study supplement - cips - leading global excellence in procurement

Study supplement

Advanced diploma inpurchasing and supply

Marketing for purchasers

01

Advanced diploma in purchasing and supplyHow to use this study supplement

IntroductionThis guide covers the syllabus content ofMarketing for Purchasers, an optional subject inthe Advanced Diploma in Purchasing and Supply.Its aim is to provide students with a structurewhich they can follow and which will guide themthrough the whole syllabus. The guide is brokendown into twenty separate study sessions, eachfocusing on a specific area of the unit content.

The guide will be equally invaluable to allstudents, irrespective of their method of study.In addition, the guide will also be of use tosubject tutors and will help them plan andprepare for course delivery to students.

Students will be required to adopt a disciplinedapproach to ensure that the directed reading(using the recommended study text) isundertaken and all learning activities and self-assessment questions are completed.

The guide includes a brief indication of the areasthat students should have considered inresponse to the self-assessment questions.However, it is emphasised that these are not‘model’ answers. Students will be expected toprovide much more comprehensive answers inthe examination.

Recommended readingThe recommended study text (directed reading)for this unit is Principles and Practice of Marketingby Jobber 6th edition, December 2009 ISBN9780077123307 Published by McGraw Hill. Thiscovers as much of the syllabus content aspossible, however at this level of qualification,students are expected to read more widely thanfrom just one source. Further suggested reading isPrinciples and Practice of Marketing by Adcock,currently the 4th edition ISBN 9780273646778Published by Pearson.Additional texts have alsobeen suggested in each study session to ensurefull coverage of the syllabus content and toenable students to study the subject morethoroughly through wider reading.

Students should note that in order to undertake aprogramme of study it will be necessary, as aminimum, to obtain a copy of the recommendedstudy text for the subject.

Study session featuresFor consistency and to aid study, the sameapproach is adopted for each session. Eachsession includes:

TitleThis provides a brief indication of the sessioncontent.

Statements of practiceThese are taken from the subject syllabus (unitcontent) and specify the level that students arerequired to achieve in order to pass theexamination.

IntroductionThis provides a summary of the session content.

Learning objectivesEach session will be broken down into parts,each covering a different area. A learningobjective has been set for each of these parts sothat students understand clearly what they areexpected to achieve before moving on to thenext section.

Learning activitiesFor each learning objective there is an activitywhich should be completed by the student. Theactivities have been created to help the studentexplore aspects of the syllabus and, in manycases, to consider how the subject is applied inpractice.

Self-assessment questionsSimilarly, for each learning objective there is aself-assessment question. These have beendesigned to test students’ knowledge andunderstanding of what they have learned.Outline responses to these questions arecontained within the guide.

ChecklistThis provides a very brief summary of any keyprinciples, tools, models and techniques whichare relevant to the session and with which thestudent should be familiar.

Directed readingThis states the appropriate references to theSenior Assessor’s recommended study text forthe subject.

Recommended further readingThis provides the appropriate references toadditional further reading text which has beensuggested.

Additional resourcesHere the guide will list any appropriateadditional information which will be of use tostudents, eg case studies, articles and websites.

CIPS past examination questionsWhere appropriate, past examination questionswhich are relevant to the content of the sessionhave been identified. Past papers are availableonline via the CIPS website.

Required academic levelStudents are reminded that, to pass theexamination, they must:-• Have appropriate knowledge and

understanding of the syllabus content in itsentirety.

• Be able to apply that knowledge andunderstanding specifically in the context ofthe questions set in the examination.

• Be able to analyse and evaluate relevanttools, models, principles and theories.

RevisionStudents are reminded that revision is a key partof preparing for the examination. Therefore,sufficient time for revision must be allowed inthe student’s study programme. This should befactored in at regular intervals throughout thestudy period and, particularly, when all studysessions have been completed and prior to theexamination.

Students are encouraged to practice using pastexamination questions. It is recommended thatthis practice is undertaken under mockexamination conditions so that students areproperly prepared for the examination.

CIPS has produced a short booklet‘Examination techniques – a guide forstudents’. Students can obtain a copy of thisonline from the CIPS website.

Getting startedStudents should obtain, and familiarisethemselves with the subject syllabus which iscontained in the Unit Content Guide (availableonline from the CIPS website).

Students should also obtain a copy of therecommended study text and, if possible, therecommended and additional further reading.

Students should then create an action plan,covering all study sessions and allowingsufficient time for adequate revision.

Author profileColin Linton DipM DipFS MBA MCIPS FCIEAFCIM FCIBColin is the CIPS Senior Assessor in Marketingfor Purchasers. His marketing career spans morethan twenty years and he now has his ownbusiness as a consultant, trainer and academic.He is a Senior Examiner for The CharteredInstitute of Marketing, a Chartered Marketer anda Chartered Educational Assessor. Colin is amember of the CIM Academic Senate, a CIMTrustee and Chair of the CIM MembershipGroup.

http://www.cips.org/documents/Examinationtechniquesguide.pdf



02

Advanced diploma in purchasing and supplyMarketing for purchasers

STUDY SESSION 1

Title The marketing function and its interactions with other departments

Statements ofpracticecovered:

• Evaluate the key components of effective marketing, planning and control within an organisation and develop a marketingand promotional plan

• Identify how purchasers can contribute towards the effective development of the marketing mix and execution of marketingplans.

Introduction: By the end of this session students should be able to apply relevant theory, tools and models. In addition, they shouldunderstand and be able to analyse:-

• The meaning of marketing• The role of the marketing function within the organisation• Marketing’s contribution within the organisation• The concept of marketing and other organisational orientations• The relationship between the marketing, purchasing and other functions within the organisation• Areas of potential conflict between marketing and other business functions• How these conflicts can be managed and resolved.

Learningobjective 1.1:

Define marketing.

Learning activity: Describe your interpretation of what marketing is.

Self-assessmentquestion:

Examine theoretical definitions of marketing.


Explain the contribution of the marketing function within an organisation.

Learning activity: Identify a company which you believe is good at marketing and examine what it is that they do well.


Explain what value marketing adds to an organisation.


Describe the different forms of orientation.

Learning activity: Identify three organisations that you are familiar with and identify their orientation.


Explain product, production, sales and marketing orientation.


Examine the steps an organisation can take to achieve a high level of marketing orientation.

Learning activity: Identify an organisation with which you are familiar that has a high level of marketing orientation. Consider the steps that theorganisation will have taken to achieve its high level of marketing orientation.


Explain the steps required to introduce a high level of marketing orientation within an organisation.

03




Explain marketing’s relationship with purchasing and other functions

Learning activity: Think about the companies where you have worked and the occasions when marketing and purchasing staff could haveworked together better.


Identify purchasing activities that marketing may also be able to help with.


Identify areas of potential conflict between different business functions and how they can be managed

Learning activity: Identify an occasion at work when you have experienced conflict between functions due to different priorities. Examine howthese conflicts were managed.


Consider the main functional objectives and priorities of purchasing, marketing and other functions.

A Checklist: (iethe principles,tools, techniques,models etc thatthe studentshould befamiliar with bythe end of thesession)

• Definitions of marketing• Business orientations• Responsibilities and objectives of business functions.

Directed reading(recommendedstudy text)

Chapter 1 (Marketing in the modern organization); Pages 3 to 13

Note: The study text only refers to production and marketing orientations and so omits discussion on product and salesorientations. These aspects are covered in detail in the recommended further reading (see below) and via the internet.

Recommendedfurther reading(additional furtherreading text)

Chapter 1 (What is marketing)Chapter 2 (Marketing orientations)

Additionalresources

Market and product orientationhttp://www.thetimes100.co.uk/theory/theory--market-product-orientation--211.php

The marketing concepthttp://www.learnmarketing.net/orientations.htm

Marketing definedhttp://learnmarketing.net/marketing.htm

CIPS pastexaminationquestions

May 2009 – Question 3November 2008 – Question 3May 2008 – Question 4

04



Notes on self-assessmentquestions(SAQ)

SAQ 1.1 Marketing academics have devised many definitions for the term ‘marketing’. Students are encouraged to research theseusing the internet and text books. Some commonly quoted definitions are:-

Philip Kotler (1999) – ‘A social and managerial process by which individuals and groups obtain what they need and wantthrough creating and exchanging products and value with others.’

Philip Kotler (1980) – ‘Marketing is the human activity directed at satisfying needs and wants through an exchange process.’

David Jobber (2007) – ‘The achievement of corporate goals through meeting and exceeding customer needs better than thecompetition.’

One of the most commonly used definitions is The Chartered Institute of Marketing’s, ‘Marketing is the management processresponsible for identifying, anticipating and satisfying customers’ requirements profitably.’

SAQ 1.2 Marketing’s contribution to an organisation is considerable and includes:-

• Customer focus• Gaining a deeper understanding of customer needs• Understanding and analysis of the internal and external environments• Understanding, evaluating and monitoring the competition• Creating value for customers• Building and maintaining customer relationships• Allocating resources effectively• Growing market share• Sales, income and profit growth• Identifying new markets.

There are many other ways that marketing adds value and students are advised to undertake their own research and to add tothe list above.

SAQ 1.3 • Product Orientation: Focus is on delivering high quality and innovative products. Typically, the product becomes the focusand there is less emphasis on identifying and satisfying ‘real’ customer needs.

• Production Orientation: Focus is on the manufacturing process, often economies of scale and mass production. Again,there is less emphasis on the needs of customers and so stocks can build up of products that customers do not actuallywant to buy.

• Sales Orientation: Focus is on the sales efforts of the organisation. Significant focus on promotional activities and salesforce incentivisation. Customers are ‘encouraged’ to buy, although there may have been insufficient focus on reallyunderstanding the needs of customers.

• Marketing Orientation: Focus is on the customer – the ‘customer is king’. Detailed analysis of customer needs which thendrives the product development process. ‘Customer focus’ permeates the whole organisation. Regular feedback fromcustomers is obtained.

05



SAQ 1.4 Marketing orientation is covered in detail in the recommended study text, see:

• Case 1.1 ‘Marketing in Action’ on page 7• Market-driven versus internally orientated businesses’ on pages 8 and 9 (including table 1.1).

SAQ 1.5 Marketing can assist purchasing with:

• Undertaking internal analysis (eg SWOT)• Analysing the external environment• Analysing the competitive environment• Identifying future requirements (identifying and anticipating future customer needs)• Reviewing product portfolios (to identify future changes)• Developing specifications.

There are other areas too. Students are encouraged to consider this question throughout their studies and to add to the listwhenever they identify something covered within the syllabus that could be of use to the purchasing function.

SAQ 1.6 Typically:

• Purchasing: EOQs; cost management and reduction; profit; stock management; standardisation of components; logistics;supplier management

• Marketing: Wide range of products; competitive advantage; customer relationship management; market share growth;customer service and quality; income; profit

• Finance: Budget setting and monitoring; funding; reporting requirements; cash flow; income; profit; share holderreturns/ROI

• Manufacturing: standardisation; production scheduling; supplies management; quality; cost management; process re-engineering.

The above is not exhaustive. Students are encouraged to undertake their own research and to consider other functional areaseg human resources, distribution and engineering/design.

06


STUDY SESSION 2

Title Marketing strategy

Statements ofpractice covered:

Evaluate the key components of effective marketing, planning and control within an organisation and develop a marketing andpromotional plan.


• The meaning of strategy• The difference between corporate and marketing objectives• The relationship between strategy, objectives and planning• Key strategic analytical tools (Ansoff matrix and Porter’s generic strategies)• The different options available to companies to enter overseas markets.


Summarise the concept of strategy and how it relates to marketing planning.

Learning activity: Examine the meaning of ‘strategy’.


Describe the differences between strategy and tactics.


Explain Ansoff’s matrix and how strategic options can be prioritised and evaluated.

Learning activity: Identify a company which has adopted each of the strategies highlighted by the Ansoff matrix.


Draw the Ansoff matrix and prepare a checklist to evaluate strategic options highlighted.


Explain Porter’s generic strategies.

Learning activity: Identify organisations which have adopted each of the strategies highlighted by Porter’s model.


Explain each of Porter’s generic strategies.


Present SMART objectives.

Learning activity: Identify the marketing objectives of the organisation where you work or for an organisation where you have workedpreviously.


What does SMART mean?

07




Define corporate and marketing objectives.

Learning activity: Identify an organisation and examine its likely corporate objectives.


Describe typical corporate and marketing objectives.


Analyse options for entering overseas markets.

Learning activity: Identify international companies which are operating in your domestic market. What has been their strategy for entering themarket?


Identify the recognised options for entering overseas markets.

Checklist: (ie theprinciples, tools,techniques,models etc thatthe studentshould befamiliar with bythe end of thesession)

• Strategy versus tactics• Corporate and marketing objectives (SMART)• Ansoff matrix• Porter’s generic strategies• Methods of entering international markets.


Chapter 2 (Marketing planning: an overview of marketing); Pages 38, 39, 41, 42, 48-54. Chapter 10 (Managing products: product life cycle, portfolio planning and product growth strategies); Pages 370-372.Chapter 19 (Analysing competitors and creating competitive advantage); Pages 713-716.Chapter 23 (International marketing); Pages 77-84.


Chapter 21 (Marketing planning) – pages 374-382.Chapter 25 (International marketing).

Additionalresources

Case study – Strategy (includes SMART objectives)http://www.thetimes100.co.uk/case-study--using-aims-objectives-to-create-business-strategy--6-267-1.php

Case study – Strategic growth (includes use of the Ansoff matrix)http://www.thetimes100.co.uk/case-study--marketing-strategy-for-growth--125-292-1.php

Case study – Strategic directionhttp://www.thetimes100.co.uk/downloads/mott_macdonald/mott_macdonald_13_full.pdf


May 2009 – Question 2May 2009 – Question 3November 2008 – Question 5November 2008 – Question 6

08



Notes on self-assessmentquestions (SAQ)

SAQ 2.1 Strategy is long term (usually 5 years plus) and encapsulates the organisation’s mission statement. Its focus is on directionand the appropriate utilisation of available resources. It involves considering what markets to operate in and the nature of thebusiness that the organisation wants to be involved in. Strategic decisions are made by the organisation’s board/executives.

Tactics are shorter term activities, actions and plans (usually for execution within 12 twelve months). These activities aremore operational in focus and may form part of a larger plan. Tactical decisions will have less impact on the organisation andwill usually be made by management.

SAQ 2.2 There are various criteria that could be used to evaluate strategic options, and thesewould vary by the nature of the organisation. Typical examples include:-

• Strategic fit• Suitability• Feasibility• Return• Costs• Capability.

There are other criteria that could also be considered. Students should develop theirown list based on the criteria that their own organisation, or one with which they arefamiliar, might use.

SAQ 2.3 Michael Porter identified three generic strategies which an organisation could adopt in order to achieve sustainablecompetitive advantage. The three strategies are:

• Cost Leadership – the organisation aims to be the lowest cost producer in the market• Differentiation – the aim is for the organisation to be different from its competitors. The challenge here is for an

organisation to find a source of differentiation that is sustainable• Focus – by focusing on the needs of a specific target market (often referred to as a niche market strategy).

SAQ 2.4 Objectives should meet the SMART criteria:

• Specific• Measurable• Achievable• Realistic• Timebound.

09



SAQ 2.5 Typical corporate objectives might include some of the following:

• Profitability and other financial measures• Global expansion• Shareholder returns• Sustainability aspects• ‘Number One’ employer.

Typical marketing objectives might include some of the following:

• Profit/income growth• Market share growth• Customer retention/acquisition• Customer satisfaction• Brand awareness/recognition• Lead/sales generation.

Students should consider the corporate and marketing objectives of their own organisation, or one with which they arefamiliar.

SAQ 2.6 The main methods are:

• Indirect exporting - via an intermediary who then sells the goods into the overseas market• Direct exporting - either directly to customers in the overseas market or via an intermediary based overseas. This approach

may involve the use of agents, distributors, licensing, franchising or direct marketing• Direct investment – either via joint venture or through creation of a wholly owned subsidiary.

10


STUDY SESSION 3

Title The marketing planning process


• Evaluate the key components of effective marketing, planning and control within an organisation and develop a marketingand promotional plan


Introduction: By the end of this session students should be able to apply relevant theory, tools and models. In addition, they shouldunderstand and be able to analyse:• The role and importance of marketing planning• How marketing planning can contribute towards an organisation’s profitability and other key objectives• The challenges which are commonly encountered by marketers when developing marketing plans• How to develop a marketing plan (each of the stages of the planning process)• How purchasing can support colleagues in the marketing function in the marketing planning process.


Identify the benefits of marketing planning.

Learning activity: For a plan you have written consider the reasons why you wrote it and what you used it for.


Describe how marketing planning can help contribute to an organisation’s profitability.


Describe the most common challenges and issues encountered when preparing marketing plans.

Learning activity: Identify a time when you have been involved in planning and when things did not go as well as you had hoped. Consider thecauses.


Identify the most common challenges encountered when writing a marketing plan.


Explain the stages of the marketing planning process.

Learning activity: Obtain a copy of a marketing plan from your organisation (or for another organisation via the internet). Compare its structurewith the typical areas highlighted within the marketing planning process.


Describe the typical contents of a marketing plan.


Assess the contribution of the purchasing function in the development of marketing plans.

Learning activity: For the organisation where you work, or for one with which you are familiar, identify the contribution of the purchasingfunction to the development of the marketing plan. If there was none, or very little, how could the plan have been improved bysuch a contribution?


Look at the contents/framework of a typical marketing plan and describe how purchasing might be able to add value.

11



Checklist: (ie theprinciples, tools,techniques, modelsetc that the studentshould be familiarwith by the end of the session)

• The marketing planning process• The marketing mix.


Chapter 2 (Marketing Planning: an overview of marketing).Chapter 21 (Managing marketing implementation, organization and control).


Chapter 21 (Marketing planning).

Additionalresources

Guide to the marketing mixhttp://www.cim.co.uk/filestore/resources/10minguides/marketingmix.pdf

Case study - Developing a marketing planhttp://www.thetimes100.co.uk/case-study--developing-market-plan--142-347-2.php

Case study - Applying the marketing mixhttp://www.thetimes100.co.uk/case-study--using-marketing-mix-fashion-industry--135-327-1.php


November 2008 – Question 5.May 2008 – Question 6.November 2007 – Question 6.


SAQ 3.1 Marketing planning contributes towards profitability in a number of ways, including:

• Sets direction• Enables appropriate allocation of resources• Monitors the external environment• Enables plans to be adjusted to meet changes in the market• Leads to greater understanding of customer needs• Identifies suitable target markets• Analyses competitors• Segments and tailors the marketing mix, ensures focus, and avoids waste.

12



SAQ 3.2 There are numerous challenges, including:

• Insufficient budget• Internal conflicts with other functions• Incorrect assumptions• Keeping pace with the external environment which is continually changing• Keeping abreast of customer needs and wants• Monitoring competitor activities• New entrants• Managing stakeholders.

SAQ 3.3 Typical contents include:

• Analysis• Marketing objectives• Definition of target markets and customers• Strategies• Tactics (the marketing mix)• Monitoring, control and feedback mechanism.

SAQ 3.4 Purchasing can provide useful input throughout the process, for example:

• Leveraging knowledge of supply markets as part of the analysis stage• Setting profit objectives – through more effective purchasing, costs can be reduced and, therefore, profitability increased• Identifying and assessing new market opportunities• Ideas for new products• Product design/specification development• Negotiating/tendering for supplies needed in product development and ongoing manufacturing• Financial analysis in developing pricing• Identifying and managing channel intermediaries and options• Purchasing marketing services .

13


STUDY SESSION 4

Title Environmental analysis and the marketing audit


Evaluate the key components of effective marketing, planning and control within an organisation and develop a marketing andpromotional plan.

Introduction: By the end of this session students should be able to apply relevant theory, tools and models. In addition, they shouldunderstand and be able to analyse:

• Environmental analysis• The marketing audit• Competitor analysis.


Explain the importance of analysing an organisation’s environments.

Learning activity: What are the constituents of the ‘environments’ which impact on the company where you work, or have worked?


Discuss why it is important for organisations to regularly assess the environments which influence their activities andstrategies.


Evaluate an organisation’s macro environment.

Learning activity: Identify how economic and political changes have influenced an industry where you live.


Describe the main macro environmental factors.


Evaluate an organisation’s micro environment.

Learning activity: Identify the elements of the micro environment which are relevant for the company where you work, or have worked.Self-assessment question: Identify why it is important to understand the micro environment.


Apply SWOT analysis

Learning activity: Conduct a SWOT analysis on two different organisations which operate in the same sector.


Explain how the findings of a SWOT analysis should be used for planning purposes.


Analyse an organisation’s competitive environment using Porter’s Five Forces model.

Learning activity: Consider and describe the competitive environment of an organisation with which you are familiar.


Apply Porter’s Five Forces model to an organisation or industry of your choice.

14




Explain the main sources of competitor intelligence.

Learning activity: Make a list of how the purchasing function can assist in competitor analysis.


Identify the sources of competitor intelligence.

Check list: (ie the principles, tools, techniques, models etc that the student should be familiar with by the end of the session)• SWOT analysis• Porter’s Five Forces Model• PESTLE analysis


Chapter 3 (The marketing environment).Chapter 19 (Analysing competitors and creating competitive advantage).


Chapter 3 (The marketing environment).Chapter 5 (The competitive environment).

Additionalresources

Case study - Environmental analysishttp://www.thetimes100.co.uk/case-study--using-pest-analysis-to-identify-external-influences--121-288-1.php

Case study - SWOT analysishttp://www.thetimes100.co.uk/case-study--swot-analysis-action--131-322-1.php

Case study – Managing external influenceshttp://www.thetimes100.co.uk/downloads/firstgroup/firstgroup_13_full.pdf

Case study - PEST analysishttp://www.thetimes100.co.uk/downloads/legalservices/legalservices_13_full.pdf


May 2008 – Question 5.November 2007 – Question 2.


SAQ 4.1 Organisations should regularly assess the environments which influence their activities and strategies because thoseenvironments are continually changing. It is important for organisations to identify these changes and adapt their strategiesand plans accordingly otherwise they will become out of touch with the market and fall behind competitors.

15



SAQ 4.2 The most common tool for describing an organisation’s macro environment is PESTLE analysis. The elements are:-

• Political• Economic• Social/cultural• Technological• Environmental (ecological)• Legal and regulatory.

SAQ 4.3 Macro environmental factors, by and large, impact most organisations. An organisation’s micro environment will be morespecific to its operations and activities and will include aspects such as competitors, customers and stakeholders. In the sameway that the macro environment is continually evolving and changing, an organisation’s micro environment will also changeshape over time. So it is vital that organisations correctly identify and regularly monitor their micro environment to ensure thatsustainable competitive advantage is achieved and maintained. It is also vital that organisations keep up to date withchanges in customer needs and wants, so that an appropriate marketing mix can be maintained.

SAQ 4.4 SWOT analysis plays a key role in planning. It is important that organisations are able to identify and monitor their strengthsand weaknesses. Within planning, the organisation should seek to address identified weaknesses and exploit theweaknesses of their competitors. Similarly, it should develop plans which maximise its own strengths and seek to developthese into aspects of unique advantage (versus competitors). Threats should be identified and appropriate actions taken tominimise the potential impact of these. Finally, plans should focus on those markets where there is significant opportunity forthe organisation. Where such opportunities exist, resources should be directed accordingly to activities which will leveragethe maximum potential.

SAQ 4.5 Porter’s Five Forces Model is clearly set out in figure 19.1 on page 775 in the recommended study text. Apply this to anorganisation/industry with which you are familiar.

SAQ 4.6 There are many sources of competitor intelligence:-

• Competitors’ marketing literature• Competitors’ marketing activities• Competitors’ websites• Marketing research• Sales staff• Interviewing new staff who have previously worked for competitor organisations• Customers who also deal with competitor organisations.

16


STUDY SESSION 5

Title Understanding organisational buying behaviour


Assess how marketers develop a detailed understanding of customers and apply segmentation techniques.


• The nature and characteristics of organisational markets• The main differences between organisational and consumer markets• The organisational decision making process• The concept of the DMU (decision making unit) and the roles of individuals within a typical organisational DMU.


Describe the characteristics of organisational markets.

Learning activity: From a marketing perspective, examine the main characteristics of organisational markets.


Make a list of the differences between organisational and consumer markets.


Analyse the stages in the organisational decision making process.

Learning activity: As a purchaser, write down the stages that you will go through when purchasing goods and services.


Identify each of the stages of the organisational decision making process.


Evaluate the roles of individuals in organisational buying.

Learning activity: Using the company where you work, or have worked, as an example, make a list of the key roles in the organisational buyingprocess.


Explain the roles that would typically make up the DMU in a large organisation.


Assess the influences on organisational buyer behaviour.

Learning activity: Using the company where you work, or have worked, as an example, make a list of the things that influence the way that youpurchase.


Assess the main influences on organisational purchasing.

17


Title Understanding organisational buying behaviour

Checklist: (ie the principles, tools,techniques,models etc thatthe studentshould befamiliar with bythe end of the session)

• The organisational decision making process• Individuals within the DMU• Influences on organisational buyer behaviour.


Chapter 5 (Understanding organisational buying behaviour)


Chapter 7 (Organisational buyer behaviour)

Additionalresources

N/A


May 2009 – Question 4November 2007 – Question 6


SAQ 5.1 Typically, organisational markets (compared to consumer markets) are:-

• Larger• Individual transaction values tend to be higher• Total acquisition costs are higher• Decision making is more complex• The buying cycle takes longer• Recognise the importance of adopting a professional approach.

SAQ 5.2 The typical stages are shown in figure 5.1 and examined in detail on pages 157 – 161 of the recommended study text.

SAQ 5.3 Typical roles within an organisational DMU include:-

• Users – those who are the end-user of what is being purchased• Influencers – those who in some way can influence the nature of what is being purchased, eg a technical advisor/expert• Initiator – someone who starts of the process by identifying the need to make a purchase• Decider – someone involved in making the decision about what to buy and who from• Approver – someone who is involved in the sign-off process, eg a budget holder• Buyer – someone who is involved in the purchasing process, eg takes part in negotiations• Gatekeeper – someone who controls and directs the flow of information, or provides access to information/people, eg the

Managing Director’s Personal Assistant.

18


Title The objectives and scope of storage and distribution

SAQ 5.4 There are many influences on organisational purchasing, including:-

• Size of organisation• Age of organis ation• Industry sector• Knowledge/experience of purchasing and other staff• Policies and procedures• Strategy• Objectives• Pricing• External factors (PESTLE)• The competitive environment• Organisational culture• Negotiating power• Relationship with suppliers.

19


STUDY SESSION 6

Title Understanding consumer buying behaviour

Statements ofpractice covered: Assess how marketers develop a detailed understanding of customers and apply segmentation techniques

Introduction:

By the end of thissession students

should be able to apply relevant theory, tools and models. In addition, they should understand and be able to analyse:-

• The natureand

characteristics of consumer markets• The consumer decision making process

• Influences ofconsumer buyer

behaviour.

Learning objective 6.1:

Describe the characteristics of consumer markets.

Learning activity:

Examine themain differences

between how you purchase things for yourself and how you purchase on behalf of your organisation, or an organisation whereyou have worked.

Self-assessment question:

Describe thedifferences

between consumer and organisational markets.


Analyse the stages in the consumer decision making process.

Learning activity: Think of a significant item that you have purchased. Describe the decision making process that you went through.


What are the various stages of the consumer decision making process?

20


Title Understanding consumer buying behaviour


• The stages in the consumer decision making process• Influences on consumer buyer behaviour• Maslow’s hierarchy of needs.


Chapter 4 (Understanding consumer behaviour).


Chapter 6 (Buyer behaviour).

Additionalresources

Consumer behaviourhttp://www.marketingteacher.com/Lessons/lesson_consumer_buying_behaviour.htm

Consumer behaviourhttp://learnmarketing.net/consumer.htm


May 2009 – Question 4November 2008 – Question 4May 2008 – Question 1November 2007 – Question 6.


SAQ 6.1 Typically, consumer markets (compared to organisational markets) differ because :

• They are smaller• Individual transaction values tend to be lower• Total acquisition costs are lower• The buying cycle is shorter• Purchases can be more emotionally driven• Purchases can be based on impulse.

21



SAQ 6.2 The recognised consumer decision making process is set out and examined in the recommended study text in figure 4.2 andon pages 119 – 126.

SAQ 6.3 There are many influences on consumer buyer behaviour, including:

• Cultural• Social• Personal• Psychological• Motivational• Economic• Marketing.

SAQ 6.4 A key goal of marketing is to influence customers and to motivate them to buy the organisation’s products. It does this by:

• Positioning• Branding• Understanding customer needs• Developing sources of competitive advantage• Segmentation• Tailoring the marketing mix so that it is focused on meeting the needs of customers• Emphasising value for money• ‘Association’ with celebrities and famous personalities.

22


STUDY SESSION 7

Title Segmentation, targeting and positioning


Assess how marketers develop a detailed understanding of customers and apply segmentation techniques.


• Segmentation• Targeting• Positioning.


Define segmentation, targeting and positioning and describe their benefits to marketers.

Learning activity: Describe the main customer segments which are targeted by the organisation where you work, or have worked.


Describe ‘positioning’ and its importance to marketers.


Evaluate the criteria for an effective segment.

Learning activity: For your own industry/sector explain the differences in the segments to which companies market.


Write a short checklist to be used as criteria for choosing effective market segments.


Apply the methods of segmenting consumer markets.

Learning activity: Identify ways that consumer markets where you live could be broken down into smaller groups for marketing purposes.


Summarise the main methods used by major organisations to segment consumer markets.


Apply the methods of segmenting organisational markets.

Learning activity: Make a list of ten different companies, near to where you live or work, and break them down into smaller groups which sharesome common characteristics.


Summarise the most common methods used by major organisations to segment organisational markets.


Explain target market strategies.

Learning activity: The company where you work has recently appointed a new Head of Purchasing. She has asked you to write a short briefingpaper explaining your company’s main target markets.


Describe the three main target market strategies.

23




Describe how positioning relates to competitive advantage.

Learning activity: Describe how the company where you work, or have worked, is ‘positioned’ in the market.


A colleague has asked you to explain the concept of competitive advantage. What would you say (in no more than 200words)?


• Bases of segmentation for consumer markets• Bases of segmentation for organisational markets• Positioning/perceptual maps• Target market strategies.


Chapter 8 (Market segmentation and positioning)


Chapter 8 (Customers, market segmentation and targeting)Chapter 5 Pages 161-166

Additionalresources

Case study - Segmentationhttp://www.thetimes100.co.uk/case-study--segmentation--143-349-1.php

Case study - Competitive advantagehttp://www.thetimes100.co.uk/case-study--using-innovation-to-create-competitive-advantage--85-331-1.php


SAQ 7.1 Positioning is vital to effective marketing. A product’s ‘position’ is the place that it occupies in its given market as perceivedby consumers in its target market. Positioning is undertaken relative to competitor products and will be influencedsignificantly by the marketing mix. Positioning can be influenced by real product/service differences or just throughperception.

It is important because it has a major impact on key decisions, for example pricing, and can have a major influence on demandlevels for the product/service. It will also influence marketing and other costs.

24



SAQ 7.2 In order to be effective, segments must comprise customers with similar characteristics and be:

• Measurable• Substantial• Accessible• Actionable.

In addition, other criteria could be considered, for example:

• Strategic fit• Alignment with available resources• Fit with brand and positioning• Potential for competitive advantage.

SAQ 7.3 Typical methods (or ‘bases’) of segmentation in consumer markets are:

• Geographic• Psychographic• Demographic• Geo-demographic• Benefits-based.

SAQ 7.4 The most common methods of segmenting organisational markets are by:

• Sector• Business type• Geography• Age of business• Size of business• Product usage• Approach to purchasing.

SAQ 7.5 The three main target market strategies are:

• Undifferentiated marketing – there are few/no differences in customer characteristics and so one product and marketingmix can be used for the whole market (ie mass marketing)

• Differentiated marketing – used where customers can be grouped into sub-sets which share common characteristics andthe company develops separate marketing mixes for each distinct group

• Concentrated marketing – where a company has special expertise in one specific segment.

SAQ 7.6 The concept of competitive advantage is critical to effective marketing. The following aspects should have been considered:-

• Undertake SWOT – competitive advantage should link in with the organisation’s strengths and identified opportunities• To be effective, competitive advantage must be sustainable• Relationship between competitive advantage and positioning• Competitive advantage is in the eyes of customers (must relate to aspects which are of importance to customers, eg

service, price, quality)• Competitor analysis is important• Need for benchmarking against key competitor organisations.

25


STUDY SESSION 8

Title Managing and developing products


Apply the marketing mix to a range of organisations and determine how the marketing mix elements can be integrated toachieve business objectives.


• The concept of product management• The importance of managing products• The tools and techniques used in managing product portfolios• The development of new products.


Explain the concept of product management.

Learning activity: You have just joined a company and discover that they have no knowledge of the concept of product management. Write ashort briefing for management and staff which sets out the key points about the concept and its importance.


Why it is important to manage the product range?


Describe the components of a product.

Learning activity: Take a product that you have purchased recently and make a list of its attributes. Prioritise the value to you of each of theattributes.


Identify the three recognised components of a product.


Assess the role of branding in product management.

Learning activity: Identify alternative branding strategies.


Identify three products that you have purchased recently. Make a list of what the brands mean to you and how they influencedyour choice.

Learningobjective 8.4

Evaluate the main tools used in managing products.

Learning activity: Identify three products that you have purchased within the last year or so and plot their position on the product life cycle.


Draw the Boston Consulting Group (BCG) matrix and explain the four product types that it reveals.

26




Describe each of the stages of the new product development process.

Learning activity: You are taking part in a creative thinking session on ways to identify new and enhanced products. What would be yourcontribution?


Identify the stages of the new product development process.

Learningobjective 8.6

Describe the concept of product adoption.

Learning activity: Describe the diffusion of innovation concept.


Identify a product which has been adopted by certain types of customers at different speeds and make a list of the reasonswhy.


• Boston Consulting Group Matrix• Product Life Cycle• The diffusion of innovation concept• New product development process• Components of a product.


Chapter 9 (Managing products: brand and corporate identity management).Chapter 10 (Managing products: product life cycle, portfolio planning and product growth strategies).Chapter 11 (Developing new products).


Chapter 11 (Products and services – the acceptability factor in marketing).Chapter 12 (Branding and building relationships with customers).Chapter 20 – (Product policy and new product development).

Additionalresources

Case study - Product developmenthttp://www.thetimes100.co.uk/case-study--product-development-through-continuous-improvement--56-338-1.php

Case study - Product launchhttp://www.thetimes100.co.uk/case-study--the-use-marketing-mix-product-launch--87-303-1.php

Case study - Product life cyclehttp://www.thetimes100.co.uk/case-study--extending-product-life-cycle--6-301-2.php

Case study - Brandinghttp://www.thetimes100.co.uk/case-study--re-branding-corporate-image--6-64-1.php


May 2009 – Question 6.November 2008 – Question 1.May 2008 – Question 2.November 2007 – Question 3.May 2007 – Question 6.

27




SAQ 8.1 It is important to manage an organisation’s product range for many reasons, including:

• To maintain a balanced portfolio of products (eg at different stages of the life cycle)• To keep the range in line with changing customer needs• To keep the portfolio competitive• To maximise income potential• To control costs• To focus resources on the most profitable products• To identify when to withdraw unsuccessful products• To ensure the portfolio adapts in line with changes in the organisation’s operating environments (micro/macro factors).

SAQ 8.2 There are three components:

• Core/basic – satisfies the essential customer need• Physical/actual – the tangible product features• Augmented – additional ‘added value’ elements.

SAQ 8.3 Students’ answers will vary depending on the examples that they have chosen. Branding is designed to impact on thecustomer in many ways and so students may have considered some of the following:

• Recognition of the brand• Value• Perceived quality• Price• Positioning versus competitor products.

SAQ 8.4 The Boston Consulting Group matrix is shown in the recommended study text in figure 10.2 and the model is discussed onpages 363-367.

SAQ 8.5 The new product development process is shown in figure 11.2 in the recommended study text and is examined in detail onpages 391-395.

SAQ 8.6 Students’ answers will vary depending on the product they have chosen to use as their example. The concept is examined indetail in the recommended study text on pages 401 - 405.

28


STUDY SESSION 9

Title Pricing tools and techniques


• Apply the marketing mix to a range of organisations and determine how the marketing mix elements can be integrated toachieve business objectives



• The role of pricing and its importance within the marketing mix• The concept of elasticity• Different approaches and to pricing• Pricing strategies• How pricing can be adapted throughout the stages of the product life cycle and for BCG product categories• How purchasing can contribute towards pricing decisions.


Assess the importance of pricing.

Learning activity: Make a list of the factors that you would consider when deciding whether or not the price of a product is reasonable.


Identify the role of pricing in product positioning.


Analyse the factors that influence product pricing.

Learning activity: Identify two brands of a similar item (eg cars) and consider why the pricing of each might be different.


Describe elasticity and its impact on product pricing.


Examine the main approaches to pricing products.

Learning activity: Identify three suppliers of the same (or similar) products and assess their approaches to pricing.


What is the difference between penetration pricing and skimming?


Apply pricing strategies to the various life cycle stages.

Learning activity: Based on a product with which you are familiar, describe the various product life cycle stages.


A small electrical product has just been launched at a price, to consumers, of £39.99. Consider, with reasons, why this pricemay vary during its life cycle.

29




Describe the different pricing strategies that could be applied to products within the BCG matrix categories.

Learning activity: Identify different products with which you are familiar and which apply to the four product categories identified by the BCGmatrix.


Identify the different pricing strategies and approaches that should be applied to products within the four BCG matrixcategories.


Examine the contribution of the purchasing function on product pricing.

Learning activity: Consider the contribution of the purchasing function helping marketing colleagues to reduce pricing.


For your own organisation, assess the extent to which purchasing has been involved in pricing decisions. If it has not beeninvolved consider how it could have made a positive contribution.


• Pricing approaches and strategies.


Chapter 12 (Pricing strategy).


Chapter 14 (Affordable offerings – price and value).

Additionalresources

Elasticity of demand explanationhttp://www.thetimes100.co.uk/theory/theory--elasticity-demand--326.php

Pricing approaches and strategieshttp://www.marketingteacher.com/Lessons/lesson_pricing.htm


November 2008 – Question 2May 2007 – Question 4

30


Title Pricing tools and techniques


SAQ 9.1 Price has a key role to play in positioning. Typically, customers consider the key aspects of price versus quality whenconsidering the positioning of a product in the market (although in some cases other considerations will also apply). Inparticular, some organisations position themselves purely on price, eg ‘no frills’ airlines and Tesco’s ‘Value’ brand. Similarly,some brands are positioned based on their exclusivity and very high prices, eg Rolls Royce.

SAQ 9.2 Understanding the elasticity of a product is critical – its elasticity will determine the impact on sales volumes when pricing isvaried. If the price of a product is altered by a small amount but demand changes significantly it is said to have elasticdemand. However, where a price change results in a similar level of change in demand, the product is said to be inelastic.Students should download the study sheet (specified in the additional resources section above) for further information.

SAQ 9.3 Penetration pricing and skimming are commonly used pricing strategies in new product launches. With penetration pricing,the company intentionally sets the launch price low with a view to gaining as much market share as possible and as quickly asit can. With skimming, the company seeks to recoup as much of its development and launch costs as it can by setting a highlaunch price. This approach will only succeed when the product is perceived as having unique advantage over its rivals – thisapproach is quite common in technologically driven industries.

SAQ 9.4 It is important that marketers monitor products throughout the various stages of the life cycle and adapt the marketing mixelements to take account of changes in the market. In respect of pricing, key influences are changes in customer demand andcompetitor activities. Demand for a product will vary significantly during the stages of the life cycle; demand will not only beinfluenced by pricing but will also be impacted by other elements of the marketing mix in addition to competitor activities.Pricing should be adjusted to suit the market characteristics of the various life cycle stages – these are explained in therecommended study text on pages 355 – 358.

SAQ 9.5 Because of the impact of pricing on demand, sales and, ultimately, market growth rates, the pricing approaches and strategiesadopted for products should be adjusted depending on where it sits within the BCG matrix and on the chosen product strategy.The BCG strategic objectives are clearly shown in figure 10.3 in the recommended study text and explained on pages 363 –367 and alternative approaches to pricing set out on pages 434 – 435.

SAQ 9.6 Students’ answer to this question will depend on the organisation where they work. Typically, purchasing can contribute topricing decisions in a number of ways:

• Financial analysis• Identifying, reducing, controlling and managing costs• Negotiating with suppliers• Ongoing supplier relationship management• Supplier performance management• Specification development• Product standardisation• Managing channel partners• Ensuring best value throughout the supply chain.

31


STUDY SESSION 10

Title Channel management





• The role of channels• Different channels commonly used by marketers• Factors which influence channel decisions and choice• Channel selection• The role of technology in channel management• The contribution of purchasing in channel management.


Explain the meaning and importance of channel management.

Learning activity: Consider how marketers in your organisation, or one with which you are familiar, use channel management.


Make a list of how channel management can help an organisation to achieve its business and marketing objectives.


Assess the main channels used by marketers.

Learning activity: Make a list of the main marketing channels that you have experienced.


What are the channels commonly used by financial services organisations.


Formulate criteria to evaluate and select distribution channels.

Learning activity: Think about the different channels that you have already identified in SAQ 10.2 and rate them in terms of appropriateness toyou.


What are the factors that influence the choice of channel.


Evaluate the impact of technology on channel management.

Learning activity: For your own organisation, or one with which you are familiar, write a brief report on how technological developments haveimpacted on its channel management.


Describe how technology has influenced channel management.

32




Examine the contribution of the purchasing function on channel management.

Learning activity: Your Managing Director is dissatisfied with the current success and performance of the organisation’s channel management.You have been asked to write a short report on how greater involvement from the purchasing department may improvechannel management.


Explain the importance of managing and motivating intermediaries in channel management.


• Different channel types• Channels in international markets.


Chapter 15 (Direct Marketing).Chapter 17 (Distribution).Chapter 18 (Digital marketing).Chapter 23 (International marketing); Pages 956 - 963.


Chapter 13 (Making products available).Chapter 17 (Direct and online marketing).

Additionalresources

International market entry methodshttp://www.learnmarketing.net/international%20marketing%20entry.htm


November 2007 – Question 1.May 2007 – Question 3.


SAQ 10.1 Effective channel management is critical to the attainment of business and marketing objectives in a number of ways:-

• It is the means through which products reach customers• Channels can be used to gather vital customer information• Channels portray the brand and its values to customers• The use of channels is a key part of positioning• Channel choice is key to effective segmentation• Choice of channels will have a major impact on costs and hence on overall profitability• Channel intermediaries can have a major impact on service and on customer satisfaction• In service delivery channels play a key role in terms of the process and physical evidence elements of the marketing mix.

33



SAQ 10.2 Major financial services organisations adopt a multi-channel approach, including:

• Branch networks• Online• ATMs• Direct sales force• Direct marketing• Via intermediaries (eg brokers).

SAQ 10.3 Channel choice can be influenced by many factors, including:

• Type of product• Geography/location• Target market• PESTLE factors• The competitive environment• Strategy• Objectives• Financial aspects (eg profit targets)• Brand, eg its recognisability• Positioning• Desired level of involvement.

SAQ 10.4 Technology has influenced channel management in a number of ways, including:

• Improved accessibility (24 hrs x 7 days x 365 days of the year)• Globalisation• Provision of management information• Improved customer service• Enabled new entrants• Reduced costs of delivery • Opened up new markets/territories.

SAQ 10.5 Intermediaries (like all suppliers) need to be managed and motivated for a number of reasons, including:

• To ensure compliance with purchasing policy etc• To ensure that agreed targets are met• To improve customer service• To highlight and achieve efficiency savings• To prioritise sales of the organisation’s products• As part of ongoing supplier relationship management• Financial management.

34


STUDY SESSION 11

Title Customer communications




• The role of communications• The development of communications objectives• The application of communication models (eg AIDA and DAGMAR)• The development of a promotional plan• The components of the promotional mix• Implementation of the promotional mix• The use of communications activities to influence customers.


Evaluate the role and importance of customer communications.

Learning activity: Consider the value of customer communications in both customer retention and new business acquisition.


Identify potential customer communications objectives.


Analyse the main communication models.

Learning activity: Apply AIDA to communications put out by the organisation where you work, or one where you have worked.


What is DAGMAR and how is it useful to marketers?


Describe the stages in the development of a promotional plan.

Learning activity: Using the examples you used in the learning activity in 11.2 identify the main messages used in each.


What are the key stages in the development of a promotional plan?


Explain the components of the promotional mix.

Learning activity: Using a product from your own organisation, or from one with which you are familiar, suggest an appropriate promotional mix.


Identify the components of the promotional mix.

35




Assess how the promotional mix is applied using the PLC and BCG matrix.

Learning activity: Consider a product, with which you are familiar. Identify and evaluate the promotional activities which were used when itwas launched.


Identify the various promotional activities which would accompany a new fizzy drink throughout its life cycle (from launch towithdrawal).


Analyse the role of the promotional mix in influencing organisational and consumer buyers.

Learning activity: Consider how an organisation’s promotional mix has been used to influence you in a significant purchase that you have made.


Make a list of ways in which elements of the promotional mix can be used to influence organisational buyers.


• AIDA• DAGMAR• Promotional mix elements• Stages in the development of a promotional (communications) plan.


Chapter 13 (Advertising).Chapter 14 (Personal selling and sales management).Chapter 15 (Direct marketing).Chapter 16 (Other promotional mix methods).Chapter 18 (Digital marketing).


Chapter 15 (Communications and promotional planning).Chapter 16 (Advertising).Chapter 17 (Direct and online marketing).Chapter 18 (Sales promotion, PR and related activities).Chapter 19 (Selling).

Additionalresources

Case study – Promoting the brandhttp://www.thetimes100.co.uk/downloads/portakabin/portakabin_13_full.pdf

Case study – Communicationshttp://www.thetimes100.co.uk/case-study--using-effective-communications--38-253-1.php

Communicationhttp://www.learnmarketing.net/promotion.htm


May 2009 – Question 1.November 2008 – Question 2.May 2007 – Question 5.

36


Title Customer communications


SAQ 11.1 Communications objectives should fit with marketing objectives which in turn should be supportive of organisational/businessobjectives. Communications activities are focused on informing and influencing customers in target markets and, so, typicalobjectives would relate to:-

• Improving awareness• Building brand recognition• Achieving positioning• Lead generation• Sales.

SAQ 11.2 DAGMAR is used to develop and define the key goals and measures in communications activity. It stands for DefiningAdvertising Goals for Measured Advertising Results.

SAQ 11.3 Typically, a promotional (or communications) plan would comprise the following:

• Identification of the target audience• Assessment of target customer needs and wants• Set communications objectives• Create the promotional message• Select the appropriate promotional mix elements• Agree/confirm budget• Media schedule• Implementation• Monitor execution• Evaluate performance against objectives• Take corrective action if necessary.

SAQ 11.4 The promotional mix comprises the following:

• Personal selling• Advertising• Direct marketing• Sales promotions• Public relations• Sponsorship• Conferences/exhibitions• Online• Virtual marketing.

SAQ 11.5 The product life cycle is set out in figure 10.1 of the recommended study text. Typical strategies, including promotional, areshown in table 10.1 which is on page 389 of the text.

SAQ 11.6 Most aspects of the promotional mix can in fact be used in organisational markets, but the emphasis is usually on moretargeted activities rather than ‘mass media’, as is frequently the case in consumer markets. Typically, in organisationalmarketing there is a greater emphasis on the use of personal selling and more focused advertising/advertorials (eg in specifictrade publications).

37


STUDY SESSION 12

Title Services marketing and the extended marketing mix




• The characteristics of services• The extended marketing mix• The application of the extended marketing mix.


Describe the characteristics of services versus goods.

Learning activity: For a service that you have experienced, assess the ways in which it differed from buying goods.


What are the key challenges that marketers experience when marketing services compared to goods?


Explain components of the extended marketing mix.

Learning activity: Taking any product with which you are familiar, describe its marketing mix (4Ps).


What are the additional three elements of the extended marketing mix?


Assess how the extended marketing mix can be used to address the key challenges faced in services marketing.

Learning activity: Taking any service that you have experienced and describe its marketing mix (7Ps).


Explain how the additional three elements in the extended marketing mix are used by services marketers to overcome thechallenges of marketing services.


• Specific characteristics of services• The extended marketing mix (7Ps).


Chapter 22 (Services marketing).


Chapter 11 (Products and services – the acceptability factor in marketing).

38


Title Services marketing and the extended marketing mix

Additionalresources

Services marketinghttp://www.learnmarketing.net/servicemarketing.htm


May 2009 – Question 6.May 2007 – Question 6.


SAQ 12.1 The challenges for services marketers are driven by the characteristics of services versus goods, ie:-

• Lack ownership• Inseparability – services cannot be separated from the service provider• Intangibility – cannot be touched• Perishability - services last a specific time and cannot be stored like a product for later use• Heterogeneity – it is difficult to make the service experience identical all of the time.

SAQ 12.2 The services marketing mix comprises the traditional 4Ps (product, price, place and promotion) plus an additional threeelements:

• People – essential in service delivery• Process – the systems and procedural aspects of delivering service to customers• Physical evidence – attempts to make the service more tangible.

SAQ 12.3 People, process and physical evidence are key elements of the marketing mix for service organisations. Marketers use theseadditional three elements to manage the specific issues faced by services marketers compared to marketers of goods (seeSAQ 12.1). The recommended study text addresses this issue in detail on pages 918 – 920.

39


STUDY SESSION 13

Title Marketing mix considerations in international markets





• Why organisations may decide to enter international markets• The factors that an organisation should consider before entering an international market• How purchasing can assist marketing colleagues in international marketing activities• The application of the marketing mix in international markets.


Analyse the factors that marketers should consider when undertaking activities in international markets.

Learning activity: Your organisation has decided to extend into a new international market. Write a short report which identifies the additionalfactors that it should consider, over and above the factors it would consider when trading within its domestic market.


Examine the impact of the macro environment on a company trading in a new overseas market.


Describe the role of purchasing in international marketing.

Learning activity: Draw up a plan for your own organisation on how purchasing and marketing staff can work together in international markets.


Explain the importance of managing suppliers and intermediaries in international marketing.


Evaluate how the marketing mix must be tailored to ensure its suitability in international markets.

Learning activity: Describe the marketing mix of an international company with which you are familiar.


Identify the factors that will influence the marketing mix of a product being launched in a new overseas territory.


In an international context:

• The marketing mix• PESTLE• International market entry options.


Chapter 23 (International marketing).Case 45 (page 905).Case 46 (page 910).

40


Title Marketing mix considerations in international markets


Chapter 25 (International marketing)

Additionalresources

International marketing – Cultural considerationshttp://www.marketingteacher.com/Lessons/lesson_international_marketing_culture.htm

International marketinghttp://www.learnmarketing.net/internationalmarketingmix.htm

Case study – International acquisitionhttp://www.thetimes100.co.uk/case-study--growing-company-by-international-aquisition--111-278-2.php


May 2009 – Question 2.May 2008 – Question 5.


SAQ 13.1 The same principles with regard to the macro environment apply to companies irrespective of where they are trading. PESTLEshould be examined, in the context of the organisation and its markets. The main issues for organisations which carry outinternational trade are monitoring changes in the macro environment and also adapting to such changes. Clearly, theimplications can be more significant in international markets as levels of knowledge and local expertise may be less than inthe domestic market. The impact of local laws, customs, duties, cultural issues etc can have a significant impact on anorganisation’s marketing in international markets. Similarly, when dealing in just domestic markets the issue of exchangerates does not apply but may be a key factor in international markets. In addition, political and economic instability may makemarketing extremely difficult in some markets.

SAQ 13.2 Suppliers and intermediaries require close management irrespective of whether or not the organisation trades internationally.In international markets, there may be additional complexities involved in managing supplier and intermediary relationshipsdue, for example, to different laws, regulations, business practices, customs, language etc. Managing suppliers andintermediaries can have a major impact on costs, profitability, sales, and on customer service, hence it is vital that this activityis carried out effectively, especially in markets which may carry greater levels of uncertainty and risk.

SAQ 13.3 The main factors that will influence the marketing mix include:-

• PESTLE factors• Standardisation versus adaption• Knowledge/experience of the market• Target market needs and wants• Segmentation• Positioning• Strategy/objectives• Competitor activities.

41


STUDY SESSION 14

Title Market research and its uses in decision-making


Analyse the market research process and market research techniques.


• The importance of market research in marketing decision making• The importance of identifying the correct ‘sample’• The main sampling techniques• Primary and secondary research• Quantitative and qualitative research.


Describe the role of market research in decision-making.

Learning activity: Find out what market research is undertaken by your organisation, or one with which you are familiar, and how it is used.


Describe to role of marketing research.


Define ‘sampling’.

Learning activity: Find out what use your organisation makes of ‘sampling’ when undertaking market research. If it does not use it, considerwhat benefits it may gain by using the technique.


You have been asked by your boss to justify the use of sampling. What are the key points that you would make?


Assess the main sampling techniques.

Learning activity: Consider the implications of creating samples which do not represent the target market.


Describe the main methods of creating an effective sample.


Explain the differences between, and uses of, primary and secondary research.

Learning activity: Your own organisation is planning to launch a new product/service. Write a short report to summarise the pros and cons ofusing secondary research versus primary research.


What are the main differences between primary and secondary research.

42




Explain the differences between and uses of quantitative and qualitative research.

Learning activity: Consider when your organisation may use qualitative research and quantitative research.


What are the main differences between quantitative and qualitative research?


• Sampling techniques• Primary and secondary research• Quantitative and qualitative research.


Chapter 7 (Marketing research and information systems).


Chapter 22 (Research for marketing).

Additionalresources

Case study – Types of researchhttp://www.thetimes100.co.uk/downloads/fsa/fsa_13_full.pdf

Case study – Primary and secondary researchhttp://www.thetimes100.co.uk/case-study--how-market-research-helps-portakabin-to-remain-at-cutting-edge--35-259-1.php

Samplinghttp://www.learnmarketing.net/sampling.htm


N/A


SAQ 14.1 Marketing research should be viewed as part of the marketing decision making toolkit. It describes the process of gathering,collating and analysing relevant market, customer and competitor data to support the development of a marketing strategyand plans. There are many specific types of marketing research, for example:-

• Market research• Product research• Pricing research• Promotion research• Distribution research• Supplier research.

43



SAQ 14.2 Sampling is a key part of the market research process. Important aspects are:

• Ideally marketers would like to ask the opinion of everyone in their target market but this is usually impractical and wouldinvolve excessive costs

• Sampling involves gathering data from a subgroup of respondents• To be effective, those people who are in the sample must have the typical characteristics of those in the identified target

market• Without sampling the results of market research could be meaningless and therefore marketing decisions could be ill-

informed.

SAQ 14.3 • An effective sample must be representative of the target market and so the characteristics of likely target marketcustomers should be assessed

• An effective sample must be sufficient in size to ensure adequate coverage of views and opinions• An appropriate sampling technique should be identified• The sampling process is set out in figure 7.6 (pages 249 – 250) of the recommended study text.

SAQ 14.4 • Primary research is specifically commissioned for a piece of work, whereas secondary research already exists and has beencommissioned for another purpose or for general use

• Primary research can be specifically tailored to address the marketer’s precise needs, whereas secondary research may notbe entirely fit for purpose

• Primary research can be quite expensive to gather, whereas secondary research may be freely available• Primary research is usually bespoke for the organisation and not available to competitors, whereas some secondary

research is available to everyone• Primary research can take time to gather and analyse, whereas secondary research is already available.

SAQ 14.5 • Quantitative research is used to gather numerical and statistical data, for example how many people and at what agestypically by things from at a certain shop; how many customers complaints have been received etc

• Qualitative research is used to gather views and opinions from people, for example how they feel about the service theyreceive; why they shop at a specific outlet; why they have felt it necessary to complain.

44


STUDY SESSION 15

Title The marketing research process




• The importance of setting research objectives• The stages in the marketing research process• The main sources of primary and secondary data• The main collection methods of qualitative and quantitative data.


Compose potential research objectives.

Learning activity: Find out what market research is conducted in your own organisation and the reasons why it does it. If it does not conductresearch, consider the value a market research programme may add.


Explain why it is important to establish clear market research objectives.


Evaluate each of the stages of the marketing research process.

Learning activity: Describe the typical contents of a market research plan.


Make a list of the typical market research questions when measuring customer satisfaction in a restaurant.


Assess the main sources (internal and external) of primary and secondary data.

Learning activity: When undertaking customer research, for example within the context of your own organisation, where might secondary databe available?


When trying to determine service quality levels, who would provide the most appropriate information?


Analyse the main quantitative and qualitative data collection methods.

Learning activity: You work for an organisation which is planning to launch a new range of pasta cooking sauces. Draw up a research planwhich identifies the main quantitative and qualitative methods of obtaining the data that you will use.


You work for a bank and are interested in finding out what consumer customers think about the service they receive. Identifythe methods you would use to determine this.

45




• The marketing research process• Sources of primary and secondary research• Quantitative and qualitative data collection methods.


Chapter 7 (Marketing research and information systems).


Chapter 22 (Research for marketing).

Additionalresources

Case study – Using market researchhttp://www.thetimes100.co.uk/downloads/firstdirect/firstdirect_13_full.pdf

Case study – Using market research in new product developmenthttp://www.thetimes100.co.uk/case-study--how-market-research-supports-new-product-development-process--144-350-1.php


November 2008 – Question 4.


SAQ 15.1 As with any plan, it is essential to set SMART objectives, in order to:-

• Give focus to the activities• Direct resources appropriately• Define the scope of the work• Provide clarity to staff• Be able to determine what has been achieved.

46



SAQ 15.2 There could be many questions for this type of research. Students should consider a combination of quantitative andqualitative questioning. For example, quantitative questions may include:-

• How often do you come here?• What age range are you?• Male or female?• Employment status• How much do you usually spend?• Do you intend to return?• Would you recommend to a friend?

Qualitative questions may include:

• Why did you choose this restaurant?• What did you think of the food?• What did you think of the service?• What could they do to improve?• What did you think about the choice of food on offer?• How did this restaurant compare with others in a similar price range?

SAQ 15.3 There are a number of sources of this type of information:

• Staff – they can be asked about their opinion of the service that they provide• Complaints department, ie monitoring complaints directly received from customers• Customers• Ex-customers.

SAQ 15.4 • Mystery shopping is commonly used by banks, and other organisations, to determine levels of service quality• Review customer complaints records• Leave customer feedback forms/cards in branches to obtain feedback from customers• Questionnaires to customers• Online, street, telephone and postal surveys• Customer focus groups• Obtain feedback from staff about their own views and their anecdotal comments from customers.

47


STUDY SESSION 16

Title Measuring the performance and effectiveness of marketing plans




• The importance of monitoring and measuring the performance of marketing plans• How the effectiveness of marketing plans and activities can be measured• The importance of setting objectives and KPIs• The budgeting in marketing planning.


Analyse the importance of measuring the effectiveness of marketing activities.

Learning activity: You have just been appointed as Marketing Director at the organisation where you work. You are shocked to discover thatthere is no systematic evaluation of marketing plans and activities. Write a short memo to staff outlining the importance ofundertaking such evaluations.


Recommend a process for monitoring and controlling the performance of marketing plans and activities.


Assess likely Key Performance Indicators (KPIs) in marketing.

Learning activity: Find out the marketing KPIs for your own organisation. If there are none, identify some KPIs which would be appropriate.


Propose and explain likely marketing KPIs.


Evaluate the role of budgeting in marketing planning.

Learning activity: Discover what the marketing budget is for your own organisation and examine how it is applied across the range of marketingactivities. If you are unable to access this information, prepare your own list of marketing activities and give an indication oftheir respective weightings in terms of likely expenditure.


Explain the role and uses of budgeting in marketing planning.


• SMART objectives• KPIs.

48


Title Measuring the performance and effectiveness of marketing plans


Chapter 21 (Managing marketing implementation, organization and control); Pages 801 – 805.


Pages 290 – 291; 309 – 310; 420 - 421.

Additionalresources

Case study – KPIshttp://www.thetimes100.co.uk/downloads/corus/corus_13_full.pdf

Marketing controlhttp://www.marketingteacher.com/Lessons/lesson_control.htm

Balanced business scorecardhttp://www.marketingteacher.com/Lessons/lesson_balanced_scorecard.htm

Measuring performance and KPIshttp://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=1079681470


November 2008 – Question 5.


SAQ 16.1 A typical marketing control process involves the following stages:

• Setting objectives• Determining performance standards and measurements• Compare actual performance against standards• Take corrective action as appropriate• Continue to monitor.

Key elements are – objectives, planned activities (schedule), budgets (planned income, expenditure).

Typical measures might include:

• Sales targets• Income generated• New business acquired• Customer satisfaction• Performance against budgets• Brand recognition• Leads generated.

49



SAQ 16.2 KPIs (Key Performance Indicators) - provide a series of measures against which senior management and external stakeholderscan judge the performance of a business.

SAQ 16.3 Budgeting plays a key role in marketing planning. Organisations have limited resources and the aim of marketing is to utilisethese scarce resources as effectively as possible. A budget will be used as part of the monitoring and control process and willset financial measurements within which marketing has committed to operate. Budgets should be reviewed on a regularbasis (most commonly each month) and variations investigated. The budget should also be regularly monitored againstchanges in the organisation’s environments to ensure that the forecast remains valid, given that changes may have takenplace beyond the organisation’s control.

50


STUDY SESSION 17

Title Managing stakeholders


• Analyse the value of developing long-term customer relationships and apply techniques which build customer loyalty andsatisfaction



• The importance of identifying and managing stakeholders• Understanding and meeting stakeholder needs and expectations• The role of communications in stakeholder management• The contribution of purchasing in managing stakeholders• Internal communications techniques.


Identify an organisation’s stakeholders.

Learning activity: Make a list of the people who have a ‘stake’ in the organisation where you work, or have worked.


Explain the influence of stakeholders on an organisation’s strategies and activities.


Evaluate the different needs and objectives of different stakeholder groups.

Learning activity: From the stakeholders you have identified in learning activity 17.1, consider how the organisation attempts to meet theirneeds.


Assess the likely objectives of the key stakeholder groups.


Explain the role and importance of communications in stakeholder management.

Learning activity: From the stakeholders you have identified in 17.1, consider how the organisation can communicate with them.


For your own organisation, consider the methods adopted to communicate with key stakeholders.


Analyse purchasing’s contribution to stakeholder management.

Learning activity: Where you work, or have worked, what involvement has purchasing (or purchasing activities) had on stakeholders?


Explore the role of purchasing activities in helping the organisation to achieve stakeholder objectives.

51


Title Managing stakeholders


Describe the main internal communications methods.

Learning activity: Make a list of the internal communications methods (and their effectiveness) used within the organisation where you work, orhave worked.


Consider why internal communications is such an important function within large organisations.


• Stakeholder analysis• Internal communications techniques.


Chapter 6 (Understanding marketing ethics and corporate social responsibility): Pages 183 – 197.Chapter 21 (Managing marketing implementation, organization and control): Pages 786 – 795.


Chapter 3 (The marketing environment); Pages 34 - 35.

Additionalresources

Case study – Stakeholdershttp://www.thetimes100.co.uk/case-study--balancing-stakeholder-needs--76-352-1.php

Case study – Stakeholdershttp://www.thetimes100.co.uk/case-study--stakeholders-recycling-re-use--41-304-1.php

Stakeholdershttp://www.learnmarketing.net/microenvironment.htm

Managing and analysing stakeholdershttp://www.mindtools.com/pages/article/newPPM_07.htm


N/A

52




SAQ 17.1 Stakeholders can have a significant influence on an organisation’s strategies and activities, for example:

• Owners/shareholders – determine strategy, set objectives, devise plans• Finance providers – can influence activities so that financial covenants are met• Customers – determine product/service offerings, determine the marketing mix• Staff – provide input into the development of plans and ultimately carry out plans• Competitors – competitor activities are, for most organisations, a key consideration when devising strategy and executing

plans• Suppliers – the availability of suppliers and the outcome of negotiations with them will influence product design, pricing,

distribution• Government – influence strategy through legislation, regulation and taxation • Lobby/activist groups – can influence strategy in terms of the potential PR impact on the organisation in the event of ‘non

compliance’ with their views• The media – can have a significant impact on the perception of the organisation and its brand, and therefore, ultimately, its

income/profitability.

SAQ 17.2 Likely objectives of stakeholders:

• Owners/shareholders – profit/return• Finance providers – interest and repayments• Customers – value for money, excellent service, brand association• Staff – working for a ‘world class’ employer, fair treatment, respect, remuneration• Competitors – will seek to maintain their own sources of advantage• Suppliers – continuity of business, certainty of payment, profit • Government – compliance with the law and regulations, collection and payment of taxes • Lobby/activist groups – influencing the organisation’s strategy and activities to meet their views• The media – to generate sufficient ‘media-worthy’ news items.

SAQ 17.3 Answers will depend on the size and nature of the organisation and the stakeholders involved. Students should take the listof stakeholders used in SAQs 17.1 and 17.2 and list, against each, how their own organisation communicates with eachappropriate stakeholder group.

SAQ 17.4 Purchasing activities can contribute towards the achievement of stakeholder objectives in a number of ways, including:-

• Owners/shareholders – contribution to strategy, cost reduction, contribution to profit• Finance providers – contribution to profit, negotiate terms with suppliers to meet cash flow requirements• Customers – improved products, delivery times, stock management, intermediaries (selection and management)• Staff – more professional procurement activity, involvement of staff in supply chain• Suppliers – selection, management and ongoing development of suppliers• Government – compliance with legal and regulatory aspects• Lobby/activist groups – development of procurement policies and compliance• The media – raising the profile of procurement, fair treatment of suppliers, working with small businesses.

53



SAQ 17.5 Internal communications are critical to success in large organisations for a number of reasons, including:-

• Keeping staff informed about key issues, eg policies, procedures, new products• Engagement• Motivation• Keeping staff aware about progress against objectives• Encourage cross-functional collaboration• Performance management• Identify opportunities for improvement• Improve productivity• Provide a forum for questions and feedback• Generate ideas for improvements and new products.

54


STUDY SESSION 18

Title Identifying and managing prospects


Analyse the value of developing long-term customer relationships and apply techniques which build customer loyalty andsatisfaction.


• The importance and meaning of ‘prospects’• The meaning and measurement of ‘market share’• How to identify and ‘qualify’ prospects• Managing relationships with prospects• Marketing activities used to build relationships with prospects.


Define ‘prospects’.

Learning activity: Draw up a profile of the typical prospects for your own organisation, or one with which you are familiar.


Explain the difference between ‘prospects’ and ‘customers’.


Examine the role of prospects in building market share.

Learning activity: Discover what market share your own organisation holds in its chosen markets. Does your organisation plan to grow its sharein these markets? If you cannot find out, consider why growing market share could be important.


Explain how managing prospects helps build market share.


Assess how relationships with prospects can be managed.

Learning activity: Consider how your organisation, or somewhere you have worked, builds relationships with new suppliers.


Explain how relationships with prospects can be managed and developed over time.


Describe the marketing activities which can be used to target prospects.

Learning activity: Consider marketing materials that you have received from companies with which you have no relationship and how effectivethese have been.


Select an organisation from a market with which you are familiar and consider how it uses the promotional mix to attract andbuild relationships with prospects.

55




• Prospects• Market share.


Chapter 20 (Competitive marketing strategy).


Chapter 19 (Selling).

Additionalresources

Case study – Growing market sharehttp://www.thetimes100.co.uk/downloads/asos/asos_13_full.pdf

Ladder of customer loyaltyhttp://www.learnmarketing.net/ladder.htm

Prospectinghttp://www.marketingteacher.com/Lessons/lesson_personal_selling.htm


Notes on self-assessment questions (SAQ).

SAQ 18.1 The ladder of customer loyalty (see additional resources above) portrays the ‘journey’ that people and organisations within anidentified target market will take. When an organisation analyses its chosen target market, it will first determine itsmaximum size; this will include all potential customers. It must then decide which, if any, to eliminate from its marketingactivities. Those that it wishes to include will be treated as ‘prospects’, ie potential future customers. Further analysis mayreveal that ‘prospects’ are not suitable or, indeed, they may decide to buy from a competitor, so not all prospects move on tobecome customers. Identifying and managing prospects (‘prospecting’) is critical to achieving market share growth.

SAQ 18.2 Achieving market share growth is dependent on two key aspects. Firstly, retaining existing customer relationships andsecondly acquiring new customers. Prospecting is an important part of new customer acquisition and provides a future‘pipeline’ of new blood for the organisation.

SAQ 18.3 Relationships with prospects need to be developed and nurtured over time, in the same way as relationships with customers.In business-to-business markets, in particular, the role of people in the process of managing relationships with prospects willbe key. In such markets, for a prospect to become a customer may be a significant step and a ‘leap of faith’ from theirperspective to switch suppliers. Very often, the prospect may operate ‘dual running’ in tandem with the existing supplier untilconfidence and trust have been built up and maintained over a period of time. In consumer markets the decision to switchmay be less significant and could be more heavily influenced by branding and other marketing activities. The use of thepromotional mix will play a key role in both consumer and business-to-business marketing to prospects (see SAQ 18.4 below).

56



SAQ 18.4 The answer will depend very much on the type of organisation chosen as the example and the nature of the industry.Students should identify the elements of the promotional mix that it uses and determine the impact that each will have on theviews of prospects. The main elements of the promotional mix are:-

• Personal selling• Advertising• Direct marketing• Sales promotions• Public relations• Sponsorship• Conferences/exhibitions• Online.

57


STUDY SESSION 19

Title Managing customer relationships




• Relationship versus transaction marketing• Building and managing long term customer relationships• The value to the organisation of customer relationships• CRM and the CRM process.


Evaluate relationship and transaction marketing.

Learning activity: Make a list of ten organisations that you deal with. Categorise the relationship you have with them as either transactional orrelationship.


Outline the differences between relationship and transaction marketing.


Assess the techniques used in building and managing long-term customer relationships.

Learning activity: You have been given responsibility for managing and developing relationships with suppliers/customers. Draw up a briefingpaper for your Managing Director which sets out the techniques that can be used to improve, build and manage suchrelationships.


In services marketing, explain how the marketing mix can be used to build and maintain customer relationships.


Explain Customer Relationship Marketing (CRM).

Learning activity: Your Managing Director has received the paper which you produced for 19.2 and is interested in considering theimplementation of a new CRM system across the organisation. She asks you to write a list of organisational benefits whichcould be achieved through the implementation of such a system.


Consider how your organisation, or one with which you are familiar, defines a ‘customer’ and manages customer relationships.


Analyse the stages of the CRM process.

Learning activity: Describe the importance of data and its accuracy in CRM.


Outline the stages of the CRM process.

58


Title Managing customer relationships


Describe the challenges and benefits of implementing CRM within an organisation.

Learning activity: Draw up a list of the benefits to the organisation and its customers of CRM.


What are the key challenges that are commonly encountered by organisations when implementing CRM?


• Relationship versus transaction marketing• CRM (Customer Relationship Marketing).


Chapter 5 (Understanding organizational buying behaviour): Pages 161 – 168.Chapter 22 (Services marketing); Pages 826 – 833.Chapter 15 (Direct marketing); Pages 554 – 559.Case 29 (page 578).Case 30 (page 583).


Chapter 12 (Branding and building relationships with external customers)

Additionalresources

N/A


May 2009 – Question 5.November 2007 – Question 4.


SAQ 19.1 Relationship and transaction marketing are different philosophical approaches to managing and maintaining contact withcustomers. Transactional relationships are very much short term and cost/price driven. There is no (or little) loyalty betweencustomer and supplier and only a limited and relatively infrequent flow of communication. In relationship marketing theemphasis is much more on developing a mutually beneficial and longer term contact programme. Pricing is more focused on‘life time value’ and there is a far greater level of loyalty, openness and trust between buyer and supplier.

59



SAQ 19.2 In services marketing, the marketing mix comprises:-

• Product• Price• Place• Promotion• Process• People• Physical evidence.

Each element of the mix can be tailored to enhance relationships with existing customers, eg:-

• Product – the products themselves can be continually enhanced and improved to add more value from the customer’sperspective

• rice – in some markets, pricing will be adjusted to reflect the value of customer relationships and the anticipated value ofthe life of the relationship

• Place – new channels can be added to enhance customer satisfaction and choice• Promotion – most elements of the promotional mix can be adapted and used to communicate with the customer and

enhance the perceived value of the brand and ongoing relationship• Process – the process will play a key role in determining customer satisfaction levels and must enable the customer easy

access and interaction with the supplier• People – arguably the key differentiator in services marketing; staff must be well trained and customer-focused• Physical evidence – physical evidence characteristics will be a constant reminder to customers of the value of the

relationship and will reinforce brand values.

SAQ 19.3 The answer will depend on the type of business and sector. Many organisations have different ‘tiers’ of customers, usuallydependent on the level of business (or future income potential). For larger, and more ‘valuable’ relationships, organisationsmay have bespoke one-on-one marketing/relationship plans with a senior manager (or executive) with overall responsibilityfor managing the relationship. Communications play a key role in managing customer relationships (see promotional mix insession 11).

60



SAQ 19.4 CRM is a continuous process with four distinct phases:

• Phase one is analysing customer data. Data may be gathered from any part of the organisation (as long as staff understandits significance and actually store it)

• Phase two is marketing and communications planning - developing a plan involving the whole marketing mix, to directlymeet the identified needs of the customer

• Phase three is interacting with customers. It is about making sure that customers understand what’s on offer throughcommunications that are targeted and timely

• Phase four is further data gathering and analysis of the data generated at phase three.

CRM is a cycle. As soon as customer information is available, it is out of date. Continuous analysis is a must if a company is tokeep abreast of changing customer needs and wants. By following this process, CRM helps an organisation to develop betterlevels of customer loyalty.

SAQ 19.5 ‘There are a number of challenges:

• CRM systems can be very expensive to buy and integrate with existing systems• Successful CRM implementation is dependent on integration with other/existing systems• Customer data needs to be acquired• Information must be kept up to date• Implementation is as much a cultural issue as technological• Staff must be encouraged to use the system.

61


STUDY SESSION 20

Title Customer satisfaction




• Define ‘customer loyalty’• The importance of customer loyalty• How customer loyalty can be built and maintained• How customer satisfaction can be defined and measured.


Define ‘loyalty’.

Learning activity: Consider organisations that you buy from (personally) that you feel loyal to and the reasons why this loyalty exists.


Define, from a marketing perspective, ‘customer loyalty’.


Assess the benefits to the organisation of achieving high levels of customer loyalty.

Learning activity: Identify three successful marketing organisations and assess the benefits that they achieve through customer loyalty.


What are the key organisational benefits of establishing high levels of loyalty with customers.


Describe how customer loyalty can be achieved.

Learning activity: Using the three organisations which you identified in 20.2, consider how they have achieved customer loyalty.


Explain the use of the marketing mix in achieving customer loyalty.


Analyse what constitutes ‘customer satisfaction’.

Learning activity: From your own perspective, what issues influenced whether or not you were satisfied with a service that you haveexperienced?


For your own organisation, or one with which you are familiar, identify the key factors that commonly lead to customersatisfaction in services.


Explain how customer satisfaction can be measured.

Learning activity: How does your organisation, or one where you have worked, measure customer satisfaction?


Write a short report for your own organisation, or one with which you are familiar, that identifies how service standardsshould be set and performance measured.

62


STUDY SESSION 20



• SERVQUAL• Ladder of customer loyalty.


Chapter 21 (Managing marketing implementation, organization and control); Pages 802 – 804.Chapter 22 (Services marketing); Pages 833 – 838.


Additionalresources

Case study – Customer servicehttp://www.thetimes100.co.uk/case-study--the-importance-excellent-customer-service--35-235-1.php

Ladder of customer loyaltyhttp://www.learnmarketing.net/ladder.htm


November 2008 – Question 4.November 2007 – Question 4.May 2007 – Question 2.


SAQ 20.1 The ladder of customer loyalty (see additional resources above) sets out the path that customers follow based on theirrelationship with an organisation. The higher up the ladder, the more loyal they become, reaching, ultimately, the level ofadvocates. Customers at this level will, effectively, market the organisation by telling other people how good it is.

SAQ 20.2 Building customer loyalty is a key goal of most organisations. The benefits can be significant, including:

• Loyalty leads to better customer retention rates, which helps market share growth.• Loyal customers will buy more products (cross-selling and up-selling)• Loyal customers are less likely to complain (more tolerant of minor mistakes and errors)• Loyal customers will provide feedback to the organisation and are more likely to participate in focus groups etc.• It is reputed to be around ten times more expensive to recruit new customers than retain existing ones (marketing costs)• Loyal customers will generate referral business• Loyal customers (when they are advocates) will tell other people about how good the organisation is.

63



SAQ 20.3 The marketing mix plays a key role in building and maintaining customer loyalty:

• Product – products must be adapted to meet the continually changing needs of customers; new products can be developedand ‘cross-sold’ to loyal customers providing further ‘lock-in’ to the organisation

• Pricing – concessions/discounts may be offered to loyal customers• Promotion – regular communications can lead to customer loyalty, but must be relevant; promotional offers may also lead

to improved customer loyalty• Place – ensuring accessibility to suit customer needs is key to building customer loyalty.

In service organisations people, process and physical evidence will also apply.

Loyalty schemes are commonly used today to build and develop relationships with customers. They can span a range ofelements of the marketing mix, as well as linking in with the organisation’s CRM system, providing important informationabout customer spending patterns and behaviour.

SAQ 20.4 Satisfaction means different things to different customer types. The SERVQUAL model has been developed to aid thedetermination and measurement of service quality. It is based on five key criteria:

• Reliability• Responsiveness• Courtesy• Competence• Tangibles.

SAQ 20.5 Typically, service standards are set by ascertaining the appropriate level sought by customers and/or benchmarking againstthe competition. Performance against standards can be measured in a number of ways, including:-

• Monitoring customer complaints• Mystery shopping• Customer satisfaction survey.

Easton House, Easton on the Hill, Stamford, Lincolnshire PE9 3NZ, UKTel +44 (0)1780 756777 Fax +44 (0)1780 751610 Email [email protected] Webwww.cips.org B

K01

/01/

07

study supplement - cips - leading global excellence in procurement

Documents