NATIONAL ECONOMICS UNIVERSITY BUSINESS SCHOOL TRAN THI THU HA MAJOR PROJECT Bachelor of Business Administration in English (E BBA) Thesis E BBA 4 IMPROVING MARKETING MIX FOR GAS PRODUCTS IN LIEN QUANG[.]
NATIONAL ECONOMICS UNIVERSITY BUSINESS SCHOOL TRAN THI THU HA MAJOR PROJECT Bachelor of Business Administration in English (E-BBA) Thesis E-BBA IMPROVING MARKETING MIX FOR GAS PRODUCTS IN LIEN QUANG THANH BUSINESS LIQUEFIED PETROLEUM GAS JOINT STOCK COMPANY Supervisor : Le Van Nam, MBA Hanoi, 2016 TABLE OF CONTENT THEORETICAL BACKGROUND ON MARKETING MIX FOR CONSUMER PRODUCTS I MARKETING AND MARKETING MIX FOR CONSUMER PRODUCTS II MARKETING MIX FOR CONSUMER GOODS Product Price 13 Place 15 Promotion 16 Factors impacting marketing mix 19 LIST OF FIGURES Figure 1.1 Concept of Marketing mix Figure 1.2 Three levels of Product .8 THEORETICAL BACKGROUND ON MARKETING MIX FOR CONSUMER PRODUCTS I MARKETING AND MARKETING MIX FOR CONSUMER PRODUCTS Marketing is a form of human activity to satisfy the needs and desires of them through the exchange Initially marketing occurs through discrete acts associated with the exchange of certain situations Therefore, it can be said that marketing appears associated with exchange of goods Nevertheless, that does not mean that marketing occurs simultaneously with the appearance of the exchange Marketing exchanged only when a state or in certain situations: either the seller trying to sell, or when the buyer is trying to buy goods It means that situations appear to exchange marketing is when people have to compete to sell or to buy So the underlying causes appear Marketing is competition In practice, marketing activity appears clearly from the modern industrial development, promoting increased production and make the provision of goods tends to exceed demand Then, it forced businesses to find better measures for consumption goods The search for better solutions to promote consumption of goods led the increasing growth of marketing and it has found a complete science – Marketing The term marketing was first launched in America in the early twentieth century It was spread to Europe, Asia, and to Vietnam in the 1980s The American Marketing Association offers the following definition: Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals Marketers use numerous tools to elicit the desired responses from their target markets These tools constitute a marketing mix Marketing mix is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market (Kotler 2002) The term “marketing mix” became popularized after Neil H.Borden published his 1964 article, “The concept of the Marketing Mix” Borden began using the term in his teaching in the late 1940’s after James Culliton has described the marketing manager as a “mixer of ingredients” The ingredients in Borden’s marketing mix included product planning, pricing, branding, distribution channels, personal selling, advertising, promotions, packaging, display, servicing, physical handling, and fact finding and analysis E Jerome McCarthy later grouped these ingredients into the four categories that today are known as the 4P’s of marketing including Product, Price, Place (distribution) and Promotion These 4P’s are the parameters that the marketing manager can control, subject to the internal and external constraints of the marketing environment The goal is to make decisions that center the 4P’s on the customers in the target market in order to create perceived value and generate a positive response Kotler (2002) map the concept of marketing mix in Figure 2.1 Figure 1.1 Concept of Marketing mix Source: Kotler, P (2002), Marketing Management, Millennium edition Therefore, we reviewed the process of the formation and development of marketing strategies to capture how the overall activities of the marketing mix strategy (marketing mix) developed When market formation, production and product supply to market is the object and the main factors in the formation of exchanges between buyers and sellers at that time When more and more products appears in the market with the same type and quality (product replacement), many manufacturers and buyers exchange trading together has created a chaotic and it is difficult to manage both the buyer and seller The buyer meets difficulty to make the best decisions, while sellers are finding it difficult to properly segment for each group of consumers In addition, the level of competition is increasing In this context, the producers (managers of each firm’s market) have to research and improve their products to suit the countless needs of consumer in the market Therefore, the product strategy is launched and applied extensively during this period Product strategy includes the following activities: - Segment clearly products and customer target groups Each line of products will suit each customer group that has tended to segment - Change the design, packaging, identity, message and communications to consumers Innovate and create new features to products - Improve product quality – this strategy creates greater competitive advantage for the products by: Consumers feel that the product relatively cheaper compared with other competitors’ products Consumer confidence would increase for the product of these manufacturers, so that people can decide to purchase additional products from the same company more easily It would make the manufacturer reach higher sales and bigger market shares - Strategies related to product life cycle Manufacturers, managers must continually market research, measurement and define phases: Introduction – Growth – Maturity – Decline, from which to define objectives for each phase and the overall plan However, competitors will quickly and easily learn the strategies and react to market makers Thus, competition and changes in product strategy will not be enough to help the manufacturer have the advantage and differentiation to attract customers and increase revenue As the result, it forces manufacturers and professionals to think about the actions of the reaction products on price, because price is one important factor and is associated with the product Consumers themselves also always consider cost when choosing any product In addition, marketers are always looking for ways to satisfy customers and gain the highest profit Pricing strategy is that the manufacturers implement the activities and actions to response the market price changes of the product in order to achieve the highest benefits for producers - Manufacturers often make the strategic and action plans related to the price as follows: Determine the actual price an the nominal price of the product/service they provide - Manufacturers will compare the level of this difference to measure the value f availability and seek for potential elements for product through pricing - Measure and estimate the market characteristics, changes in economic and costs and so on to specify the price in accordance with the stages in the life cycle of the product and in accordance with market and seasons to achieve the objectives of each phase The more lucrative the market is, the more appearance of manufacturers has That led to a time that the current market will saturate the market and purchasing power will decline, regardless of that the product life cycle is limited This time the company had to consider two options: - Invest capital to penetrate its existing markets through research and product improvement, through its attractive prices to attract more number of current customers - Or invest in a new market The fact is that product A in A saturate market still could be a new product in market B (with different culture) Like the legendary Silk Road – It is a lesson that when the silk is great importance to use in the other countries Moreover, from here distribution strategy was formed to help producers continue to penetrate new market Distribution strategy (Place) includes activities that producers plan, organize their distribution system effectively sell products to different markets, for example: - Measure and estimate demands, then segment the market based on criteria and management purposes and organize a variety of suitable distribution systems; - Determine the number and type of appropriate distribution channels; - Plan and implement an approach to market most effectively; - Perform a variety of strategies and tactics in order to match the demands If new markets are not yet exploited, making consumers aware products and trust services of the company is quite a big concern of the producer So the promotion strategy is launched to tackle the exploitation of the maximum purchasing power of the market Promotion strategy comprises of activities to communicate with target consumers in order to increase better sales It means that promotion strategy make customers aware about products and services their consumers and stimulate consumer demand The major activities in this strategy include: Advertising Promotion Personal selling Public relations and publicity Direct marketing The structure of marketing activities is an on-going progress It always accommodates itself to the changes of the market while creating changes to the market at the same time The economists always have to observe, study the operation of the market to generate new strategies to create new competitive advantage, satisfy and meet market demands better The in-depth understanding of all the components (Product, Price, Place and Promotion) and in the marketing mix is essential in assessing and improving marketing strategy for a product II MARKETING MIX FOR CONSUMER GOODS Product According to Kotler (Principles of Marketing, 2003), Product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need It includes physical objects, services, persons, places, organizations and ideas He also suggested that a product should be viewed in three levels as follows Figure 1.2 Three levels of Product Source: www.marketingteacher.com Level 1: Core Product is the core benefit that a product offers Customers who purchase a camera are buying more than just a camera they are purchasing memories Level 2: Actual Product: The strategy at this level involves organizations branding, adding features and benefits to ensure that their product offers a differential advantage from their competitors Level 3: Augmented product: is additional non-tangible benefit(s) that is (are) being offered? Competition at this level is based around after sales service, warranties, delivery and so on John Lewis, a retail departmental store, offers free five-year guarantee on purchases of their Television sets, this gives their customers the additional benefit of peace of mind over the five years should their purchase develop a fault When placing a product within a market, many factors and decisions have to be taken into consideration These include controlling product attributes, packaging, providing product-support services, product mix decisions and product life-cycle strategy Controlling product attributes Developing a product involves defining the benefits that the product will offer These benefits are communicated and delivered by tangible product attributes, such as quality, features, style and design Decisions about these attributes are particularly important as they greatly affect consumer reaction to a product Products are usually considered the number one factor contributing towards building goodwill of a firm A product should be unique, durable, reliable, comfortable and economical Product quality Quality is one of the marketer’s major positioning tools Quality has a direct impact on product performance; hence, it is closely linked to customer value and satisfaction For example, Siemens defines quality this way: “Quality is when our customers come back and our products don’t.” This customer-focused definition suggests that quality begins with customer needs, goes beyond customer satisfaction and ends with customer retention “Total quality management” (TQM) is an approach in which all the company’s people are involved in constantly improving the quality of products, services and business processes During the past two decades, companies, large and small, have credited TQM with greatly improving their market shares and profits However, customers’ requirement of quality is unlimited Therefore, companies need to research the quality of replaced product to identify the level of its product’s quality and the payment ability of target customers Product features A product can be offered with varying features Features are a competitive tool for differentiating the company’s product from competitors’ products Being the first producer to introduce a needed and valued new feature is one of the most effective ways to compete In order to identify new features and decide the producers need to determine which ones should be added to its product The company should periodically survey buyers who have used the product and asked these questions: How you like the product? Which specific features of the product you like most? Which features could we add to improve the product? How much would you pay for each feature? The answers provide the company with a rich list of feature ideas Each feature should be assessed on the basis of its customer value versus its company cost Features that customers value little in relation to costs should be dropped; those that customers value highly in relation to costs should be added Product style and design Another way to add customer value is through distinctive product style and design Some companies have reputations for outstanding style and design, such as iMAC and Sony Vaio Some companies have integrated style and design with their corporate culture They recognize that design is one of the most powerful competitive weapons 10 in a company’s marketing arsenal Many companies, however, lack a “design touch” Their product designs function poorly or are dull or common looking Some companies like Fiat Auto have learnt that design and style matters The Italian car company’s European market share had collapsed from 10 percent in 1990 to percent in 2003 Part of the problem is that they have alienated drivers by succeeding in making some rather ugly-looking cars Design is a broader concept than style Style simply describes the appearance of a product A sensational style may grab attention and produce pleasing aesthetics, but it does not necessarily make the product perform better In some cases, it might even result in worse performance For example, a chair may look great yet be extremely uncomfortable Good design contributes to a product’s usefulness as well as to its looks Canon (cameras), Sony (hi-fis), Philips (compact disc players and shavers), Ford (cars) and Swatch (watches) have also profited from their commitment to product design Differentiating through design is also a familiar strategy in premium products such as Rolex and Omega watches Good design can attract attention, improve product performance, cut production costs and give the product a strong competitive advantage in the target market Packaging The activities of designing and producing the container or wrapped for a product The package may include the product’s primary container (the tube holding and protecting Close-up toothpaste); a secondary package that is thrown away when the product is about to be used (the cardboard box containing the tube of Close-up); and the shipping package necessary to store, identify and ship the product (a corrugated box carrying six dozen tubes of Close-up toothpaste) Labeling which is printed information appearing on or with the package is also part of packaging Innovative packaging can give a company an advantage over competitors Branding 11 Brand is a name, term, sign, symbol or design that adds value to the products Perhaps the most distinctive skill of professional marketers is their ability to create, maintain, protect and enhance brands The American Marketing Association defines a brand as a name, term, sign, symbol, or design, or a combination of these, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors For example, most consumers would perceive a bottle of Channel perfume as a high-quality, expensive product However, the same perfume in an unmarked bottle would likely be viewed as lower in quality, even if the fragrance were identical Brand positioning Brand positioning is the work of identifying a market niche for a brand, product or service utilizing traditional marketing placement strategies (i.e price, promotion, distribution, packaging and competition) A strong brand positioning means the brand has a unique, credible, sustainable and valued place in customers’ minds Brand personality Brand personality can be defined as “the set of human characteristics associated with a brand” (Aaker 1997) Personality is how the brand behaves Refers to the outcome of all consumer’s experiences with the brand, in other words, the brand personality is the weighted average of previous impressions In the consumer’s mind, these impressions merge to form an overall concept of what to expect from brand Providing product-support services Product-support services include warranties, delivery, after sale service and installation More and more companies are using product-support services as a major tool in gaining competitive advantage Good customer service makes sound business sense It costs less to keep the goodwill of existing customers than it does to attract new customers or woo back lost customers A company should design its product and support services to meet the needs of target customers 12 Product mix decisions A product mix (also called product assortment) is the set of all products and items that a particular marketer offers for sale The product mix of an individual company can be described in terms of width, length, depth, and consistency The width refers to how many different product lines the company carries; The length refers to the total number of items in the mix; The depth of a product mix refers to how many variants of each product are offered; The consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way (Kotler, 2002) Price Price is the amount of money charged for a product or service More broadly, price is the sum of all the values that consumers exchange for the benefits of having or using the product or service Price is the only element in the marketing mix that produces revenue; all other elements represent costs Price is also one of the most flexible elements of the marketing mix A well-chosen pricing strategy should three things: Achieve the financial goals of the company (profitability): Price and costs determine financial performance Pricing strategy needs to be assessed as to their estimated impact on the firm’s financial statements in short and long run Fit the realities of the marketplace: the pricing strategy should be considered to the payment ability of customers Prices that are too high may not be accepted to buyers Support a product’s positioning and be consistent with the other variables in the marketing mix: Prices may be used to enhance product image, promote the use of the product, and create awareness and so on The visibility of price (high or low) may reduce the effectiveness of other positioning components such as 13 advertising It often depends on how other variables in marketing mix are used For example, price can be used as an incentive to channel members as salespersons and as a signal of value as well as a way to attack competitors In setting prices, a company follows a six-step procedure: (1) Select the pricing objective (2) Determine demand (3) Estimate costs (4) Analyze competitors’ costs, prices and offers (5) Select a pricing method (cost-plus pricing, break-even analysis and target profit pricing, perceived-value pricing, going-rate pricing, sealed bid pricing and psychological pricing) (6) Select the final price Companies not usually set a single price, but rather a pricing structure that reflects variations in geographical demand and costs, market-segment requirements, purchase timing, order levels, and other factors Several price-adaptation strategies are available: Geographical pricing; Price discounts and allowances; Promotional pricing; Discriminatory pricing (the company sells a product at different prices to different market segments); Product-mix pricing (includes setting prices for product lines, optional features, captive products, two-part items, by-products, and product bundles) (Kotler, 2002) After developing pricing strategies, firms often face situations in which they need to 14 change prices by initiating price cut or price increases In these situations, companies need to consider how stakeholders will react to price changes In addition, marketers must develop strategies to respond to competitors’ price changes The firm’s strategy often depends on whether it is producing homogenous or non-homogenous products Although price competition is a major problem facing companies, many not handle pricing well The most common mistakes are these: Pricing is too cost-oriented; price is not revised often enough to capitalize on market changes; price is set independent of the rest of the marketing mix rather than as an intrinsic element of market-positioning strategy; price is not varied enough for different product items, market segments, and purchase occasions Place The next element is the distribution system which comprised the wholesale and retail channels through which products and services move to the final users They may constitute business entities such as the company’s sales force, independent distributors, agents, as well as franchised outlets Place stands for various activities the company undertake such as channels, coverage, location, inventory and transport, to make the product accessible and available to target customers Thus, a firm must identify, recruit, and link various middlemen under and marketing facilitators so that its products and services are efficiently supplied to the target market Channels of Distribution: The main object of marketing process is to deliver the goods their ultimate consumers The process involves a number of functions Of these functions two are most important First, the creation of demand Secondly, the supply of goods whenever and sales promotion activities On the other hands, the distribution function is concerned 15 with management of system of distribution of goods This system is known as channels of distribution is a very important one Therefore, it should be examined thoroughly By channels of distribution it mean the intermediaries through which the goods or products are transferred from the producers to the actual users In other words, distribution channels are the system of economic institutions through which a producer of goods delivers them into the hands of the users Distribution (Place) Decisions: Some examples of distribution decisions include: Distribution channels Market coverage (inclusive, selective or exclusive distribution) Specific channel members Inventory management Warehousing Distribution centers Order processing Transportation Promotion Marketing communications, a fourth element in marketing strategy, includes such components as print and television advertising, direct mail, trade shows, point- of- sale merchandise displays, sampling, and telemarketing Modern marketing calls for more than developing a good product, pricing it attractively, and making it accessible to target customers Companies must also communicate with present and potential stakeholders, and with the general public Promotion stands for the various activities the company undertake to communicate its products merits and to persuade target customers to buy them Thus every company has to buy advertising, set up sales-promotions, arrange publicity and dispatch sales people to promote its products The company must communicate information about 16 product existence, features, terms etc to the customers, suppliers and dealers And it must communicate to the internal public particularly to its directors, middle management, sales force and works Fundamentally, there are three basic objectives of promotion These are: To present information to consumers as well as others; To increase demand; And to differentiate a product The following are two types of Promotion: Above the line promotion: Promotion in the media (TV, radio, mewspapers, Internet, mobile phones) in which the advertiser pays an advertising agency to place the ad Below the line promotion: All other promotion Much of this is intended to be subtle enough for the consumer to be unaware that promotion is taking place For instance, sponsorship, product placement, endorsements, sales promotion, merchandising, direct mail, personal selling, public relations, trade shows The specification of five elements creates a promotional mix or promotional plan These elements are personal selling, advertising, sales promotion, direct marketing, and public relations and publicity Advertising Advertising can be defined as any paid form of non-personal presentation and promotion of ideas, goods or services through mass media such as newspapers, magazines, television or radio by an identified sponsor Although advertising is used mostly by business firms, it is also used by a wide range of not-for-profit organizations, professionals and social agencies to communicate their causes to various target publics Advertising is a good way to inform and persuade, whether the purpose is to sell Nokia mobile phones worldwide or to encourage smokers to give up the habit Advertising is used in order to stimulate a response from the target audience 17 The response may be perceptual in nature: for example, the consumer develops specific views or opinions about the product or brand, or these feelings are altered by the ad The response could be behavioral: for instance, the consumer buys the product or increases the amount that he or she buys Public relation and publicity Public Relations (PR) is a field concerned with maintaining public image for highprofile people, commercial businesses and organizations, non-profit associations or programs PR is used to build rapport with employees, customers, investors, voters, or the general public Almost any organization that has a stake in how it is portrayed in the public arena employs some levels of public relations Public relations include a variety of programs to promote or protect a company’s image or individual products The appeal of public relations and publicity is based on three distinctive qualities: (1) high credibility (news stories and features are more authentic and credible than ads); (2) ability to catch buyers off guard (reach prospects who prefer to avoid salespeople and advertisements); and (3) dramatization (the potential for dramatizing a company or product) Sales promotion Sales promotion consists of short-term incentives, in addition to the basic benefits offered by the product or service, to encourage the purchase or sale of a product or service Whereas advertising offers reasons to buy a product or service, sales promotion offers reasons that would achieve immediate sales It seeks to motivate the customer to buy now Sales promotion includes a wide variety of promotion tools designed to stimulate earlier or stronger market response These tools are used by many organizations - manufacturers, distributors, retailers, trade associations and nonprofit institutions - and may be targeted towards the consumer or final buyer, business customers, the trade or retailer and the company’s sales force Consumer promotions include money-off, coupons, premiums, contests and others to: (1) increase short-term sales; (2) help build long-term market share; (3) entice consumers to try a new 18 product; (4) lure consumers away from competitors’ products; (5) encourage consumers to “load up” on a mature product; or (6) hold and reward loyal customers Trade promotions range from special discounts, free goods and loyalty bonuses to training Direct marketing Direct marketing is a form of advertising that reaches its audience without using traditional formal channels of advertising, such as TV, newspapers or radio Businesses communicate straight to the consumer with advertising techniques such as fliers, catalogue distribution, promotional letters, and street advertising Direct marketing is predominantly used by small to medium-size enterprises with limited advertising budgets that not have a well-recognized brand message A wellexecuted direct advertising campaign can offer a positive return on investment as the message is not hidden with overcomplicated branding There are several tools to plan a direct marketing campaign, including direct mail, telephone and fax, mobile marketing, online marketing, door-to-door marketing, direct response television and radio, and fliers and catalogue Personal selling Personal selling activity is crucial to enhance a company’s equity Its primary purpose includes educating customers, providing product usage and marketing assistance, and providing after-sale service and support to buyers It also allows for a two-way communications Therefore, it helps company yield intermediate feedback, bringing greater ability to demonstrate a product’s functioning and performance characteristics as well as developing long-term relationship In short, marketing mix involves decisions regarding products to the made available, the price to be charged for the same, and the incentives to be provided to the consumers in the markets where products would be made available for sale These decisions are taken keeping in view the influence of marketing forces outside the 19 ... 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