Creation and Distribution of Goods and Services - Essay Example

? Creation and Distribution of Goods and Services CREATION AND DISTRIBUTION OF GOODS AND SERVICES In 1988, Aldus corporation’s sales and marketing executives met to start strategic marketing planning for the year 1989. The marketing manager for their European operations, Richard Strong, proposed the splitting of Aldus’ product family into two distinct lines of production. One would be the Aldus professional series that would include professional versions of PageMaker, Aldus snapshot, Aldus freehand, and additional products aimed at creative graphics markets. The other was the Aldus executive series that included persuasion, PageMaker, and other products aimed at the business market. Richard Strong put forward the argument that the proposals would allow the corporation to develop two focused and separate market and product strategies for the market segments. The initial response was guarded, with its advantage being that it would allow the corporation to clarify positioning of its products while aiding Aldus to establish a unique and strong company identity in both market segments. However, the corporation had based its success via the offering of a single product line bridging creative professionals and business. This paper aims to evaluate this proposal. Strong’s proposal to alter the positioning strategy for Aldus As PageMaker’s sophistication grew to meet the high-end user’s evolving needs, the product became more unattractive to the business segment that was not as sophisticated. The primary distribution channels lacked sophistication to lend support to these high-end users, leading Strong to believe that the corporation faced the danger of being unable to serve these two markets. The situation was made worse in the European market by Apple Macintosh’s weak position, which made Aldus depend more PageMaker’s MS-DOS version. With the size of MS-DOS professional segment in the market being small, Aldus Europe was dependent on this segment for growth in the market. Strong saw the need for the professional and business user continuing their divergence since graphics professionals demand more sophistication, features, as well as more power and access to more technical support and increased compatibility with hardware and software used in the course of their business. Trying to meet these segment’s divergent needs with one product line placed a high demand on software development staff. The product’s complexity would complicate the upgrade task and delay upgrade schedules. Conflict in the corporation arose because the software development staff was oriented to the graphic’s market, while others were oriented to business segments. Both groups could only respond to the needs of their market via a single product. Splitting Aldus into two divisions would allow them to focus on these different market segments. These organizational and product line decisions were made due to what industry executives viewed as polarization of software distribution. Telemarketers, mail order firms and superstores increasingly served the market, with the high-end served by boutiques that had the ability to provide after sales support, consulting, and needs assessment. Hardware sellers were becoming less viable as software dealers. Differences between Consumer and Organizational Markets The first difference between consumer markets and organizational markets has to do with the nature of purchases (Pride et al, 2012). Organizational consumers buy capital equipment, semi-finished goods and raw materials for utilization in further operations or for reselling to others while final consumers normally acquire finished items for household, family or personal use. Organizational consumers are also more likely to demand exact specifications of products. Final consumers usually buy on a stylistic and descriptive basis. Additionally, organizational consumers usually use multiple buying responsibilities where more than one employee participates in expensive or complex purchase decisions. Consumer markets use it less formally and less frequently. Another difference between the two markets is based on demand (Pride et al, 2012). For organizational markets, derived demand occurs due to the quantity of items being purchased, which are often based on anticipated demand from the final consumer for finished services and products. Therefore, organizational consumers have less sensitivity to changes in price. As long as the consumer market is willing to pay higher prices, they do not object to price increases. Demand is volatile because of the accelerator principle where the consumer market demand affects numerous levels of organizational consumers. There are also more final consumers, compared to organizational consumers, with organizational consumers being more graphically concentrated than their counterparts are. Organizational consumers also buy through specialists and have shorter distribution channels. Finally, organizational and consumer markets differ based on a global perspective (Pride et al, 2012). Organizational consumers have more distinctions around the globe and sellers need to comprehend and respond to these distinctions. Companies that do business in foreign markets need to know how to deal with the organizational market consumers in those markets. The different cultures present in many nations around the world impact largely on the manner in which the organizational consumers in these markets are handled. These differences contribute to positioning strategy in several ways. They give an Aldus an added advantage over competitors enabling them to fit product offerings more closely to customers, as well as satisfy their customers. Marketers are also enabled in their knowledge of whether controllable variables like marketing mix variables will affect buying behavior. Consumer behavior can be defined as the acts of individuals that are involved directly in the obtaining, usage, and disposal of services and goods including the process of decision making that precedes this acts. This encompasses observable behavior of purchases, as well as, the underlying and less-measurable reasons behind these purchase decisions. The definition is also applicable to organizational buying behavior although groups can make most decisions in this area. The implications and concepts associated with the buyer behavior are applicable to corporations with capital fatigue. Criteria for Segmenting Markets Market segmentation, in essence, entails the process via which a market is divided into different homogenous consumer groups (Pride et al, 2012). Variation of consumers is dependent on various factors such as buying practices, locations, buying attitudes, resources and wants. Via segmentation, large and heterogeneous markets can be divided into much smaller segments, which are much easier to manage with services and products that match the consumer’s particular needs. The criteria for segmenting markets first requires that the segment must be measurable, meaning that one should tell the approximate number of potential clients and how many businesses exist in the segment. A segment must also be accessible via communication and distribution channels, such as the internet, telecom, distributors, transportation and sales force. The segment must also be durable with changes that can be attributed to its rarity and infrequency (Pride et al, 2012). It should also be substantial with its size considerably big enough to warrant treatment as a segment, as well as large enough for it to be profitable. Segments also need to be different in their various responses to various marketing efforts. Organizational and consumer markets do not undergo segmentation based on a similar variable since they possess inherent differences. Consumer market segmentation is done on the back of various variables that can be used alone or in combination (Pride et al, 2012). These variables include demographic variables, geographic variables, behavioral variables and psychographic variables. Organizational market segmentation, on the other hand, can be done on the basis of company size, the industry it serves, approaches used during the purchasing, the usage of products, situational factors such as urgency and seasonal trend, and geographic factors such as concentration of consumers and regional rate of industrial growth. Proposed Segmentation Scheme Based On Specific Market Characteristics For The Aldus Corporation. The management at Aldus Corporation viewed the publishing market for desktops as divided into four segments, with basis on the operating system in use with the computer, as well as whether the user was a creative graphics professional or a businessperson. The four segments were PC (MS-DOS) segment 3, Macintosh segment 2 for business users, PC (MS-DOS) segment 4 and Macintosh segment 1 for graphics professionals. Aldus introduced PageMaker into the 1st segment, offering this user segment a technology for them to buy manually and work outside services aimed at typesetting. The second segment attracted to PageMaker constituted a group of enthusiasts in Macintosh technology who had graphics orientation and wished to incorporate their documents with graphics. An increase in laser printer availability led to a growth of this segment from 1986. The early adopters and innovators in segments 1 and 2 possessed a higher degree of technical ability, and wanted to invest more time in learning how to maneuver the complex software. Segment 3 PageMaker began to penetrate after the release of the product’s PC version. The fourth segment involved creative graphics professionals utilizing PCs. In segment one, PageMaker dominated market share with approximately seventy percent of market share. Market research commissioned by Aldus suggested that less than twenty percent of the potential market for graphics art had adopted desktop publishing by 1988. It was suggested that the potential, creative graphics professional market could be tapped fully in approximately five years. PageMaker was also market share leader in the second segment, with sales in 1988 increasing in lieu with new installations to Macintosh since most of the Macintosh users with the use for PageMaker already had software for desktop publishing. Future sales were found to be highly dependent on the continued ability by Apple to develop new clients and increase existing client base penetration. Segment 3 was established as the one with great potential, especially with the large base possessing PCs and increasing laser printer availability. Aldus was of the belief that the real competition came from advanced word processors and low-end publishing software for desktops. PageMaker and Ventura had approximately equal share of this segment’s desktop publishing market for high-end clientele. PageMaker possessed a strong position in Segment 4, even though it was not as large. Define the stages of the product life cycle. A new product goes though a sequence from introduction, then growth, maturity, and finally decline (Pride et al, 2012). The product life cycle is associated with changes to the marketing situation, which impacts the marketing mix and marketing strategy. The introduction phase sees the firm seeking to build awareness about their brand, as well as the development of its product’s market. Product quality level and branding are established, with intellectual property protection being sought. Pricing could either be low to build up a market share or high in order to recover the cost of development. The company also practices selective distribution until there is evidence of acceptance from the consumers concerning the product. Finally, promotion is aimed at the innovators, as well as early adopters, with marketing communications looking to build awareness about the product, as well as educating potential clients concerning the product. The growth stage sees the firm attempting to build preference of their brand and increase their market share (Pride et al, 2012). The firm maintains its product quality, adds support services and features to its products. They also maintain their price as they enjoy little competition and cater to increasing demand. They add distribution channels as demand increases and the clients become more attracted to their product. Promotion is at this phase aimed at a much broader swathe of the market. The maturity stage sees diminishing growth in sales, with competition promoting products similar to those of the firm (Pride et al, 2012). During this stage, product features are enhanced to differentiate the products from the competitor’s product. The competition causes the firm to drop their prices, with distribution getting more intensive with incentives offered to encourage clients to favor the firm’s products. The firm also intensifies their advertising in order to differentiate their product. Finally, the product enters the decline stage, which involves a decline in sales that could see the firm harvest the product, maintain the product or discontinue it, depending on sales. Based on the new vision for Aldus Corporation, the professional version of PageMaker is at the growth stage. If the growth stage would be introduced into the market, then sales would increase. It would cause an increase in sales because it would meet needs of the graphical professional. This product may also not require as much input as that required when Aldus was launched. Since most of the codes are still present, Aldus would only have to tackle a few problems. The product also requires a degree of public awareness, so Aldus will start promoting the product. Since it is a new version with different features, functions and brand, Aldus needs to devote more time informing its potential clients about it. Finally, the product is in growth phase since profits would start to increase once the version of professional PageMaker version was introduced into the market. Aldus will work on pricing, product and distributional strategies via improving them. Appropriate Marketing Mix for the Professional Version of PageMaker Aldus’ marketing mix will be examined using four elements. The first element is the product, with the product having greater capability to meet the needs of the clients. It will satisfy the needs of sophisticated graphic designers and leave room for additional technical assistance. Additionally, it will possess a greater ability to incorporate other hardware and software. The product should also meet the business clients’ needs via possession of higher levels of automation, minimal technical assistance and ease of use. Another element is price. As the products are tailor made to please high-end users’ desires, pricing will respond to this function. Addition of value will lead to a boost in the ability of the product to fetch a higher price. The professional PageMaker version will have a much lower price due to the simplicity of its usage. Promotion is an additional element of the marketing mix. Aldus will dedicate resources to advertising in order to educate the consumer concerning their new products. Additionally, they should look into other products in the market that could facilitate the new product’s sustainability. Advertisements can be created to launch the product. Finally, Aldus will have to use personal selling to inform organizational and consumer markets concerning their product offering. They could also use direct mail to publicize this new line of products. Place is the final element of the marketing mix that Aldus should use. Strategies of distribution also need to be changed so that the corporation focuses on retailing the professional version of PageMaker. The professional version entails education of distributors concerning the product since most have been slow in tackling this segment. Concept of perceived value Perceived value happens when the consumer weighs the purchasing cost of a commodity against the product’s value in their life if they choose to buy eventually the product (Pride et al, 2012). This concept of perceived value is applicable to the majority of firms, since all firms require demonstrating to its clientele that products will bring them higher returns as compared to the resources that the client will have to part with in order to purchase the product. How perceived value influences marketing strategy Perceived value exerts influence on all aspects of the marketing process. All the prices have to be reasonable such that they are not too steep, or they will put off clients from buying the product. Conversely, the prices must not be set too low, or the clients will assume that this product will have no value in their business, such as was the case with Aldus PageMaker during its inception stages. In addition, perceived value also affects the strategies aimed at promoting the product since the consumer needs to be told about the product’s benefits. Aldus Corporation needed to do this via informing their clients regarding the benefits to be got out of desktop publishing. Problems that Aldus may encounter should it pursue selling to organizational buyers Aldus Corporation may have some problems in marketing their product to organizational consumers, especially in instances where other competitors in the desktop publishing business are in existence. Organizational consumers enter into agreements in the long-term with their suppliers in contrast with the consumer markets. Thus, it becomes increasingly difficult to convince these organizations to try out the new product from Aldus Corporation. Aldus Corporation will also face problems in several instances, where the firm does not have financial and human resources to understand all the intricacies of PC publishing. This would work against Aldus by making the product less attractive. Conclusion Aldus Corporation’s manager, Richard Strong, introduced a proposal aimed at developing an efficient and effective way to cater for the requirements of their client base. Despite all the challenges that were experienced in the face of such an approach, especially as concerned the company’s future direction, Aldus Corporation should consider the proposal to enhance the corporation’s competitive stature. References Pride, William. Hughes, Robert. & Kapoor, Jack. (2012). Business. Mason : South-Western Cengage Learning. Read More