Marketing Managemnt - Assignment Example

? Marketing Management inserts his/her Inserts Word Count: 3,000 words Marketing management has gained increasing importance in recent years owing to the notion of globalization and internationalization which has given way to the boundary-less movement of goods and services. Marketing for products that are sold across various cultures, languages, tastes, demographics and external conditions is no longer a simplistic job- it requires adequate and periodic management so that the product achieves a strategic fit with the diverse external environment. No longer can marketers focus their efforts on just the four P’s (product, price, promotion, place)- they have come to realize the blooming significance of 4C’s; Consumer (as opposed to Product), Cost (as opposed to Price), Convenience ( as opposed to Place) and Communications ( as opposed to Promotion) (Crandall, 2002). Thus, the above indicates the growing importance of marketing management which enables managers and executives to deal with strategic marketing challenges that the organizations face every day. An important task for marketing managers is the creation of value for consumers. The challenge is thus, how to offer that value? The idea of customer relationship management (which is a part of marketing management) stems from the notion of value creation. At the heart of successful marketing efforts is the ability of the company to provide a product that satisfies the needs of customers. Towards this end it is important to define what a need is- a need is defined as a felt deprivation for something. So, for instance, to feel thirsty is a need that has to be satisfied. A want refers to the means by which that need is satisfied. Thus, how the thirst is quenched (through water, drink, and juice) would become a want. Marketers must target customer needs and satisfy wants. On the contrary, however, it is observed today that marketers are creating needs rather than satisfying them. To this end, the importance of product comes into play. The product is the crux of marketing- Marketing is grounded in “consumers” and consumers demand products to satisfy their needs. The product is the starting point for most marketing efforts. It is interesting to note that a product consists of five layers although it may appear as a single, holistic object to us. The central part of the product is referred to as the “core”. It is this core that forms the basis for the other layers (including basic, expected, augmented and potential product). An example would be of a Nikon camera. Its core benefit would be to allow the user to take photographs and make videos with ease. The actual product will comprise of the brand name (Nikon), high resolution, carrying case etc. The augmented product would be warranty, demonstration and repair etc. Core benefits are often represented as order qualifiers or the bare minimum necessary for products to stay in the market (Homburg et al., 2005). This would simply mean the delivery for what is promised. A product or a brand is s promise, and when it is fulfilled in the quantity and quality desired by consumers the phenomenon is termed as core benefits or order qualifiers. For instance, the basic attribute of a bank is to offer accurate maintenance of consumer accounts. Bottled/mineral water provides consumer with a basic minimum level of ingredients or required calorie intake. Conceptual studies from research have revealed that core benefits are a subset of the larger group “customer benefits” which encompasses not only core benefits but also add-on benefits as discussed earlier. These customer benefits are viewed as the constructive values of customer relationship (Homburg et al., 2005). The core of a product is not tangible- it takes the form of a benefit or an advantage that a consumer may have from using it (Homburg et al., 2005). Thus, the core of a product is in abstract form and cannot be touched. Alternately, core defines the need that marketers attempt to satisfy. So, in the earlier example of thirst, the thirst is the need marketers will attempt to satisfy and a juice will benefit consumers by quenching their thirst. Similarly, a luxurious car will offer comfort and convenience which will be its core benefit. Core benefit is often the most difficult to define because of its abstract nature. It is the satisfaction a customer may receive from a product. It consists of both rational and non-rational elements (Homburg et al., 2005). So, reverting to the example of the car, the shine and robustness of a new car are the non-rational elements, whereas, a high resale price is a rational component. Thus, the core benefit has been a thrust of marketing efforts since time immemorial; without the identification of the need that marketers have to satisfy no marketing effort can begin, let along succeed. This shall be discussed in the remaining part of this paper and a critical evaluation shall be made with respect to the same, keeping in view the dynamics of changing world markets. Some core benefits are universal (such as ease of use of a camera or convenience of a car); however, in the increasingly globalized world these benefits are more often culturally influenced (Sinha & DeSarbo, 1998). According to various researchers, this core benefit derives its substance from the notion of self-reference (Hofstede, 1980). When discussing about international markets, this self-reference is subject to various cultural influences. However, there is insufficient research to date which explores the complex role of cultural differences on the buyer-seller interaction (Doney & Cannon, 1997). Specially, in the B2B market, this area’s importance has been ignored in most research with the majority talking about the impact of culture on advertising, product development, organizations and innovativeness. However, the research that has been conducted points to the relative importance of offering of core benefit as far as customer satisfaction is concerned. According to Hooley and Saunders, consumers have little interest in the specific characteristics of a product as compared to the benefits it shall provide them (Hooley, 1993). It is the determination of these costs and benefits to the customer that ultimately lead to the determination of customer value. According to research, the core benefits must be distinguished from those that are “add-ons” or additional. The difference lies in the fact that the core benefits are the result of the fulfillment of basic survival needs of the consumer, whereas, the add-on benefits result from the fulfillment of not so basic needs. These add-on benefits are the result of satisfaction of those needs that are not required; rather, they are created for the customer. This is similar to the notion of value-creation (Butz & Goodstein, 1996). Although these benefits may not be explicitly required by the customer, these add-on benefits enable organizations to differentiate themselves from each other. It is interesting to note that consumers perceive these core benefits and add-on benefits in different ways and it is a crucial task for marketers to understand these perceptions so that they are in a better position to offer them. Offering core benefits enables organizations to gain the consideration of consumers, whereas, the offering of add-ons facilitates in the objective of value-creation and is a popular differentiation strategy. However, the globalized and interrelated marketplace of today makes this process of understanding even more complicated as marketers struggle to assess the impact of cultural and geographical differences on the perceptions regarding the core benefits and add-on benefits. Several factors are analyzed in this context; researchers have developed a coherent set of factors that help in shaping consumers’ perceptions about the core benefits. These include the development of product markets, access to international goods and services, norms of the society and expectations that are influenced largely by the societal culture (Sinha & DeSarbo, 1998). On, the other hand, a major criticism of marketers’ efforts to focus solely on core benefits is that the globalized markets of today, products are becoming homogenous because of cut-throat competition. It is argued along these lines that marketers need to focus their efforts on differentiating their products in an attempt as creating advantages for themselves which are sustainable. Thus, long term survival in today’s markets requires focus on add-ons and value creation in order to deliver customer value. A conceptual model developed by Christian Homburg, Sabine Kuester, Nikolas Beutin, and Ajay Menon, explicitly defines the impact of culture on core benefits and add-on benefits. More importantly, however, the study reveals an in-depth explanation and discussion on the two major constructs- the core benefits and add-ons which is the basis of discussion in this paper. The model is presented in Appendix 1. Thus, core benefits of a product are defined as a combination of the product characteristics and relationship characteristics (Homburg et al., 2005). The product characteristics comprise of the product quality and service quality (Homburg et al., 2005). Relationship characteristics comprise of trust and joint action (Homburg et al., 2005). The quality of the product is defined as the perception of the consumer with respect to specific dimensions of a product (Homburg et al., 2005). For B2B marketing, a high quality product enhances the quality of the ultimate end product for the customer. The quality of a product is an Order qualifies since it enables as device for consumers for screening various products; hence, it is a crucial aspect of a product which can definitely not be ignored. The ultimate objective of marketers is to establish a profitable relationship with the customer and this cannot be achieved without offering the bare minimum specifications and features of a product. Service quality is also a core benefit since it denotes the fit between the company’s delivery of technical advice and post-purchase maintenance of the product and the consumer’s expectations regarding the nature of this service. In a more indirect way, the service provided by the organization to consumers elongates the product’s life and ensures in greater satisfaction for the consumer (Homburg et al., 2005). The third and final construct used to define core benefits is that of Trust (Homburg et al., 2005). Although trust is an abstract concept and has much depth, it is convenient to define trust as simply the credibility of the product and organization in the minds of consumers. More aptly put, trust means that consumers believe in the fact that the product will not be responsible for any negative consequences and will always or mostly give positive experiences to the consumer (Homburg et al., 2005). This has important implications for marketers as far as B2B businesses are concerned, since the existence of trust reduces the costs of transacting for the businesses and increases their competitiveness. Trust is, thus, not an add-on benefit but a core benefit which all marketers ought to aim at because the absence of trust in buyer-seller relationship will lead to its failure ultimately. Critics argue that marketers ought to target more than just the core benefits. The thrust of this argument is that consumer purchases are backed by a myriad of factors other than the product itself. These factors include the delivery service, after-sales maintenance and repair, warranty, goodwill of the organization and the quality of interaction with various touch points of the business (Colgate & Alexander, 2002). These factors create a perceived value of the product in the minds of consumers and augment the basic product. Various studies have been conducted that support this line of argument. Various names have been attached to the notion of add-on benefits in marketing literature including “product extensions” (Kotler, 1972), “peripheral services” (Sasser et al., 1978) etc. According to Kotler, the notion of the extended product comprises of the host of services that accompany the basic product offering. So, while the core product exemplifies the area of business for a company and is centered on its core competencies, the augmented product deals with the extra services regarding the product. According to researchers the add-on benefits or services can be categorized into two broad areas- those services that support and those that facilitate (Gronroos, 1990). The services that are referred to as supporting are those that are closely related to differentiation of the product offering, whereas, those that are facilitating are closely related to the use of the product; that is, its core benefit. Thus, while the supporting benefits maybe done away with; the facilitating ones cannot be avoided (Colgate & Alexander, 2002). To this extent, it is important to note that marketers cannot simply focus their attention on the core product; they need to offer these facilitating services to ensure that the product is delivered in a manner that facilitates its use or consumption. A study conducted by Mark Colgate and Nicholas Alexander points to a case where the services of financial sector are used by businesses in the retailing sector by emphasizing that these financial services are the add-ons or the augmented products that accompany the core product of retailers. It is not clearly evident whether these financial services are either supporting or facilitating. They may take on different roles depending on the situation. For instance, these services may become facilitating when the consumer is not able to consume the products without the facility of credit cards (Colgate & Alexander, 2002). However, the same may become supporting when store cards are used for the purpose of convenience rather than for the purpose of buying the product (Colgate & Alexander, 2002). As far as the augmentation of services is concerned, the element of augmentation enhances the chances of success for other new services. The study closely studies the benefits of financial services as an augmented product. The most profound benefit was the provision of marketing information as well as direct role in maximization of profits (Colgate & Alexander, 2002). Cluster relationships are developed with consumers through these products (Colgate & Alexander, 2002). The results also revealed that the financial services were not considered to be a natural outgrowth of the purchase activity. It also revealed that these services were not a part of facilitation for use of the core product; rather they were related to the supporting aspect. Infact, the existence of these services was considered as having a negative impact on the core operations of retailers (Colgate & Alexander, 2002). It was clear in the research that the benefits of these services most closely related with the supporting aspect as opposed to the facilitating aspect (Colgate & Alexander, 2002). Furthermore, these add-on benefits differ with the stage of offering of the financial service a retailer is at (Colgate & Alexander, 2002). Also the channel through which the add-on service is offered (in this case financial service) affects the perceived benefits. Thus, research has demonstrated several important arguments in favor of the augmented product. Marketers must identify the reason for which the add-on service is being provided. The benefits of a facilitating service differ greatly from supporting service. It is extremely essential for organizations to gain an understanding of the potential benefits of an augmented product. Often companies end up being disappointed by the fact that their expectations of the benefits of add-on services (as facilitating the realization of the core benefits of the product) do not match the actual results (Colgate & Alexander, 2002). Thus, augmented products may or may not support the core benefit of a product and more often their benefits are realized when they support a non-core benefit rather than a core benefit. On the contrary, such add-on benefits that are supporting in nature tend to divert the consumer’s attention away from the core competencies of the company and the product (Colgate & Alexander, 2002). This could be, for example, when these add-ons harm the buyer-seller relationship that has been developed through the core product. Marketers must therefore treat the augmented products with caution; they need to understand the nature of the augmentation and its implications. Therefore, research bears witness to the fact that there are a multitude of complexities associated with the way the augmented benefits are employed by organizations. Marketers, at the strategic level, need to plan their moves in a way that the goal of each marketing effort is clearly defined in order to clearly delineate on the possible benefits of each strategy. It can perhaps be said with much conviction that in the past the product was the starting point when organizations adopted the selling strategy; however, in today’s globalized world marketers have moved way beyond the notion of the product and are striving to deliver an experience. The entire concept of brand management surrounds around the idea of add-ons that create personalities, persona and perceptions regarding products. Products are no longer just products- they are human beings that have personalities. This image is not created by the product itself; it’s created by the additional features that accompany the product. Thus, the quality of a perfume maybe par excellence but if it lacks a powerful brand ambassador to back its persona, it’s likely to fail. To this end, the importance of augmented benefits cannot be ignored. Thus, to conclude, the challenge lies in bridging the two ends of core benefits and augmented benefits. Throughout literature various attributes and benefits of targeting both these benefits has been demonstrated. On the one hand are researchers who claim that concentration on the core value of the product is quintessential to winning the hearts of customers and developing successful business relationships with them which is the ultimate goal of marketing efforts. On the other end are those who argue that mere concentration on these efforts is not sufficient; marketers need to step beyond the core competencies and focus of the added benefits of products in order to effectively differentiate their product offerings. In between these two; however, a compromise can be reached as to a double-edged strategy that targets the core and the augmented aspects simultaneously. However, no hard and fast rule can be applied to all products and it is important to recognize that products differ in terms of their nature and distribution. References: Butz, H.E. & Goodstein, L.D., 1996. Measuring Customer Value, Gaining the Strategic Advantage. Organizational Dynamics, 24, pp.63-77. Colgate, M. & Alexander, N., 2002. Benefits and Barriers of Product Augmentation: Retailers and Financial services. Journal of Marketing Management, 18, pp.105-23. Crandall, R., 2002. Marketing your services: for people who hate to sell. New York: Mc Graw-Hill. Doney, P.M. & Cannon, J.P., 1997. An Examination of Trust in Buyer–Supplier Relationships. Journal of Marketing, 61, p.35–51. Gronroos, C., 1990. Service Marketing and Management. London: Lexington Books. Hofstede, G., 1980. Culture’s Consequences: International Differences in Work Related Values. California: Sage Publications. Homburg, C., Kuester, S., Beutin, N. & Menon, A., 2005. Determinants of Customer Benefits in Business-to-Business Markets:A Cross-Cultural Comparison. Journal of International Marketing, 13(3), pp.1-31. Hooley, G.J.a.J.S., 1993. Competitive Positioning:The Key to Marketing Strategy. New York: Prentice Hall. Kotler, P.2., 1972. Marketing Management: Analysis, Planning and Control. 2nd ed. New Jersey: Prentice Hall. Sasser, W.E., Olsen, R.P. & Wyckoff, D., 1978. Management of Service. Boston: Allyn and Bacon. Sinha, I. & DeSarbo, W.S., 1998. An Integrated Approach to a Spatial Modeling of Perceived Customer Value. Journal of Marketing Research, 35, p.236–49. Appendix 1 Source: Homburg et al., 2005. Conceptual Model. Read More