consumers we are generally talking about fairly straightforward problems.
There is a subtle difference between needs and wants in marketing terms. A need can be described as a consumer problem that MUST be solved – such as being hungry. Whereas a want is an optional approach to solving a consumer need or is a personal goal or desire for the consumer – such as going to a restaurant.
In this example, there are multiple ways that a consumer can solve their need when they are hungry: food at home, quick snack, fast food, beverage, distraction, restaurant, and so on. As you can see, restaurant is only one solution.
Therefore, the underlying NEED that the consumer wants to solve is hunger and the preferred solution at the time is a restaurant. The choice of solving this need through going to a restaurant would be considered a WANT – likewise if the consumer went to a restaurant for a special or social occasion that this would also be considered a WANT.
The customer’s assessment of their satisfaction following a purchase and consumption of a product involves a comparison of two views:
The consumer will engage in a mental comparison and make statements like:
In the three examples above, there were there different levels of satisfaction outcomes: very satisfied, just satisfied and dissatisfied.
These outcomes are very important to marketers as they will determine the future purchasing behavior and loyalty of these customers. It is highly likely that very satisfied customers will continue to be customers of the firm/brand.
However, there are other purchasing and word-of-mouth benefits that are likely to occur with very satisfied customers as compared to dissatisfied customers, as shown in the following table.
|Consumer behavior||Very satisfied||Dissatisfied|
|Likelihood of re-purchase||Quite likely||Somewhat likely, perhaps will give the brand one more chance|
|Long-term loyalty||Quite likely||Quite unlikely|
|Customer lifetime value||Reasonably high due to long-term purchases||Very low due to short-term purchases|
|Likelihood of positive/negative word-of-mouth||Somewhat likely for positive word-of-mouth||Quite likely for negative word-of-mouth|
|Price sensitivity||Low, willingness to tolerate price increases||High, unlikely to tolerate price increases|
|Responsiveness to new products||Quite interested in new products||Less likely to be interested in further products|
|Responsiveness to other products under the same brand name||Likely to purchase our products under the same brand||Less likely to purchase of products under the brand|
|Responsiveness to direct marketing and other forms of promotion||Likely to be high, as quite interested in the brand/firm||Likely to have a low level of response to deals and special offers|
|Willingness to tolerate problems/poor performance||Likely to be accepting of occasional problems||Unlikely to accept further problems without switching brands|
As you can see from the above table, customer satisfaction is a sought-after marketing goal primarily because it not only delivers ongoing sales and loyal customers, but generates significant opportunities to grow through the existing customer base as well as attracting new customers to the brand/firm through positive word-of-mouth. Revenue increases are also likely through reduced price sensitivity and increased product take up rates of very satisfied customers.
Customer satisfaction definition
In marketing, the word benefit refers to some advantage or positive outcome for the consumer. That is, the consumer is better off due to the purchase/consumption of the product.
Products are designed to solve problems or meet needs of consumers. Therefore, an appropriate product design should deliver a series of benefits for consumers, as outlined in this diagram.
As you can see, consumer benefits stem from the addition of individual product features, as well as the overall product design.
As an example, consider the Apple iPhone. It has many features included such as a camera, sound, touch screen, and so on. However, many consumers are also attracted by the overall look, style, functionality and user interface of the phone.
It goes without saying that the more benefits perceived by the consumer, the more likely they are to see value in that particular product. This is because with the perceived benefits, the consumer is more likely to consider that these benefits exceed the cost of acquisition.
A good way to think about the firm’s value proposition is consider what is different and beneficial about the firm’s (or brand’s) offering/s in the marketplace.
Over time, firms/brands will develop and enhance multiple offerings for their target markets. If consumers perceive that the firm/brand offers good value then they are more likely to become and remain customers.
As a simple definition, the brand’s value proposition is:
The overall package of perceived value (that is, key benefits less costs) offered by the brand.
Let’s use McDonald’s as an example to describe a value proposition. In particular we are looking at how McDonald’s is differentiated from its competitors – what overall package of benefits and unique offerings to they provide their customers?
McDonald’s value proposition would include:
You should note, that this overall value proposition for McDonald’s would appeal to a number of different target markets.
For example, a broad range of food choices would appeal to a family. Comfortable seating and in-store facilities would appeal to somebody who is looking to have a bite to eat and relax or perhaps socialize.
McDonald’s, in their overall value proposition, have a number of distinctive benefits over their key competitors – such as, locations, facilities, speed of service and distinctive products.
The essence of the value proposition is to give consumers a reason to become a customer of your brand – because the offering has aspects of value that are attractive to a particular consumer within a target market – as is the case with McDonald’s value proposition.
If you have previously studied economics, then the chances are you have seen the word “utility”. Utility is the economic term for the range of value and benefits received by consumer from the acquisition and consumption of a product.
Therefore, in marketing we can use the terms customer value and utility on a interchangeable basis. But the word “value” has now become more common in usage because it is much clearer to what it means.
A firm goes through the process of both creating and distributing a product to create utility (value) for the end consumer. There are five types of different utilities that can be generated for a consumer by a firm.
These are: form utility, task utility, time utility, place utility, and possession utility.
This means that the firm adds value by designing a product in a particular way. This is most common with physical goods, where the design, look, features of the product are enjoyed and/or appreciated by the consumer.
Task utility is usually associated with a service firm, where the organization provides value through performing a task (delivering a service) for a consumer. For example, a laundry service, childcare service, legal advice, and so on – all provide some form of service or undertake a task for the consumer.
Time utility refers to adding value to the consumer by having the product available when the consumer needs it. A good example here would be a convenience store that is open 24/7 – which provides a time advantage over a regular supermarket.
Similar to time utility above, place utility refers to having the product available at a location that is suitable for the consumer. For example, home delivered food, mobile services, stores with lots of locations, and so on – all provide the consumer value through the ease of availability.
Possession utility means that the product is relatively easy to acquire. For example, an expensive piece of furniture might be made more easily available through a low interest financing deal. Or a bank may simplify the steps needed to obtain a loan. In both cases, the firm is looking to make it easier for the consumer to possess (own) the product.
As you can see, these forms of economic utilities in marketing are designed to increase the level of value and convenience to consumers.
What you should note is value extends beyond just the product (form utility). In the above list of utilities, value also extends to task (service), the convenience of time, the convenience of location and access, and the convenience of and easy purchase and an easy process.