New firms may still enter the market during this stage. These late entries skip the early life cycle stages, including the profitable growth stage. They must try to take market share from established firms, which is difficult and expensive in a saturated, flat market. Customers who are satisfied with their current relationship won't be interested in switching to an unknown brand.
In the United States, the markets for most cars, boats, television sets, and most household appliances are in market maturity. This stage may continue for many years -- until a new product idea comes along that makes the old product concept obsolete -- even though individual brands or models come and go.
During the maturity phase, less efficient firms can't compete with the increasing pressure on prices and drop out of the market.
During the Sales Decline stage, new products replace the old. Price competition from dying products becomes more vigorous, but firms with strong brands may make profits until the end because they successfully differentiated their products. They may also keep some sales by appealing to the most loyal customers or those who are slow to try new ideas. These buyers might switch later, smoothing the sales decline.
Although the life of different products varies, in general product life cycles are getting shorter. This is partly due to rapidly changing technology -- one new invention may make possible many new products that replace old ones. Tiny electronic microchips led to hundreds of new products, from calculators and digital watches in the early days, to today's microchip-controlled valves in artificial hearts. Patents for a new invention may not be much protection in slowing down competitors, who can often find ways to copy a product idea without violating a specific patent. Worse, some firms find out than an unethical competitor simply disregarded the patent protection. Patent violations by foreign competitors are very common, and sometimes a product's life can be over before a case can get through Patent Court bottlenecks.
Shorter life cycles mean that firms must constantly develop new products in order to stay in business. Further, they must offer marketing mixes that make the most of the Market Growth stage, when profits are highest. People always need to travel but trends are constantly changing, we need to make sure we can always provide what the customers want; this is mainly the best service.
The company with the first entry in a product market sometimes referred to as the "Pioneer" or "Innovator," usually has an advantage, because they have the opportunity to establish their brand name in the minds of consumers before competitors enter the market. However, during the Market Growth stage, competitors are likely to introduce product improvements. Fast changes in marketing strategy may be necessary, because profits don't automatically go to the innovator.
The Boston Matrix is a method of analysing the product portfolio of a business (the number and range of products a business produces at a particular point in time). This model was developed by a group of management consultants called the Boston Consulting Group. It divides the products that are produced by a business into four categories, according to their market share and the level of market growth. The categories are:
Problem child – This is a product that has a low market share in a high growth industry – often newly launched products. They will require a significant amount of money to be spent on their promotion in order to achieve a healthy market share. These products are at the ‘introduction’ stage of the product life cycle.
Stars – These products have high market share in a high growth market. They are very successful products that create a large amount of revenue for the business. They still require money to be spent on their promotion in order to keep ahead of rival products in the marketplace. These products are at the ‘growth’ stage of the product life cycle. An example of Stars in the travel business would be net fares. Airlines give agencies that sell a lot of their flights consolidated fares that can be much cheaper than normal published fares. We can then sell them on to clients adding between 10 and 50% profit onto the fares, depending on the fare and the client, and still save the client money off the normal published fare. As a large independent agency, we have consolidated fares with most airlines so we try to push these types of tickets as much as possible as they make us much more money than the normal published fares, which give us 4% commission plus the service fee for that particular ticket.
Cash Cows – High market share in a stable market (i.e. market growth is low), at the maturity / saturation stages of their product life cycle and produce a large amount of revenue for the business.
Dogs – These products have a very low market share in a low growth market. They produce very little revenue for the business and are at the decline stage of the product life cycle. The business has to decide whether to try and extend the life cycle and boost sales revenues, or whether to delete the product from the portfolio. The Far East would come under this category at the moment.
The Product Life Cycle and the Boston Matrix are just two tools that can help understand what is happening to the business and help to develop an appropriate business for product positioning to ensure that the business optimises the ROI over the life of the product and can support investment for future business survival.
TD Travel Group is a great example of Perfect Competition with all the cost cutting that goes on in the travel industry. This exists when there are so many people in the market and other conditions are such, that no one can influence the price, all other things being equal. Any business charging more than the market price will lose all its customers to rivals, and any business charging less than the market price will be swamped with customers whom it cannot satisfy.
In a free market economy the allocation of most scarce resources is determined by the price mechanism. Price is determined by the interaction of supply and demand. Demand is the amount of a good that consumers are willing and able to buy at a given price. Supply is how much of a given product the sellers are prepared to supply to the market at any given price. Supply and demand is only effective if backed up with the ability to pay.
Given the current situation and lack of demand for flights at this time TD Travel Group have to continue to supply a professional service to keep existing customers. They also have to gain new customers both through the demise of the weaker less professional business travel organisations and through the professionalism and marketing of our organisation.
TD Travel Group has to supply what the customer needs i.e. the best travel options at the best possible price. If they continue to supply this then clients will be happy with their service and demand more. If they fail to supply this then demand from customers will reduce, as they will get a better service from elsewhere.
A perfect example of a factor affecting demand for TD Travel Groups products and services is the terrorist attacks of September 11th. This has caused less demand for people traveling especially to America, which is a large percentage of our business. This coupled with suggested worldwide recession has instigated a major upheaval in the whole travel industry. As a result of this airlines and aircraft manufacturers have announced whole scale job losses, business travel industry leaders have predicted huge cuts in travel spend and closer to home initial feedback from TD Travel Groups own customers points to a general review of travel patterns and budgets. Just as the travel industry had almost recovered from the terrorist attacks, there has been the Iraqi War, limiting flights to the Middle East by airlines due to lack of demand for them and putting off both business and leisure travelers. The most current issue is SARS; nobody wants to travel to the Far East or to Canada with the situation as it is at the moment. TD has had to tighten its belt to try and minimise costs as much as possible.
Other factors that affect the demand for TD Travel Groups services are:
The time of year – With being a business travel organisation there is much less demand for travel in the holiday seasons such as July and August, or Christmas and Easter. This is due to the fact that most business travelers would rather be spending that time at home or on personal holidays with their families.
Clients winning or tendering for new contracts – If an existing client gains a new contract in Dubai then it will mean a lot more travel by them to that destination, therefore increasing demand. If this be the case TD Travel Group would strive to get a corporate deal with an airline to that destination to lower costs considerably for their client.
Major sporting events / Conferences worldwide – This obviously increases demand to a certain area, TD would try to block off airline seats or hotel rooms etc to guarantee their customer a place.
Client’s travel budgets – if these budgets rise or fall then demand for our services will also rise or fall. For most companies, corporate travel is their second largest expenditure.
TD Travel makes sure that whether demand is high or low we always offer the best service to our clients. TD Travel Group has identified customers’ objectives and managed them by employing the best travel consultants in the business that provide fast efficient response times and professional, unbiased consultancy.
TD Travel group also provides 24-hour service, efficient ticket deliveries or dispatch, fast refund processing, account management, management information reports and centralised accounts control. On top of all this we provide unlimited fare saving opportunities guaranteeing overall better value for money and cost saving.
The marketing manager is constantly meeting with clients, both new and old, to research the clients needs and to discuss the service we provide and make sure there are no problems. Our job is no longer to sell flights / hotels / car hire etc, it is to provide a service. Companies can book most of their travel needs on the Internet now; it is the service we give that they are paying for. All our clients agree that the services we provide are worth paying service fees for. The Marketing manager will also discuss our service fees and come to an agreement with new or existing clients on their specific tailor made fees and services. This process is only used for companies with a high usage / spend with us. For smaller usage companies or individuals who get our number from yellow pages etc or new clients, we have a set service fee band (band B), which we use. Most companies understand the service fees and are happy paying them, for the smaller companies, the service fees will only get changed to tailor made service fees if they are unhappy about any aspect of the normal Band B fees. The service fees then become Band T (tailor made), for these fees we have to check in the company profiles every time we make a booking to see what fee to charge. It may be that a high usage / spend client may be happy with the band B fees and they will stay on that level, or it may be that an individual who only travels four times a year may get put on band T service fee, it depends on all the above factors, and most importantly in the service industry – what the customer wants.
TD is a firm believer of customer care. This emphasises the importance of an organisations attitude to, and covers every aspect of its relationship with, its customers. It aims to close the gap between customers’ expectations and their experience.
TD’s competition is any independent business travel company. There is no main rival or competitor; all business travel agencies are our competitors. We gain competitive advantage by providing better service than any of our competitors to maintain customers and to introduce new customers. The threat of substitute products such as internet booking companies like expedia.co.uk and opodo.co.uk can also be looked upon as a benefit as it is an extra tool for us to use to ensure we obtain the best possible prices for the clients. Some clients may prefer to book direct on the Internet, but at some point we know these clients will come back to us respecting the service we provide them with as no internet booking company can match with the personalised service we can offer. Technological change is rapid, TD prides itself on making the right decisions early thus giving us competitive advantage as by having the best computer systems we can provide the best service.
There are some things, which TD cannot control such as the economic state of the world. A perfect example of this is the terrorist attacks of September 11th, Iraqi war and SARS; which were discussed earlier in the report.
As a response to this TD Travel Group has to take certain steps to control costs. New policies have been put in place and it is hoped that these policies will hold off more serious cutbacks, until a clearer picture emerges of the full affect these events will have on TD Travel group. The new policies include a total ban on all overtime, including Saturday opening hours where time off in lieu is to be taken as opposed to pay, thus creating a better balance by distribution of the work we have. Telephone calls have to be cut considerably by making greater use of the computerised systems we have available to us, making quotations when clients initially call the office rather than ringing them back and reducing personal calls and calls to mobile phones and 0870 prefixed numbers as these are the most expensive calls. TD has also offered all employees the option to take unpaid leave whilst it is quiet, instead of using up their holiday entitlement.
The national environment affects all practically all businesses. Growth inflation unemployment, interest rates, taxation rates and the level of personal saving are all relevant. Another factor, which affects the long-term national economic prospects, is the makeup of the population. In some countries the retired population is increasing faster than the working population, because people are living longer but having fewer children. This may mean that economic growth will slow down, because too small a proportion of the population is making things to sell.
The political environment can also affect businesses like TD travel group. Businesses, like everyone else, have to work within the law. Laws are made by parliament for the good of the society as a whole. What laws are made depends on which political party holds power. Therefore the political environment is important to businesses. Ways in which it can affect companies such as TD Travel group are:
Dealings with customers – can be affected by laws on the sale of goods and services, on advertising and on trade descriptions.
How a business treats its employees – is affected by employment legislation and trade union law, largely designed to protect employee’s rights.
Dealings with shareholders – are affected by the Companies Acts, which law down how information must be given in published accounts and what dividends may be paid.
The criminal law – can affect companies. Companies as separate legal persons distinct from their directors and employees can commit some offences.
Part 2 – The marketing mix
The marketing mix is the organisation's overall offer, or value, to the customer. 'The basic marketing mix is often nicknamed:
"The 4Ps" (product, place/distribution, pricing, promotion); these are elements in the marketers armoury - aspects that can be manipulated to keep ahead of the competition'
Dibb & Simkin, 1994.
Successful organisations need to focus on marketing rather than selling. They realise that the organisation as a whole needs to direct its efforts at providing the customer with what is required (the product) at the right time (place), the right price and in the right manner (promotion). In this way a customer is likely to be satisfied; they will keep the product, pay the bill, buy again and recommend to others. An organisation that thinks solely in terms of selling may find itself unable to compete in the marketplace.
A target market consists of a group of customers (people or organisations) at whom the seller directs a marketing program. Target market selection must be based on careful analysis of market opportunities. Usually the selection process involves some form of research and market segmentation. When target markets have been selected, the company can then proceed to the next step in strategic marketing planning – designing an appealing Marketing Mix. TD Travel Groups target market is any business in the North West area with any sort of travel needs.
The combination of the four primary elements that comprise a company’s marketing program is termed the marketing mix. The design, implementation and evaluation of the marketing mix constitute the bulk of a firms marketing effort. The four elements of the marketing mix are:
Product – A product is anything offered for attention, acquisition, use, or consumption that might satisfy a want or need. Products can be physical objects, services, persons, places, organisations, and ideas. Managing the product ingredient includes planning and developing the right goods/services to be marketed by the company. Strategies are needed for changing existing products, adding new ones, and taking other actions that affect the assortment of products carried. Strategic decisions are also needed regarding branding, packaging and various other product features. These features can include new product development, product management, product features and benefits, branding, packaging and after sales service. A product has a finite life. We would be hard-pressed to identify any product older than five years that exists today in its original form. Although many simple products appear to change little, if at all, closer scrutiny would show that at least one aspect of the product has changed over time. Products have both tangible and intangible benefits. Tangible benefits include benefits, which can be measured such as the top speed of a car. Intangible benefits are benefits that cannot be measured such as the enjoyment the customer will get from the product. It is important that the product is changed as necessary to bring it up to date and prevent it from being overtaken by competitors.
Price - Management must determine the right base price for its products by considering the demand for the service, the production, marketing and administration costs, and influence of the competition. It must then decide upon strategies concerning discounts and other price-related factors. These factors can include costs, profitability and value for money, competitiveness and incentives. TD has a set service fee band for most clients; every ticket we issue has a service fee added onto it. TD sets these prices by determining what profit we need to make and what customers are prepared to pay. For example service fees for any booking done with BA are more than the service fees with any other airline as BA pay us less commission than any other airline. Easyjet and Ryanair bookings that are made on the Internet we charge £25.00 per booking, as we don’t make any commission on these bookings. Certain companies have bespoke tailor made service fees to better suit their needs, these are decided on by the travel manager of the company and our marketing manager. Our job is to supply customer needs as profitably as possible. All profit organisations, and many non-profit organisations, must set prices on their goods or services. Price is the only element in the marketing mix that produces revenue; all other elements represent costs. In the narrowest sense, price is the amount of money charged for a product. More broadly, price is the sum of all the values that consumers exchange for the benefits of having or using the product. At the same time, pricing and price competition is the number one problem facing many marketing executives. Yet, many companies do not handle pricing well. The most common mistakes are:
Pricing that is too cost oriented;
Prices that are not revised often enough to reflect changes in the market;
Prices that do not take the entire marketing mix into account;
Prices that are not varied enough for different products, different market segments, and different purchase occasions.
Historically, price has been the major factor affecting buyer choice. This is still true in poorer nations, among poorer groups, and with commodity products. However, non-price factors have become more important in buyer-choice behavior in recent years.
It is very important that the correct price is charged for a product. If the price is too high consumers will avoid the product, as they will believe it to be too expensive yet if the product is priced too low they may believe that there is something wrong with the product for it to be so cheap. Also if the company charges too low a price, it may not cover its costs. There are many different pricing strategies that companies can use to decide on a price for their product.
"Skimming" refers to setting initially high prices, and slowly lowering them over time to maximize profits at every price-sensitive layer in the market. As initial sales slow down, and/or as competitors threaten to introduce similar products, the price is lowered just enough to make it worthwhile for the next segment to buy. Several industries use this pricing strategy very effectively. Examples include: fashion (designer originals and beginning-of-season sales vs. copycat designs and end-of-season sales); publishing (hard cover vs. paperback books); and sports equipment (new golf club innovations are slowly reduced in price each season as new models are introduced).
"Penetration" involves setting a low initial price to enter the market quickly and deeply, attract a large number of buyers, and win a large market share. The resulting high sales volume often means lower costs, as the company moves quickly down the production experience curve, allowing a further reduction in price. Several conditions favor setting a low price:
1. the market must be highly price sensitive so that a low price produces more market growth;
2. production and distribution costs must fall as sales volume increases;
3. the low price should serve as a barrier to entry for competitors -- otherwise the price advantage may be only temporary.
Place – Place includes all company activities involved in making the product available to target consumers. It includes: channels of distribution, the extent of market coverage, managing discrepancies of quantity and assortment, retail locations, and the management of inventory, transportation, and logistics. Ultimately, Place is involved in making the product convenient for the target customers to purchase. Management’s responsibility is to select and manage the trade channels through which the product will reach the right market at the right time. They must also develop a distribution system for physically handling and transporting the products through these channels. A distribution channel moves goods from producers to consumers. It overcomes the major time, place, and possession gaps that separate goods and services from those who would use them. Features can include access to target market, channel structure & management, retailer image & logistics. TD Travel Group provides same day delivery of any travel products or we can arrange for tickets to be collected at the airport electronically, we send tickets special delivery or we will even meet clients at the airport to ensure they have their travel documents with them when they need them. There is no extra charge for these services as they are all included in the price of the service fees. Service channels in general are simpler and more direct than those for products – this is largely because of the intangibility of services. The concept of distribution channels is not limited to the distribution of physical goods. Producers of services and ideas also face the problem of making their output available to target populations. In the private sector, department stores, hotels, banks, and other service providers take great care to place their outlets in locations convenient to target customers. In the public sector, service organizations and agencies develop "educational distribution systems" and "health delivery systems" for reaching sometimes widely spread populations. Hospitals must be located geographically to serve various patient populations with complete medical care, and schools must be located close to the children who need to be taught. Communities must locate their fire stations to provide rapid coverage of fires in every neighborhood, and polling stations must be placed where people can vote without spending excessive time and effort. In today's global marketplace, selling a product is sometimes easier than getting it to customers. Companies must decide on the best way to store, handle, and move their products and services so that they are available to customers in the right assortments and quantities, in the right place, and at the right time. Logistics effectiveness will have a major impact on both customer satisfaction and company costs. A poor distribution system can destroy an otherwise good marketing effort. Physical distribution, or marketing logistics, involves planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit. Logistics involves the management of entire supply chains, or value-added flows from suppliers to final users.
Promotion – Management needs to inform and persuade the market regarding a company’s products. Advertising, personal selling, sales promotion and publicity are the major promotional activities. Features can include developing promotional mixes, advertising management, sales promotion management, sales management, PR management and direct marketing. Strategies for promotion in the service sector include:
- Making the service tangible by linking it to concrete images
- Creating a favourable image for the service or service provider
- Show the tangible benefits of purchasing an intangible service
- Personal selling
- Publicity campaigns
- Internal Marketing
TD Travel obtains databases of companies in the North West from the chamber of commerce, or company names from Yell.com or from TD’s own database that has built up over 18 years, and sends out mail shots, approx 3000 at a time and 2-4 times a year. We also have TD Travel Group desk pads which we give out to existing clients every Christmas. Our website is another form of promotion of TD. We send out email shots and have an electronic newsletter going out to clients. In the introduction stage, advertising and public relations are good for producing high awareness, and sales promotion is useful in promoting trial purchase. Personal selling must be used to get the trade to carry the product. During growth, advertising and PR are still very influential, whereas sales promotion can be reduced because fewer incentives are necessary. In maturity, sales promotion becomes important again -- buyers know the brands, and promotion can aid or prevent brand switching. In decline, advertising is used to remind end users of the product, PR is dropped, and salespeople give the product only a little attention. Sales promotion, however, might be strong, as the company seeks to squeeze every last ounce of potential from the product.
The four ingredients in the marketing mix are interrelated; decisions in one area usually affect decisions in another. Each of the four also contains countless variables. A company may market one item or several, related or unrelated. The item may be distributed through wholesalers or directly to retailers, and so on. Ultimately, from the multitude of variables, management must select the combination that will best adapt to the environment, satisfy target markets, and still meet marketing and organisational goals. The marketing mix can be expressed in a more customer orientated way as the '4Cs':
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Customer Value 'product' benefits from the buyers point of view
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Cost to the customer 'price' plus the customers costs - e.g. travel
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Convenience for the buyer equivalent to 'place'/channels of distribution
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Communication is a two-way dialogue - not just 'promotion'.
The marketing of services presents particular problems given characteristics such as:
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Intangibility - Services cannot be touched or stocked. They are an experience.
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Inseparability - Production, consumption and distribution are simultaneous. 'Production' staff are also the customer contact.
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Heterogeneity - Quality is variable - and customers tend to use Price as an indicator of quality.
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Perishability - Customers are less easily convinced of reliability than with a tangible product.
To address the special difficulties of services marketing, Booms & Pitner proposed an extended marketing mix; this is known as the 7P’s. The first four P’s are as above; the additional 3 are as follows:
People – Add value and dimension to the marketing package way beyond the basic product offering. Customers like the fact that we are an independent business travel agency – they can speak to the same person every time they call and clients become friends. Staff selection, motivation and particularly customer care training are critical.
Processes – ‘Manufactured’ and consumed live on the spot – consistency can be more difficult that with manufacturing. At TD we strive to always give the best service and therefore provide consistency. Measures of performance, e.g. satisfaction questionnaires and ‘mystery customer’ surveys, can monitor efficiency.
Physical evidence – Of particular relevance to retailers e.g. atmosphere, ambience, image, & design of premises (environment and surroundings). TD is situated in a perfect place for a business travel company, close to the airport and the city center. The offices we are based in are good quality offices and there is always a good atmosphere in the office, which radiates out to clients who only contact us by telephone or email.
The above 3P’s add value and provide competitive advantage; they are specific to the services sector. Relationship marketing in any type of market is increasingly throwing the emphasis on adding value to products through service; inevitably the 3P’s impinge on this.
TD Travel Group also uses the AIDA model for its marketing purposes:
Awareness – It raises awareness by sending out mail shots
Interest – Mail shots generate interest
Desire – Once an interest has been shown in TD, personal introduction letters follows it up
Action – Action is then taken by TD Travel Group to set up a company profile and find out more / arrange to visit the interested company. The company will then take action to use TD Travel Group as their business travel provider.
Summary
Marketing puts the customer at the centre of the organisation. The organisations that do so reap the profits. In the grocery sector, Sainsburys, and more recently Tesco, have a firm commitment to marketing, putting them amongst the most profitable retailers in the country. It was said several years ago that Marks & Spencer did not even use the word 'marketing'. They believed they placed their customer truly at the centre and that their merchandising and customer definition strategy led them to be the most profitable retailer in Europe.
But how does this stack up today. It seems that their customers changed. Customer preferences and desires moved on and the company neglected to see how their customer base was becoming more segmented with differing tastes emerging. The company's products and services become seen as less "vibrant", too staid, insufficiently dynamic.
The word got out quickly to customers that the merchandise range was dull, lifeless, old. Profitability levels and customer confidence dropped. The company that neglected its market research needed to regroup urgently and strengthen its marketing skills. However this required profound management reorientation and development of marketing competences. The famous retailer is now struggling to make up lost ground and to regain its ascendancy in a much more volatile market.
To achieve success companies must go further than mere customer satisfaction: they must do it better than competition… The modern marketing concept can be expressed as:
'The achievement of corporate goals through meeting and exceeding customer needs better than the competition.'
[Jobber 1995]
This is the 'approach or concept which can be used as the guiding philosophy for all of the activities of an organisation......... Peter Drucker once wrote "There is only one valid definition of business purpose: to create a customer." At its simplest, if you do not have any customers for the product or service your business offers, then there is no reason for continuing existence.'
[Adcock et al 1995].
Bibliography
www.otterbein.edu/home/fac/brccbly/courses/badm640/plc.htm
http://sol.brunel.ac.uk/~jarvis/bola/marketing/mix.html
http://duenow.com/search.php?search=Marketing%20mix&&search_term
Classwork Notes
HNC Business core unit 1 – Marketing
BPP publishing – August 2000