I have been asked to produce a marketing strategy for an existing or new product on the market in the U.K. The strategy will be based on the four P's, Price, Place, Promotion and Product.
Contents Page
Terms of Reference 2
2 Procedure 2
2.1 Text 2
2.2 Electronics 2
2.3 Organisations 2
2.4 People 2
3 Findings 2
3.1 The Principles of Marketing 3
3.1.1 Understanding customers needs 3
3.1.2 Marketing aims and objectives 3
3.1.2.1 Objectives 4
3.1.3 What marketing has to achieve to be successful 4
3.1.4 Marketing principles related to my product 5
3.2 Primary and Secondary Marketing Information 6
3.2.1 Analysis of research methods 6
3.2.1.1 Implementing market research 7
3.2.1.2 Primary Research Methods 8
3.2.1.3 Secondary Research Methods 11
3.2.2 Secondary Research 12
3.2.2.1 Evaluating Research 14
3.2.3 Primary Research 14
3.2.3.1 Evaluation of Results 21
3.3 Methods of analysing marketing opportunities 21
3.3.1 PESTEL analysis 21
3.3.2 SWOT analysis 24
3.4 Developing marketing strategies 25
3.4.1 Marketing Models 25
3.4.1.1 Ansoff Matrix 25
3.4.1.2 The Product Lifecycle 27
3.4.1.3 Boston Matrix 29
3.5 Creating a strategy that meet customer needs 30
3.6 Marketing Strategy 31
3.6.1 Targets 31
3.6.2 Short Term Goals 31
3.6.3 Long Term Goals 31
3.6.4 The Four P's 31
3.6.4.1 The price part of the 4P's 31
3.6.4.2 The Product part of the four P's 35
3.6.5 Promotions 38
3.6.5.1 Branding 38
3.6.5.2 Advertising 39
3.6.5.2.1 Why do firms advertise? 39
3.6.5.3 The Place part of the four P's 40
4 Conclusion 40
4.1 How is my marketing strategy based upon the principles of marketing 40
4.2 How my market research affected my choice of marketing strategy 41
4.3 How external influences affected my choice of marketing strategy 41
5 Evaluation 41
5.1 How likely is it that my strategy will succeed? 41
Terms of Reference
I have been asked to produce a marketing strategy for an existing or new product on the market in the U.K. The strategy will be based on the four P's, Price, Place, Promotion and Product. I am going to use primary and secondary research to enhance my report. I will analyse my strategies to see if they are appropriate for the consumers needs and wants.
2 Procedure
I am going to use the following sources for the my report.
2.1 Text
When I am writing this report I will use textbooks, newspapers and magazines. Theory books are going to be a lot of use in this report as they will have a lot of information which will prove to be of great use.
2.2 Electronics
The internet is going to be a lot of use in this report as I will be able to access and use secondary research from the internet. I will also be able to access my products website which has a lot of information about their past and what they are doing to the company to try and expand and increase their market share.
2.3 Organisations
When I am doing this report I will make visits, look at the annual report of the business and try to analyse the company as a whole.
2.4 People
I might make a get in contact with the business or even make a visit. This will enable me to interview some of the customers and staff.
3 Findings
I have chosen to produce my report on a car. I have chosen the Mercedes Benz Estate, the E Class. This car has recently been altered and is now being sold in the UK with prices from £27,380.
3.1 The Principles of Marketing
A dictionary definition of marketing is 'the business of selling goods including advertising, packaging, etc.' The etc is important because it is what marketing is about; the identification and satisfaction of customers' needs and wants. Advertising and packaging are only a small part of this process.
The Chartered Institute of Marketing defines marketing as 'the management process responsible for identifying, anticipating and satisfying customer requirements profitably'.
Marketing is the management processes of identifying, anticipating and satisfying the needs of actual or potential customers, whether for profit or not.
3.1.1 Understanding customers needs
When marketing a product, organisations need to be able to identify the needs of both existing and potential customers. It is also necessary to be able to anticipate future trends and developments which could influence customers' demands. For example an organisation holding furniture would need to increase it stocks if there was an upturn in the property market.
Marketing involves constantly reviewing all aspects of a product or a service in order to ensure that it continues to satisfy potential customers wants. This involves satisfying the four P's;
* Having the right product
* At the right price
* At the right time
* At the right place
Successful businesses put the customer first, they are customer orientated; it responds to customers demands for new products. The business is dynamic and responds quickly to changes in the market.
3.1.2 Marketing aims and objectives
An example of an aim is to 'increase sales'; a marketing objective could be to 'increase sales by 20% over the next six years'. The difference is that an objective is quantified and precise, it must also show a quantified time period. An objective should be S.M.A.R.T. (specific, measurable, achievable, realistic and timed). Targets should motivate staff and be the basis for planning and decision making.
Every business should have its own objectives. They will depend on the demands of existing and potential customers. Here are a few examples of business objectives that relate to customers' demands; Lloyds TSB would want to sell more financial products, such as mortgages and loans. A college might wish to attract more adults onto higher GNVQ level courses.
When we look at business we see several common objectives.
3.1.2.1 Objectives
* To increase sales revenue (for example, by 21 percent over two years).
* To increase market share (for example, by 4 percent over 10 years). Market share is the proportion of the market served by a particular business. Being 'Number One' means that you can use economies of scale
* To maintain/improve product and business image. Companies spend millions on promoting and protecting image.
* To give quality assurance. Total Quality Assurance (TQA) is now recognised as vital if a business wants to increase its sales and meet it's customers' demands. Quality assurance began as a method of controlling production. Today these are applied to all aspects of the business and marketing is no exception.
The first aim of a business should be to provide a 'quality service' and a 'quality good'. ISO 9000 is the international standard. In order to achieve TQM the business will have to make sure that:
* Management and workforce are committed and focused on quality
* Everything the business does is for the customer
* Everyone is seen and treated as a customer
* The business should know the customers' problems and needs. This means having a customer care service where they have the principles of once a customer, always a customer.
Marketing objectives provide a vision of what the business intends to achieve. They are important to its survival.
3.1.3 What marketing has to achieve to be successful
Businesses have to create and keep customers. This means businesses have to identify and understand the needs of customers. This means they have to create quality products, at the right price and in the perfect condition.
Keeping ahead of the competition is very important to becoming a successful company. Many markets are competitive businesses have a lot of competition, businesses have to continually improve their products and services.
Communication within the business is vital. Communication with customers to satisfy their expectations is important if you wish to continue supplying them. This is probably more important than anything else in the marketing department. As the continually following up the customer, making sure everything that the company does is of a high standard and how we can do better.
3.1.4 Marketing principles related to my product
A few years ago Mercedes Benz altered their marketing strategy for their E-Class Estate. They altered the product part of the 4 P's. They have made their product more luxurious and more desirable. Mercedes have their 'MobiloLife', which is a round the clock emergency assistance scheme which allows drivers to call for immediate technical assistance, any time, anywhere in Europe. This will appeal to many potential customers.
Mercedes have also altered the promotion part of the 4P's. They advertise the car in magazines which a potential customer would be reading. They advertise in a variety of magazines, which have a many different audiences. For example they advertise in Country Life which would be read by the older generation and Vogue which is a magazine which is read by the younger, fashionable, affluent person.
I feel that they have changed the target market. Ten years ago you would only see the older generation driving a Mercedes estate. But over the past few years Mercedes have changed their target group. They advertise in younger people's magazines and have changed the product so it will appeal to the younger generation as well as the older generation.
Mercedes have a slogan 'Committed to you. For the lifetime of your car.' Mercedes a promoting themselves as a caring organisation, which has a good after sale assistance.
When marketing my product I intend to identify customers' needs wants. I will carry out extensive research into what existing and potential customers expect from Mercedes. I will be trying to satisfy the four P's.
Mercedes have not altered to price or place of the 4P's. It would be very hard for Mercedes to alter their 'place', as they sell their cars from Mercedes dealerships.
Mercedes have a reputable image I will try to continue this. I will review customer service polices.
3.2 Primary and Secondary Marketing Information
3.2.1 Analysis of research methods
Why carry out market research?
Market research enables companies to anticipate what customers want. When companies launch a new product, they are submitting themselves to a lot of risk. If the new product or services fails they will have lost the capital that they put into developing and producing the new good. This can be millions of pounds when you are looking at larger companies. For example with Mercedes when they bring out a new car, they spend millions of pounds, designing, testing and developing it. A good reputation or image can also be lost if a company produces a product that is not popular. To minimise these risk companies invest in market research. Market research is not always viable if the cost of producing the wrong product is low.#
Market research can be very costly. Nevertheless, costs vary, according to the sample size and research method used. Time is another factor business take into account when they are researching a new product. If a company takes to long researching and developing a product, a rival company may launch a product before they do, causing losses. Different research methods take varying amounts of time to conduct.
If research is not up to date then it become invalid. Secondary research isn't always suitable as it has to be adapted to be suitable for the content it is being used for, because when it was first researched, it was researched for another cause.
Primary research is carried out for the first time to collect first hand or primary data from actual or future users of the product. Data is often collected from the street or work place.
The data is collected for a purpose, and will be original. It will be upto date when it is researched. It can be used to provide answers and establish a database.
Business do not always do primary research themselves they often go externally of the business. Using an agency is often cheaper than a company doing the research themselves.
Market research has been defined as, 'systematic problem analysis, model building and fact finding for the purpose of improved decision making in the marketing of a good or a service. To put this simply it means getting the information for identifying the customer's needs and wants and spotting the market opportunities and trends.
For a company to achieve maximum sales, a organisation needs to identify its customers and market the product for these target customers. This process is called allied to market segmentation and means dividing the market into segments. This can be done by age, sex, income, geographical area or lifestyle. Marketing can then by focused on the chosen group of people.
3.2.1.1 Implementing market research
These are the stages that I have identified for carrying out a market research survey
Stage One
Define what information needs to be collected. If you are trying to research into a problem you need to be very sure what the problem is before you commence with any actual research. Decide what market segment is being target for the product, this will enable you to do research with the right group of people.
Stage Two
Plan the investigation. Some of the things that need to be considered before research begins:
* The deadline for completion
* The complexity if the issues (more complex issues take longer to investigate)
* The cost which are involved
* Whether the survey is to be local, regional or national
* The biggest question is whether is can this research be done with the budget given.
Stage Three
Collect the data. A sample will have to be selected.. The type of sample required will depend on the requirements of the investigation
Stage Four
Organise the data. Once the data has been collected it needs to be counted.
Stage Five
Analyse the data. The data needs to be interpreted so that it is in a format that can be used to market the product.
Stage Six
Present the information.
Stage Seven
Make conclusions and recommendations from data that has been collected.
3.2.1.2 Primary Research Methods
There are five basic methods that can be used for collecting information
The choice of method will be determined by many factors. For example, ...
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Stage Four
Organise the data. Once the data has been collected it needs to be counted.
Stage Five
Analyse the data. The data needs to be interpreted so that it is in a format that can be used to market the product.
Stage Six
Present the information.
Stage Seven
Make conclusions and recommendations from data that has been collected.
3.2.1.2 Primary Research Methods
There are five basic methods that can be used for collecting information
The choice of method will be determined by many factors. For example, if a wide area has to be covered then it maybe more appropriate to use postal questionnaires because these are cheaper than interviews.
Types of Interviews
* Structured interviews with closed questions. The interviewer will ask a set number of prepared questions during this formal interview.
* Structured interview with open questions. In this, the interviewee can answer question with longer answers.
* Informal direct interview is where the interviewer will try to guide the interview by asking leading questions.
* Informal, this is where there is a discussion; it may lead in any direction.
The interview with structured closed questions is the quickest and is the easiest to analyse. So it is used the most often.
Focus Groups
A group of five to ten people, who represent consumers, are brought together by a market research company in an informal environment to discuss issues. The main purpose of this is to identify consumers needs, desires and expectations for products on the market. They are used because they are cheap, a few sessions need to be run so a more reliable view is given.
Panels
Panels are set up on a semi-permanent basis. Members are chosen so that they represent views from the population. They do not meet together as there can be hundreds of people involved.
Questionnaires
A questionnaire is a set of questions, which are given to a predetermined number of people. Questionnaires are often used in schools, colleges or at local shopping centres. They can be completed by the respondent or the interviewer can write down the answer as they are given orally.
There are many different types of questions that can be asked;
* Dichotomous, which are close ended questions with only two possible answers. For example yes or no.
* Multiple choice, they are also closed ended questions, but they have more than one possible answer.
* Open ended questions; these are structured so that any answer can be given. These questions are not good when a large number of questionnaires are being sent out, because every answer will be different. It is very had to quantify answers to a question like this.
* Scaled questions are questions where the respondent can answer from a range of fixed answers. For example on a scale of 1 to 10 how good is your present car that you drive?
Sampling
A sample survey is a representative of something. For example it should represent the whole population. The purpose of sampling is to find out and make estimates about the population from the sample.
Test Marketing
Test marketing is usually used when companies do not have sufficient time or money to do market research. Manufactures will often test the reaction of consumers to the new product by launching the product in a small area. The data which is obtained from this will enable the company of the product is worthy of a nationwide launch. The test area should represent the nation; it should have a variety of different people. I.e. they should have varying ages, incomes and lifestyles etc.
Suitability of market research methods
Interviews
Interviews would not be appropriate for my product as the they are very expensive, they need trained interviewers, they take along time to conduct.
Focus Groups
Focus groups would not be appropriate as they attract the same group of people who may only give answers which researchers want, I would also not have enough time for this
Panels
Panel members need to be rotated to prevent answers to be repeated.
Questionnaires
I will use questionnaires in my market research.
Advantages of Questionnaires
* Costs can be kept to a minimum
* People have time to respond
* Any area can be covered
* People may be more truthful if questionnaires are anonymous.
Disadvantages of Questionnaires
* There can be a very low response rate
* A large number of questionnaires need to be sent out as there is a low response rate
* Questionnaires cannot be explained
Sampling
Sampling may not be appropriate for my product will not be appropriate as I will not be able to get the people who will represent the UK population.
Test Marketing
Test marketing will not be appropriate for my product as I will not be able to able to actually launch the product because my product cost £000's.
3.2.1.3 Secondary Research Methods
Secondary research is data that has been previously found, it would have been collected by others for their own purpose. Great care needs to be taken when selecting what data is suitable, because the data will not be presented for your purpose.
Secondary research is very easy to get hold of. Most of it is free, expect for some specialised data.
Marketing Databases
This is a collection of related marketing data, on past, current and potential customers. Most organisations hold databases like these in a computer where it can be organised and sorted by a computer program.
Customer sales trends for new and existing products
Businesses are able to look at national expenditure figures over the past five years. This allows them to see the trends. Trends are affected by changes in income, unemployment, relative prices and social conditions.
Sales trends and forecasting - using market research database information.
The basis of good planning for all businesses is the accurate forecasting of the potential demand for products. Estimates for the costs cannot be made until this calculation is made.
Time series analysis
A time series analysis shows historical data which can be used to predict future trends.
Summarising
When business look at marketing research they often summarise the data, as it can often be difficult to understand in its raw form. Average figures are usually used for these. When an average figure is used extreme values tend to be ignored.
Qualitive methods of forecasting
Client and customer surveys are a method where businesses survey their buyers to find out what they expect to be ordering over the next 12 to 18 months. This does not always work as buyers do not always know what they will want in the future.
The Delphi method involves asking a group of experts to look into the future to predict major trends. The experts are often expensive.
When ever research is collected the management team will analyse it. Professional knowledge is can still be better than computers.
Problems with forecasting
The accuracy of the data depends on many factors:
* The amount of data a business has will determine how accurate the research will be. The more research a business has the more reliable it will be.
* Will there be any significant changes in the social environment.
* Is the data biased
* Will the business continue to pursue the same objectives
3.2.2 Secondary Research
I am going to compile information about rival products from other companies. I am going to compare the lowest specification models across the range. This will enable me to see what comes with the car as standard, without paying extra for it.
Mercedes Benz E200 Class Estate
BMW 5 Series Touring
Audi A6 Avant Estate
Price
£27380
£25495
£22,525
Engine (cc)
800
2171
986
Transmission
5 Speed Manual
5 Speed Manual
5 Speed Manual
CO2 Figure (g/km)
218 (29%)
230 (32%)
220 (30%)
Safety Features
Head Airbag
Door Reinforcements
Active Light System
ABS
Alarm
Power Steering
SBC Braking System
Head Airbag
Door Reinforcements
Restraints
ABS
Alarm
Power Steering
ASR Traction
Airbags
Remote control central locking
Side impact protection
MPG
31.0
29.5
33.2
Exterior
Green tinted glass
Body coloured bumpers
Remote control key
Automatic tailgate
Body coloured bumpers
Remote control key
Tinted Glass
Body Coloured Bumpers
Roof Rails
Interior
Headlamps with clear lenses
Eucalyptus fine wood trim
Instrument cluster with front surround in black, dials in black
Load compartment cover
Stowage box
Automatically extending load bay floor
CD player
Air Conditioning
Digital Clock
Outside temp. display
Leather Seats
Climate Control
Electric Seats
3.2.2.1 Evaluating Research
I have collected data about two other rival products which are competing against my product. They have all been priced differently, Mercedes and BMW have priced their cars higher than Audi have, mainly because they have a better image. If you are seen driving a Merced or a BMW people look, and are impressed, because of the badge on the front of the car. The Audi is equally good or it may even be superior to the other two, but it does not have the badge on the front, which has a good image.
The Audi has many extras that the other cars does not have, such as; leather seats and climate control. BMW and Mercedes charge extra for these two. This makes the cost of buying a Mercedes or a BMW even greater.
All three of these cars are targeted for business drivers, who drive long miles. They would be concerned amount how many miles to the gallon the car would do. Looking at this data we can see that the Audi has the best MPG. Business drivers would also be concerned about the CO2 figure, as car owners are now taxed on this.
The Mercedes and BMW are able to charge more for their cars as a good image comes with them.
The accuracy of this research should be accurate. It is up to date, so the likelihood of it being correct is high. The data could be biased as it has been produced by the company selling the car. I took care to only take data that is not biased.
3.2.3 Primary Research
Market research will play a major part in my analysis of the demands of consumers. I am going to use a questionnaire so I will be able to quantify the demand for my product.
I decided that I would use a questionnaire for my primary research. I then had to decided what sampling I was going to use. The larger the sample group the more reliable the results will be. Due to time restrictions I had only have a very small sample size. This may affect the quality of my results. However large my sample size was, it will still not accurately show the whole population. I used the largest sample size I could possibly use with the time I had available. I thought that an appropriate sample size will be 200. Although my sample size is 200 people I am was unlike to have 200 questionnaires returned.
I used a stratified sample. I only interviewed people over 17. I feel this is necessary and appropriate, because people who are under the age of seventeen years old are unable to drive, so they are not in a position to be buying a car. So they are inappropriate for my sample.
My questionnaire used mainly multiple choice questions; this offers a wide variety of answer but enables results to be calculated quickly.
I have objectives that I wish to for fill;
Objective one
I intend to see if the product part of the four P's is correct.
Objective Two
I will also find out if the price part of four P's is correct with the current product.
Objective Three
I will also find out if the promotion part of four P's is correct with the current product.
The questions that I used are below with a description about them, telling you why I used them.
. Who are the manufacturers of the car you currently drive? (Please tick the appropriate box)
BMW ( Audi (
Mercedes ( Peugeot (
Renault ( Skoda (
Ford ( Vauxhall (
Other (please specify)......................................................
This question will help me to identify how many people currently drive a Mercedes and together with question three will enable me are pleased with their Mercedes. This will enable me to satisfy objective one. I have used a closed question with a limited number of responses.
2. Did you buy your present car when it was new? (Please tick the appropriate box)
Yes (
No (
This will question will enable me to know how a customer bought their car. This will then allow me identify the things that detract a second hand car buyer from buying a new car.
3. What car do you intend to replace your present car with? (Please tick the appropriate box)
BMW ( Audi (
Mercedes ( Other (
This question will enable me to for fill objective one. If question one was answered Mercedes, and this question is not answered Mercedes then we will know that the car owner is not satisfied with his or her car. We may need to re-design the car.
4. If you were to purchase a new car would you be prepared to pay more money for your car if it was produced by a highly regarded company? For example a BMW or Mercedes. (Please tick the appropriate box)
Yes (
No (
This question will answer my second objective. If people are not prepared to pay more money for a Mercedes then we may need to re-think the pricing of the car.
5. How much do you budget to spend on a car? (Please tick the appropriate box)
Under £7000 (
Up to £12000 (
Up to £20000 (
Up to £30000 (
Up to £40000 (
Over £40000 (
This question is similar to the previous, we are trying to answer the second objective.
6. Which of the following features do you think should come as standard with a new car? (Please tick more than one box)
Air Conditioning (
Climate Control (
CD Player (
Satellite Navigation (
This question has been used so that I am able to see if any promotions are need when the car is sold. For example; Satellite Navigation is free with every car purchased this month. I have also used this question to enable me find out if the product is correct
7. Would you prefer to buy a car which has very little equipment as standard and pay less for it? (Please tick the appropriate box)
Yes (
No (
This question is similar to the previous, it has been used to enable me to identify the demands of potential customers.
My questionnaire has produced the following results; The first graph below shows what cars the respondents currently drive. All people that did not drive where excluded from the results, as they are not the people that are going to be buying a car.
The next graph shows the percentage of people driving various different cars, who bought their cars new.
A graph showing the percentage of people driving various different cars, who bought their cars new
This graph shows that a greater percentage of Mercedes drivers purchase their cars new compared to any other car owner.
The next graph shows the percentage of drivers who are loyal to their current car manufacturer.
A graph showing the percentage of drivers who when they buy their next car will be loyal to their current car manufacturer
This graph shows that 80% of Mercedes drivers are satisfied with the cars and so contented with them that when they replace their current car will buy another Mercedes. This would identify that Mercedes have correctly identified the demands of consumers.
The next graph shows the results from a question which asked, 'if you were to purchase a new car would you be prepared to pay more money for the car if were to be manufactured by a highly regarded company?'. I have analysed the results and I have created a graph that shows of owners of certain types of cars would be prepared to pay for a car manufactured by a highly regarded company.
A graph showing the percentage of drivers of certain cars who are willing to pay extra for a car that has been manufactured by a highly regarded company
This shows that 40% of BMW drivers said that they would not be prepared to pay a little extra money for a car next time they were considering buying a new car if it had been manufactured by a highly regarded company. This could be the result of dissatisfaction for BMW products. BMW could have possibly got the marketing mix wrong.
The following graph shows the percentage of people driving certain cars who are prepared to pay between £30,000 and £40,000 for a new car.
A graph showing the percentage of people driving certain cars who are prepared to pay between £30,000 and £40,000 for a new car
Tese results show the average Mercedes driver budgets more for their new car than any other car owner. This would explain why Mercedes have higher prices than other car companies.
In the next graph I will show the equipment that Mercedes drivers want in their cars.
A graph showing the percentage of Mercedes drivers who wish to have these features as standard on cars.
A significant quantity of Mercedes drivers wish to have many features as standard. This would not increase the cost of the car, as a large percentage of new cars that are bought have these extras installed in their cars anyway. Having these features as standard would make the actual cost of the car more obvious. Some cars are advertised as being very cheap, but when you study the small print you see that the standard equipment is very poor. If more equipment came as standard then this would eliminate this problem.
A graph showing the percentage of people driving certain cars who would prefer car manufactures to reduce the standard equipment in cars so that the cost is reduced
This shows that the Mercedes like to have a lot of equipment in the car as standard. The rest of the market would prefer to have cheaper cars.
3.2.3.1 Evaluation of Results
The data that I have collected may not be particularly accurate as I only have a small sample size. I only have a sample of 125 people, this does is not sufficient to portray the car market as a whole. However big my sample size was it might not represent the whole population.
To ensure that my results are valid I have looked for similar secondary research on the internet. This will prove that my results are correct.
3.3 Methods of analysing marketing opportunities
3.3.1 PESTEL analysis
When a new product is being launched a company needs to analyse the external environment. The first thing that they need to research is whether the market is stable. Stable conditions exist whether there are little or no changes taking place in the market. This market is mature and organisations will only need to make minor adjustments to maintain its position. Forecasting is relatively easy.
For a business to be successful it needs to know about its external environment. It needs to know about:
* How the demand is affected by the PESTEL factors
* The marketing opportunities that may exist
* The impact which it has on the market.
PESTEL
P is for political factors
How the product or organisation is affected by the political environment?
Is there a stable political situation? This could be any of the following;
* Is there a democratic government?
* Is there a national election approaching, this may affect the economy, because governments tend to boost the economy prior to an election.
* What political party is in power?
* Do they have any strong views which could effect the business
Political factors that would effect my product are the taxes. Petrol is considered a demerit good by the government, the particular Mercedes that I am looking at has a range of engines which are all large and are not particularly fuel efficient. The tax on fuel is ever increasing, this may have an effect on the demand of my product, as people may be becoming more concerned about the cost of maintaining the car.
The chancellor has recently established a new law which declares that there is tax on the CO2 emissions of cars. As I have previously stated Mercedes have large engines which do not have particularly good CO2 emissions. The demand for my product could be affected by this tax.
E is for economy
Changes in the economy effect both consumers and business. The impact will vary for example a rise in the price in petrol will tend hit old people the hardest, where a rise in interest rates tends to affect people with large mortgages.
Economic influences and consumer spending;
* Retail prices rise when income rises.
* Retail prices rise when population rises.
* Retail prices fall when unemployment rises.
* Retail prices fall when savings rises.
* Retail prices fall when RPI rises.
The economic situation will have an affect on all businesses. But the economic factors will have a greater impact on Mercedes than other industries. This is because the products which Mercedes sell are not essential, people do not need to have a car and they could just as easily buy a car without the image or prestige which the Mercedes carries.
Gross Domestic Product which takes the whole of the UK economy into account and will give you an average wage for a UK per annum. The average wage has increased recently, this has given people more money to spend. This may have increased the demand for a Mercedes as people will have more money and they may be prepared to spend more on a car and buy a Mercedes.
S is for social factors
There are many social and cultural changes that a business needs to be aware of;
* Buying Habits ~ how often do people shop
* Religion ~ do religions have beliefs about not buying certain products
* Education levels ~ 40 percent of people continue into further education, compared to five percent in the 1960's, creating a much more discriminating group of consumers
* Population ~ the size, age and location all have an impact
* Lifestyle ~ a recent lifestyle change is the increased demand for instant ready meals
It has becoming increasingly fashionable to drive cars with an good image. This may have given Mercedes a demand boost. Also people are living lives where they demand a car which is more practical than a BMW coupe. People need larger cars to accommodate children, sports and other activities. People may see a Mercedes Estate as a car which will offer them the practicality they need.
T is for technology
How will the production, storage and the marketing of the product be affected by the ever increasing use of technology. Technology allows businesses to cut costs.
Technological advances have allowed Mercedes to cut cost dramatically. The use of robotics has reduced the amount of labour required to produce cars. Mercedes have to keep up to date with modern machinery otherwise they will fall behind other manufactures as cost will rise.
E is for environmental
Environmental issues are now a major concern for businesses as more and more people are now concerned about the environment. Raw materials are becoming more expensive as they are becoming less available.
L is for legal
Legal rules and regulations can either be an opportunity or a constraint on the organisation. When marketing a product companies are not allowed discriminate of gender or race.
3.3.2 SWOT analysis
SWOT is an acronym for strengths, weaknesses, opportunities and threats. SWOT is a technique for comparing or matching an organisation' internal strengths and weaknesses with the opportunities and threats found in the external environment.
Strengths
* Substantial amounts of capital available
* Ability to make cost reductions
* There are Mercedes dealerships are all around the country
* Global brand recognition
Weaknesses
* Large organisation so changes in the practise of an organisation take along time, also they are slow to react to market changes
* Sales team are only interested in the amount of cars sold, not the profit made.
Opportunities
* The possibility of buying out another car manufacturer
* Include more features in car
Threats
* People becoming more conscious about environment and using public transport
* Consumers real wage decreases so they have less money to buy cars
For Mercedes to continuing its increasing market share they need to market their product heavily. They need to make the consumer feel like it is an essential item to have a Mercedes. Mercedes need to play on the image that they have to increase sales. A pricing strategy is also appropriate. Mercedes have high margins on their cars so they are able to reduce the price of their cars. This will increase the demand for the product.
3.4 Developing marketing strategies
3.4.1 Marketing Models
Now I have collect information about my products external and internal environment I need to asses possible strategies. They are:
* Ansoff matrix
* Product lifecycle
* Boston Matrix
3.4.1.1 Ansoff Matrix
Existing
Markets
Penetration
Existing products in existing markets
Low risk strategy
Product Expansion
New Product in existing market
Medium risk strategy
New
Market Expansion
Existing product in new market
Medium risk strategy
Diversification
New product in a new market
Highest risk strategy
Existing Products New
In the above diagram you can see the horizontal axis which shows the existing and new products. The vertical axis shows the new and existing markets.
Market penetration
For goods or services that are in the market penetration area growth strategies are used where the business focuses on selling existing products into existing markets is used.
Market penetration seeks to achieve three main objectives:
• Increase the market share of current products - this can be achieved by competitive pricing strategies, advertising, sales promotion.
• Become more dominant in a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market harder for competitors to compete.
• Increase usage by existing customers - for example by introducing loyalty schemes
A market penetration marketing strategy is will require much investment in new market research.
Market development
For goods or services that are in the Market development area a growth strategy where the business seeks to sell its existing products into new markets is used..
There are many possible ways of using this strategy, including:
• New geographical markets; for example exporting the product to a new country
• New product packaging
• New distribution channels
• Different pricing policies to attract different customers or create new market segments
Product development
For goods or services that are in the Product development area a growth strategy where a business aims to introduce new products into existing markets is used. This strategy may require the business to develop modified products which can appeal to existing markets.
Diversification
For goods or services that are in the Diversification area a growth strategy where a business markets new products in new markets will be used.
This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience.
For a business to adopt a strategy where they have a new product and new market they must have a clear idea about what it expects to gain from the strategy and an assessment of the risks.
Existing
Markets
Penetration
Product Expansion
New
Market Expansion
Diversification
Existing Products New
The red dot on the ansoff matrix above shows where my product is. The market has not changed much and the product has recently been modified, but only minor changes have been made, it still remains similar to the old Mercedes Estate.
3.4.1.2 The Product Lifecycle
The product lifecycle shows how products go through stages during their life in the market place. The graph often has two lines - one to show the level of profit, and one to show the level of sales: like the one below.
Firms will often try to use extension strategies. These are techniques to try to delay the decline stage of the product life cycle. The maturity stage is a good stage for the company in terms of generating cash. The costs of developing the product and establishing it in the market are paid and it tends to then be at a profitable stage. The longer the company can extend this stage the better it will be for them.
The product life cycle above shows that Mercedes have used extension strategies to extend the life of the product. The sales of Mercedes estates have now reached a stage where they in a state of saturation.
The life cycle is not always beneficial as it cannot predict the future it only shows a record of the past. Also not all products will go through all of the stages. Another disadvantage of the lifecycle is that it does not show a specific time, so you cannot base objectives around the life cycle.
3.4.1.3 Boston Matrix
A Boston matrix is useful as it helps businesses identify possible areas of growth.
If your product is in the problem child it has a low market share in a rapidly growing market. The organisation can either support the product with advertising or drop it.
Stars are products with a high market share in a rapidly growing market. The product should be generating large profits at this time. Heavy marketing is still need to keep the product in its position.
Cash cows have a high market share in a slow growing market, they are often mature markets. A product here should be receiving high profits because it is benefiting from economies of scale.
Dogs have low market share in markets where there is little growth. A dog is usually reaching the end of its product life. Unless the product is expected to grow, there is little point continuing to support it.
There are also many disadvantages of the Boston Matrix, they are;
* It is very difficult to define high and low.
* The model assumes that all businesses want to expand, some small businesses do not.
* The matrix focuses on market share and growth but it ignores other factors which maybe important, such as profit margins.
My product sits where the red dot is on the diagram above. It is situated here because the market for estate cars is growing, more and more people want cars which are more practical and suitable for the many activities which they do. Mercedes do not have the largest market share as there are a company which has prestige and has a reputable image. For the previous reasons my product is situated where it is on the Boston matrix. It shows that the Mercedes E Class estate needs to be rethought, or heavily marketed.
3.5 Creating a strategy that meet customer needs
Now that I have looked at the marketing models I need to create a strategy which suits my product and its potential customers.
The marketing mix refers to the four key parts of a company's marketing policy . The four key parts are often called the 'Four P's' which are:
* Price
* Place
* Promotion
* Product
I am satisfied with the place and part of the 'Four P's'. I am going to create a marketing strategy that will involve the price, promotion and product part of the four p's.
3.6 Marketing Strategy
Now that I have analysed the internal and external strengths and weaknesses of my product I am going to develop a marketing strategy for my product. I will create specific short term and long term goals for my strategy. My strategy will be based around the four P's.
3.6.1 Targets
3.6.2 Short Term Goals
In the short term, I would like the sales of the Mercedes Benz estate to increase. I would like to increase sales. 305,000 E class where sold in the United Kingdom over the 2002-2003 financial period. This is a growth of 26%. I would like to increase the sales of the estate by twenty percent in the next year.
I would also like to increase profits from Mercedes estates by £10 million over the next year.
3.6.3 Long Term Goals
In the long run, I would like the market share for the Mercedes Benz estate to increase. I would like Mercedes to capture market share from other executive estates.
3.6.4 The Four P's
The four P's of marketing are as follows as I have previously explained;
Price
Product
Promotion
Place
3.6.4.1 The price part of the 4P's
Price is the only aspect of the marketing mix that directly affects the revenue; all other aspects involve costs. Therefore, it is extremely important to get the right pricing strategy.
I have created a pricing strategy checklist. I will use this to guide me through the process of pricing my product.
Pricing strategy checklist
How competitive is the market?
How price sensitive is the market?
What is the existing range of prices?
Should prices be below, the same as, or above competitors?
Should this be a permanent condition?
Will this price achieve the business objectives?
Will the proposed price cover costs?
How will the other components of the marketing mix be used?
What image is the business trying to achieve?
What are the upper and lower limits?
How has the Ansoff matrix, Boston matrix and product life cycle models contributed to my choice of strategy?
Price setting
When a price is being set the following factors need to be considered;
* Identify who the customers are. What can they afford or willing to pay for the good?
* Investigate competitors' prices and then decide whether to keep prices in line or under cut them.
There are many pricing strategies that businesses can use, here are a few.
Penetration Pricing
Penetration pricing is when the prices are set very low to enable the company to gain a foothold in a competitive market. Once the business has an increased in its market share, prices can be raised. This pricing strategy is not appropriate to my product because products that have a low price are given an image of poor quality, even if they are not of poor quality. Mercedes already have a significant market share and they do not want to be associated with an image of poor quality.
This strategy is most effective when the demand for the product is elastic, so that consumer is more tempted away from their usual suppliers. This is not the case with Mercedes Benz, as the demand for a Mercedes estate is inelastic. Where the demand for the good varies very little with large price variations. This is because people are prepared to pay a great deal of money for the prestige which comes with owning a Mercedes.
Skimming pricing
With skimming pricing, prices are initially set very high. This takes advantage of some people's desire for a new product at any price. This pricing is often used with computer software and games consoles when they are first released. The product is a novelty and the supplier will have little or no competition. The price will be gradually reduced as the demand for the product at that price decreases.
Skimming would be a very effective pricing strategy for my product if it was the only prestige car in the market. The demand for a Mercedes inelastic but not inelastic enough to support this pricing strategy.
Loss leader pricing
Loss leader pricing is where a product is priced very low to attract customers in the hope that they will purchase other products. This would not be suitable for Mercedes as they are not going to get consumers to purchase other products as a car is a major purchase which takes a large percentage of annual earnings.
Price Discrimination
Price discrimination occurs when a firm offers the same product at different prices when consumers can be kept separate. Mercedes currently use this pricing strategy. They charge people
Competitive Pricing
This is where the business sets the price to roughly what the other competitors are charging. This process works well if competitors businesses are similar.
Competitive pricing would not be appropriate to my business Mercedes. If Mercedes where to price their estates at similarly to other manufactures like Vauxhall, then Mercedes would lose their image of being a quality car manufacture. This would not be in their best interests as they have a niche market at the moment, which they would lose if they had a pricing strategy to this.
Target profit pricing
This involves using a breakeven analysis, which shows total costs and total revenues at different volumes of sales. The price must be set a level at which the firm at least covers its variable costs other wise there is not point in continuing production. Profits are only made at a volume of sales above the breakeven level. This is the point at which a firm covers its fixed and variable costs for a given price.
Destroyer Pricing
Destroyer pricing is a strategy where businesses cut prices in the short run to run other businesses out of business. It is also used to deter other businesses from entering the market. This pricing strategy is illegal so I will not be using this strategy.
The price that Mercedes charge is not going to be a major part in my marketing strategy. The demand for a Mercedes is relatively inelastic compared to other car manufactures. This is because when someone is purchasing a Mercedes they are obviously prepared to pay for a high quality good, which has the branding and image as well. They could easily
This tells us that Mercedes do not need to have a competitive pricing strategy because people demand for the product is not affected by the price. As demand relatively unaffected by price I am going to use a pricing strategy that will allow me to increase profits. Therefore achieving my short term goal of increasing profits on Mercedes estates by £10 million.
This diagram below shows that the price will be raised. This will cause an excess in supply. But the increase in the price of the product will greatly out weight the fall in the quantity demanded.
3.6.4.2 The Product part of the four P's
The product part of the four P's is not going change. As the market research showed, the majority of people who have bought Mercedes are happy with what they have purchased. The 'looks' of the car have been altered recently so they are up to date with current styles.
The only thing that will be changed about the product will be how it is produced. With modern methods of production, Mercedes will be able to produce their cars more efficiently. This will cut cost therefore increasing the margin, so Mercedes will receive large profits. This may cost Mercedes a lot of money to buy new machinery, but in the long run Mercedes will be better off for doing this as they will save money producing cars efficiently.
The diagram below shows that Mercedes offer a product which is renowned for it quality at a competitive price.
As I said in my PESTEL analysis people are become increasingly aware of the damage that we are causing to the environment. These views should be confronted. People should be aware that Mercedes Benz to car about the environment. Mercedes should develop their brand name to be associated with environmental friendly issues.
To create an image of environmentally friendliness Mercedes should develop and bring out an E Class estate which has an environmentally friendly engine within.
This has moved our product on the Ansoff matrix. We have moved across the matrix towards the product development side.
Existing
Markets
Market Penetration
Product Development
New
Market Development
Diversification
Existing Products New
To see what the most important part of my product I am going to use a value analysis of my product.
The diagram above is showing what the most important part of the product is. Function is all about what the product does, if a product orientated around its function it must work to precise tolerances. If it orientated around the aesthetics is looks must be considered in the design. Economy of manufacture is concerned with how cheaply the product can be made.
My product is situated between the aesthetics and the function. This is because aesthetics are important because people are buying a Mercedes as an alternative to a cheaper car, so they are expecting something extra for their money. It is half way between function as people want a car which can perform, it must have good engine specifications.
3.6.5 Promotions
The term promotion refers to activities in a business that are intended to persuade the customer to buy the businesses product.
3.6.5.1 Branding
Brand names are an essential part of the way a product is packaged. Packaging my product, a car, may not be suitable but the brand name is very important as it carriers the Mercedes image of prestige and quality.
The purpose of branding is to differentiate products that are basically the same product. It is a very important feature for by product, which is in a non-price competition in a competitive market. Mercedes are trying to create it's own niche market.
Branding is important because it helps to create customer loyalty and increases sales. Many people have been persuaded to only buy Mercedes' cars through branding. Mercedes has effectively achieved an inelastic demand for the product, they have used this and adjusted the price accordingly. This is why I found Mercedes to be charging more for their car than other manufactures in my market research.
With Mercedes new environmentally friendly attitude, they ought to promote themselves on this. Mercedes will promote themselves on having environmentally friendly cars. If people think of Mercedes as being environmentally friendly they may have more incentive to buy a Mercedes.
3.6.5.2 Advertising
Advertising was created to inform consumers of products. It is normally informative when it tells the consumers about the product, what it does, how it works, what it costs and where it can be bought. It is persuasive and is intend to tempt consumers to buy a particular product and not a competitors substitute.
3.6.5.2.1 Why do firms advertise?
The main purpose of advertising are to;
* Increase the demand. Shift the demand curve to the right, so that the business can sell more at any particular price
* Create or change an image.
* Create brand loyalty so that customers will cootinue to buy the product
* Raise the profit revenue by appealing to the emotions; for example, charities are now heavily advertising
* Maintain the present market share.
As I have previously said, Mercedes are going to promote themselves on being environmentally friendly. A Television advertising campaign showing viewers that Mercedes Benz has an environmentally friendly car and promotes the protection of our world. The advert must also show that performance of the car is not lost.
The general household survey has been very useful for researching for my advertising. To achieve my objective of increasing market share Mercedes will need to take market share from other car manufacturers. I will be targeting BMW drivers in my television advertising campaign. From the general household survey I have found out that the typical BMW driver reads "The Times" newspaper and watches the news at six o' clock on ITV. I plan to have an advertising campaign on the television before the six o' clock news on channel three. An advertising campaign on the television may be very expensive but a lot of people will see the advert so it is worth the money spent on it.
As I have previously said BMW drivers read "The Times". An advertising campaign in "The Times". I have chosen to have an advertising campaign in this paper because it is the paper that the people read who we are targeting.
3.6.5.3 The Place part of the four P's
Mercedes Benz manufacturer the cars and they also sell their cars in retailers around the country. The placing of these retailers I very important. There is little point in having retailers in areas of the country where there are large amounts of unemployment or low real wages as there is going to be only a small demand for our product. Therefore going to be important where we locate retailers.
4 Conclusion
The marketing strategy that I have created for my product is essential for my product. As without it sales would begin to decrease. My PESTEL analysis showed that people are becoming more aware of the environment. My marketing strategy shows a Mercedes being friendlier to the environment. Without my marketing strategy people may stop buying Mercedes for a more environmentally friendly option.
The market share of the Mercedes E Class is not as high as I could be. It is below many of its competitors, who do not have an image like Mercedes that is respected. A larger market share would generate more profits, due to higher sales. An increase in market share is not going to happen on its own. Mercedes needed to have a new marketing strategy to increase market share.
My PESTEL analysis also found that the average family size getting smaller. People may decide that they do not need a car as large as a Mercedes and go for a smaller option. My advertising campaign shows that even the small one child families still need large cars for friends, and equipment for hobbies. Without this marketing strategy people may have seen other alternatives to the Mercedes.
I have used many different models in my marketing strategy. Some of them have flaws. The life cycle has many disadvantages for example the life cycle only takes sales have happened in the past. It does not predict the sales trends in the future. The Ansoff matrix takes two things into account, whether the market or product is existing or a new product. It does not take things like the type of product, what market it is in or how old the product is. This means that the Ansoff matrix is not giving the full picture of the product. I have also used the Boston matrix which was very useful when I was making my marketing stradegy.
4.1 How is my marketing strategy based upon the principles of marketing
As I have previously said in this report the CIM define marketing as the, "management process that identifies, anticipates and satisfies customer requirements, profitable". My marketing strategy is based upon this. I have identified through market research that people want a car that is practical, but still is able to perform. People also are concerned of the ever increasing threat of our environment running out of resources. People want a car that will still go fast, but does not pollute the environment too much.
Before I created a new marketing strategy for my product, the Mercedes estate did not satisfy people's requirements from a car. This is a reason why my marketing strategy was needed. The Mercedes estate was losing touch with what people want from a car. My marketing strategy has satisfies customers requirements, through a new promotion of the product.
I chose to have a marketing strategy which was based around promotion. This was because of market research. My market research showed that the majority of people are prepared to pay a lot more for a car if they think that they are getting good value out of the car. To get people to think this I needed to promote the extras that come with my product.
4.2 How my market research affected my choice of marketing strategy
To create my marketing strategy I have used a lot market research. My market research has allowed me to choose a strategy which is appropriate to my product and its market.
4.3 How external influences affected my choice of marketing strategy
Mercedes competitors have helped me to develop my marketing strategy. Some competitors have seen that people want cars that are large, but are still friendly to the environment. These competitors are selling their products successfully so a marketing strategy that develops the products eco friendliness seemed suitable.
The Ansoff matrix has also shown the most suitable marketing strategy. The Ansoff matrix is not perfect as it only takes the state of the market and product into consideration. It does not take any other factors into account. The type of product, the product's competitors, the type of customer are not accounted for in the Ansoff matrix, so it cannot give a full picture of the product.
5 Evaluation
5.1 How likely is it that my strategy will succeed?
I am first going to look at the strengths, weaknesses, threats and opportunities for my strategy.
Strengths
* Mercedes is a very large business and has a lot of capital. This means there will not be a small budget for my marketing strategy.
* The product is a well established and any marketing strategy is low risk. If this strategy was to go wrong sales would not be affected too much.
* Mercedes is a large multinational business and has an extensive product range, so if the sales of the E-Class estate were to fall in the UK then the global Mercedes turnover would not be affected too much.
* Mercedes already has a good image.
* The estate market is growing. Sales are going to increase whether Mercedes have a new marketing strategy or not.
* Mercedes do not need to have too many advertising campaigns as Mercedes advertises itself, through magazines and the general public talking about Mercedes.
Weaknesses
* Mercedes is priced above its competitors. If the image of Mercedes was to be lost then Mercedes would have to reduce their prices, due to the decrease in demand.
* My marketing strategy will be very costly and if it fails then a lot of money will have been lost.
* My product is not competitively priced, so it will be very hard to tempt people away from a cheaper option.
* My research may not be accurate. The survey that I sent out only went to a small number of people. The results from this survey may not reflect the whole population opinion. Only a small minority who received my survey.
Opportunities
* Mercedes is in a growing market so Mercedes has the potential to increase its sales and market share.
* Mercedes are selling their cars at premium prices, so it is possible for Mercedes to reduce the price of their cars.
Threats
* People may not see my advertisements and money will have been wasted as the strategy will not have been successful.
* People may decide that they do not need big cars, my product will lose sales.
If my marketing strategy is successful the product life cycle will look something like the life cycle shown in the diagram below.
If my marketing strategy is not successful then the sales may be at B on the diagram. If it is a successful marketing strategy will be at A on the product life cycle. A few months after my marketing strategy sales may fall to C on the diagram. My product is likely to get to A on the diagram because after my marketing campaign many more people will know about the new features that I have added to my product. If my marketing strategy is successful then it should be a while before sales decrease to C.
The Boston matrix shows that the market share of my product is low. This could mean that one of the four Ps are not correct. I have altered the promotion of the product. This will increase the demand for my car. This may take sales from competing companies and my market share will grow and my product will move across to the star section. To ensure that my product increases its market share I targeted BMW drivers through advertising. Adverts for my products will be shown before the ITV news at six o clock. This is targeting BMW drivers as through my market research I found results from a general household survey that say that the average BMW driver watches the six o clock news on channel three and also read the Times. I have targeted these people. This will reduce the sales of BMW and will increase Mercedes market share.
My product has adopted the position on the Ansoff Matrix, shown below in the diagram. I have chosen to use a strategy in the penetration section. Strategies in this section are relatively safe as if it the marketing strategy fails the product is already in an existing product in an existing market.
My market strategy is likely to work as long as my research is accurate. But there may be some issues about my research not being valid. As my survey only had a small sample size, the results of it may not be very accurate. So if you take that into account the chances of my marketing strategy being successful is very small.
Mercedes would be very unlikely to take on my marketing strategy
Existing
Markets
Penetration
Product Expansion
New
Market Expansion
Diversification
Existing Products New
I have penetrated the market using a promotion technique. I will successfully do this, because as more and more people become aware of the environmental issues they will find that the only luxury car that is still good for the environment.
UNIT 3 - Orlando Baker - 12B/BS
