Course Code: AMK-01
Course Title: Marketing
Assignment Code: AMK-01/TMA/2014-15
Coverage: All Blocks
Maximum Marks: 100
Attempt all the questions.
1. Discuss various branding strategies available to marketers. Also discuss their relative merits and limitations.
Solution:-
The 12 Principles of Branding Strategy available to the marketers:
In a situation where you’re selling to multiple personalities, it’s best to first connect everyone on a common ground then articulate clearly what’s in it for each of them.
The goal is to stimulate an engaging conversation that allows us to change perception, diagnose expectations and bring clarity to the dialogue.
That’s the essence of developing a brand strategy – the foundation of your communication that builds authentic relationships between you and your audience.
It is by defining your brand strategy that allows you to utilize marketing, advertising, public relations and social media to consistently and accurately reinforce your character.
Without defining the core strategy, all channels of communication can often become a hit and miss expense.
Here are 12 brand strategy principles I believe to be the key to achieve business success.
1. Define your brand
It starts with your authenticity, the core purpose, vision, mission, position, values and character. Focus on what you do best and then communicated your inimitable strengths through consistency.
There are many examples of companies acquiring other brands but only to sell them off later because they don’t fit within the brand and its architecture.
Microsoft acquired Razorfish in 2007 when it bought aQuantive, a digital marketing services company, for about US $6 billion then sold it a few years later for $530 million.
Simply put, Razor fish isn’t a good fit with Microsoft’s brand strategy.
2. Your brand is your business model
Supports and challenge your business model to maximize the potential within your brand. Think of personal brands like Oprah, Donald Trump, Martha Stewart and Richard Branson.
These individuals practically built their business right on top of their personal brand; everything they offer is an extension of their brand promise.
3. Consistency
Consistency in your message is the key to differentiate.
Own your position on every reference point for everything that you do. President Obama focuses on one message only during his campaign, CHANGE. BMW has always been known as the “ultimate driving machine.”
4. Start from the Inside out
everyone in your company can tell you what they see, think and feel about your brand. That’s the story you should bring to the customers as well, drive impact beyond just the walls of marketing.
That’s example how Zappos empowers employees to strengthen consumer perception on its brand.
5. Connect on the emotional level.
A brand is not a name, logo, website, ad campaigns or PR; those are only the tools not the brand. A brand is a desirable idea manifested in products, services, people, places and experiences.
Starbucks created a third space experience that’s desirable and exclusive so people would want to stay and pay for the overpriced coffee.
Sell people something that satisfies not only their physical needs but their emotional needs and their need to identify themselves to your brand.
6. Empower brand champions
Award those that love your brand to help drive the message, facility activities so they can be part of the process.
If your brand advocate doesn’t tell you what you should or should not be doing, it’s time to evaluate your brand promise.
Go and talk to someone that works at the Apple retail store or an iPhone owner and you’ll see just how passionate they are about Apple. It’s a lifestyle and a culture.
7. Stay relevant and flexible
A well managed brand is always making adjustments. Branding is a process, not a race, not an event so expect to constantly tweak your message and refresh your image.
Successful brands don’t cling to the old ways just because they worked in the past; instead, they try to re-invent themselves by being flexible which frees them to be more savvy and creative.
Here is an example: when the economy tanked this year automaker Hyundai came out with an assurance program that lets you return your car if you lose your job with no further financial obligation and no damage to your credit.
The results?
As of end of February, onlytwo buyers have taken advantage of this program but it has boosted their sales by 14% year-over-year in Q1, only one of the two companies increased revenue while companies such as Honda experienced a drop of more than 30%.
Follow by that campaign in July, as gas prices expected to push higher during peak summer travel months, Hyundai came out with another program that guarantees a year’s worth of gas at $1.49 per gallon on most models.
8. Align tactics with strategy
Convey the brand message on the most appropriate media platform with specific campaign objectives.
Because consumers are bombarded by commercial messages everyday, they’re also actively blocking out the great majority of them.
Invest your branding efforts on the right platform that communicates to the right channels.
Television may be expensive but it has a broader reach, wider demographics and can produce instant impact. On the other hand, social media may seem cheap but it takes time, resources and may not give you the desire outcome.
9. Measure the effectiveness
Focus on the ROI (return on investment) is the key to measure the effectiveness of your strategies.
Often times it is how well your organization can be inspired to execute the strategies. It could also be reflected in brand valuation or how your customers react to your product and price adjustments.
Ultimately it should resonate with sales and that means profitability. But don’t just focus increasing sales when you could be getting a profit boost by reducing overheads and expenses as well.
Give yourself options to test different marketing tactics, make sure they fit your brand authenticity and aligns with your strategy.
10. Cultivate your community
Community is a powerful and effective platform on which to engage customers and create loyalty towards the brand.
In an active community, members feel a need to connect with each other in the context of the brand’s consumption.
We all want to be an insider of something, it excites us to tell people which community we’re part of and what knowledge we posses.
In many ways it’s our ego that prides us to be part of a sports team or a professional group.
Guess what car would members of the Porsche club consider first when it’s time to purchase their next vehicle?
Brand communities allow companies to collaborate with customers in all phases of value creation via crowd sourcing such as product design, pricing strategy, availability, and even how to sell.
11. Keep your enemies closer
Even if you have the most innovative, highly desirable product, you can expect new competitors with a superior value proposition to enter your market down the road.
The market is always big enough for new players to improve what you deliver better, faster, cheaper. Call it hyper competition or innovation economics, competition could be good for you believe it or not.
It challenges you brand to elevate the strategy and deliver more value.
Just look at how the Big Three (automobile manufacturers General Motors, Ford, and Chrysler) got crushed in the past decade by competitions from Germany and Japanese.
Not only do their competitors make a better product, they’re more efficient doing it and command a higher brand loyalty.
In 2008, Toyota overtook GM while Honda passed Chrysler in US sales.
12. Practice brand strategy thinking
IDEO’s CEO Tim Brown calls design thinking “a process for creating new choices.”
Essentially it means to not just settle for the choices currently available but tothink outside the box without being limited.
This concept actually applies to your brand strategy creation process that I called brand strategy thinking.
It’s always easier to execute tactics than coming up with a strategy because it implies the possibility of failure.
It’s much faster to emulate what worked for your competitor than to come up with something original and creative.
But the truth is, that’s not you and it violates the first principle of brand strategy. Brand strategy thinking is about creating the right experience that involve all the stakeholders to foster a better strategy.
Leverage the ecosystem that includes your employees, partners and customers to help you articulate your brand strategy so they sync together.
The take away: Having a brand strategy will bring clarity and meaning to your brand so you can focus on making, creating, and selling things that people actually care about.
If you could do that, your brand would be unique and memorable on its way to become an esteemed brand.
Merits and Limitations of Branding:
Branding is the process of communicating the value of your company and its products to a target market. This is normally done through various marketing and communication approaches, including advertising and public relations. Typically, it takes time and consistency in messages and performance for branding to work.
High Profit Margins
Successful branding normally leads to strong profit margins. As opposed to low-cost providers who target price-conscious consumers, companies that invest in branding usually focus on quality and service benefits. By building a brand image that is valued by quality-concerned customers, you can command higher prices in the marketplace. When combined with effective cost-control measures, your profit margins are optimized in this scenario.
Long-Term Emphasis
Branding is intended to offer a company stability and longevity. By consistently delivering messages about your value proposition and presenting products and services that fulfill those commitments, you assimilate your brand into society and culture. Over the long run, customers tend to migrate toward brands that are easily recognizable and trusted. Strong branding also aids word of mouth as customers share their own experience with others. This long-term emphasis insulates you from some of the risks of a slumping economy or industry.
High Costs
A primary drawback of branding is that it costs money to develop and promote a strong brand. Ideally, your investment provides ample return to justify the costs, but this is not guaranteed. As noted, companies that build strong brands do so over time through regular investments in advertising. Additionally, they invest in market research and product development to be able to offer high quality. These costs leave little room for error in buying, pricing and forecasting sales.
Limited Flexibility
One necessary evil of thoroughly defining a company or product’s brand is that it can limit your flexibility moving forward. Kleenex, for instance, has struggled in some of its attempts to develop and promote products beyond facial tissue. The company is so ingrained as a leader in that product category that it is difficult for customers to see the company as a marketer of anything else. Companies have been able to extend brands in some cases by emphasizing company strengths over product attachments.
2. (a) State the task of physical distribution system and explain them in detail.
Solution:-
Definition
Physical distribution is the group of activities associated with the supply of finished product from the production line to the consumers. The physical distribution considers many sales distribution channels, such as wholesale and retail, and includes critical decision areas like customer service, inventory, materials, packaging, order processing, and transportation and logistics. You often will hear these processes be referred to as distribution, which is used to describe the marketing and movement of products.
Accounting for nearly half of the entire marketing budget of products, the physical distribution process typically garnishes a lot of attention from business managers and owners. As a result, these activities are often the focus of process improvement and cost-saving initiatives in many companies.
Importance of Physical Distribution
The importance of physical distribution to a company can vary and is typically associated with the type of product and the necessity it has to customer satisfaction. Strategically staging products in locations to support order shipments and coming up with a rapid and consistent manner to move the product enables companies to be successful in dynamic markets.
Physical distribution is managed with a systems approach and considers key interrelated functions to provide efficient movement of products. The functions are interrelated because any time a decision is made in one area it has an effect on the others. For example, a business that is providing custom handbags would consider shipping finished products via air freight versus rail or truck in order to expedite shipment time. The importance of this decision would offset the cost of inventory control, which could be much more costly. Managing physical distribution from a systems approach can provide benefit in controlling costs and meeting customer service demands.
Functions of Physical Distribution
The key functions within the physical distribution system are:
Customer service
Order processing
Inventory control
Transportation and logistics
Packaging and materials
The customer service function is a strategically designed standard for consumer satisfaction that the business intends to provide to its customers. As an example, a customer satisfaction approach for the handbag business mentioned above may be that 75% of all custom handbags are delivered to the customer within 72 hours of ordering. An additional approach might include that 95% of custom handbags be delivered to the customer within 96 hours of purchase. Once these customer service standards are set, the physical distribution system is then designed to attain these goals.
Order processing is designed to take the customer orders and execute the specifics the customer has purchased. The business is concerned with this function because it directly relates to how the customer is serviced and attaining the customer service goals. If the order processing system is efficient, then the business can avoid other costs in other functions, such as transportation or inventory control. For example, if the handbag business has an error in the processing of a customer order, the business has to turn to premium transportation modes, such as next day air or overnight, to meet the customer service standard set out, which will increase the transportation cost.
Inventory control is a major role player in the distribution system of a business. Costs include investment into current inventory, loss of demand for products, and depreciation. There are different types of inventory control systems that can be implemented, such as first in-first out (or FIFO) and flow through, which are methods for businesses to handle products.
First in-first out, or FIFO, is a method in which the new products coming into the warehouse replace existing products of the same SKU so that merchandise is cycled and does not expire or become old as more recent production is available. Flow through, on the other hand, is product that does not get processed in the warehouse. It is offloaded from an inbound trailer, pushed across the warehouse and onto outbound trailers for departure without being stored in the warehouse.
(b) What is sales promotion? Describe various tools of sales promotion at consumer’s level.
Solution:-
“A planned and implemented marketing activity that both enhances product or service appeal and changes consumer behavior positively in return for an additional benefit for purchase or participation.” – The Institute of Sales Promotion (UK)
“SP are marketing and communications activities that change the price/value relationship of a product or service perceived by the target, thereby (1) generating immediate sales and (2) altering the long-term brand value.” – Schultz, Robinson and Petrison
“SP is an action-focused marketing event whose purpose is to have impact on the behavior of the firm’s customers”. – Blattberg and Neslin
To increase the sales of a product, the producers or manufacturers use various measures like free samples, bonus, etc. These measures are called the tools or techniques of sales promotion.
Free samples: These are distributed to attract consumers to try out a new product and thereby create new customers. Some businessmen distribute samples among selected persons in order to popularize the product.
Common examples – shampoo, washing powder, coffee powder, etc.
Premium or Bonus offer: This is a reward given to the existing customers. This tool will help increase the sales of the product among the existing customers itself.
A milk shaker along with Nescafe, mug with Bourn vita, toothbrush with 500 grams of toothpaste might be some examples of this tool.
Exchange schemes: It refers to offering exchange of old product for a new product at a price less than the original price of the product. This is useful for drawing attention to product improvement.
Most common example for this tool is – ‘Bring your old mixer-cum-juicer and exchange it for a new one just by paying Rs.500′
Price-off offer: Under this offer, products are sold at a price lower than the original price. This type of scheme is designed to boost up sales in off-season and sometimes while introducing a new product in the market.
‘Rs. 2 off on purchase of lifeboy soap, Rs. 15 off on a pack of 250 grams of Taj Mahal tea, Rs. 1000 off on cooler’ etc., are some of the common schemes.
Coupons: Sometimes, coupons are issued by manufacturers either in the packet of a product or through an advertisement printed in the newspaper or magazine or through mail. These coupons can be presented to the retailer while buying the product. The holder of the coupon gets the product at a discount. Best example for this is coupons distributed by the pizza restaurants like dominos, pizza hut, etc.
Fairs and Exhibitions: Fairs and exhibitions may be organized at local, regional, national or international level to introduce new products, demonstrate the products and to explain special features and usefulness of the products. Apart from this small stalls are also placed in popular locations where the products are sold in smaller quantity to attract more customers.
Bonus points: certain retail shops will have a scheme which will require the customer to be a member of the shop and to acquire membership card for the same. And every time the customer makes a purchase bonus points are added to the card and at the end of the year gifts are given for the points earned. Example – coffee day bonus points card
Money Back offer: Under this scheme customers are given assurance that full value of the product will be returned to them if they are not satisfied after using the product. This creates confidence among the customers with regard to the quality of the product. This technique is particularly useful while introducing new products in the market.
Scratch and win offer: To induce the customer to buy a particular product ‘scratch and win’ scheme is also offered. Under this scheme a customer scratch a specific marked area on the package of the product and gets the benefit according to the message written there.
3. Describe promotion mix with suitable examples. Also explain the elements of promotion mix with their advantages and disadvantages.
Solution:-
Specific combination of promotional methods such as print or broadcast advertising, direct marketing, personal selling, point of sale display, merchandising, etc, used for one product or a family of products.
There are five (sometimes six) main aspects of a promotional mix . These are:
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Advertising: Presentation and promotion of ideas, goods, or services by an identified sponsor. Examples: Print ads, radio, television, billboard, direct mail, brochures and catalogs, signs, in-store displays, posters, motion pictures, Web pages, banner ads, and emails. (Always in Paid Form non personal)
Personal selling: A process of helping and persuading one or more prospects to purchase a good or service or to act on any idea through the use of an oral presentation. Examples: Sales presentations, sales meetings, sales training and incentive programs for intermediary salespeople, samples, and telemarketing. Can be face-to-face or via telephone.
Sales promotion: Media and non-media marketing communication are employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability. Examples: Coupons, sweepstakes, contests, product samples, rebates, tie-ins, self-liquidating premiums, trade shows, trade-ins, and exhibitions.
Public relations: Paid intimate stimulation of supply for a product, service, or business unit by planting significant news about it or a favorable presentation of it in the media. Examples: Newspaper and magazine articles/reports, TVs and radio presentations, charitable contributions, speeches, issue advertising, and seminars.
Direct Marketing is a channel-agnostic form of advertising that allows businesses and nonprofits to communicate straight to the customer, with advertising techniques such as mobile messaging, email, interactive consumer websites, online display ads, fliers, catalog distribution, promotional letters, and outdoor advertising.
Corporate image may be considered as a sixth aspect of promotion mix. The Image of an organization is a crucial point in marketing. If the reputation of a company is bad, consumers are less willing to buy a product from this company as they would have been, if the company had a good image. Sponsorship is sometimes added as an seventh aspect.
New Media is also sometimes considered an element of the promotion mix.
Advantages and Disadvantages of Each Element of the Promotional Mix
Mix Element
Advantages
Disadvantages
Advertising
Good for building awareness
Effective at reaching a wide audience
Repetition of main brand and product positioning helps build customer trust
Impersonal – cannot answer all a customer’s questions
Not good at getting customers to make a final purchasing decision
Personal Selling
Highly interactive – lots of communication between the buyer and seller
Excellent for communicating complex / detailed product information and features
Relationships can be built up – important if closing the sale make take a long time
Costly – employing a sales force has many hidden costs in addition to wages
Not suitable if there are thousands of important buyers
Sales Promotion
Can stimulate quick increases in sales by targeting promotional incentives on particular products
Good short term tactical tool
If used over the long-term, customers may get used to the effect
Too much promotion may damage the brand image
Public Relations
Often seen as more “credible” – since the message seems to be coming from a third party (e.g. magazine, newspaper)
Cheap way of reaching many customers – if the publicity is achieved through the right media
Risk of losing control – cannot always control what other people write or say about your product
4. Differentiate between the following:
(a) Sales promotion and personal selling
(b) Product mix and product line
(c) Departmental stores and super markets
(d) Quantity discount and cash discount
Solution:-
(a) Sales promotion and personal selling
Every businessman wants to increase the sale of goods that he deals in. He can adopt several ways for that purpose. You might have heard about “Lakhpati Bano”, “Win a tour to Singapore”, “30% extra in a pack of one kg”, “scratch the card and win a prize” etc. You might also have seen gifts like lunch box, pencil box, pen, shampoo pouch etc. offered free with some products.
There are also exchange offers, like in exchange of existing model of television you can get a new model at a reduced price. You may have also observed in your neighbouring markets notices of “winter sale”, “summer sale”, “trade fairs”, “discount up to 50%” and many other schemes to attract customers to buy certain products. All these are incentives offered by manufacturers or dealers to increase the sale of their goods. These incentives may be in the form of free samples, gifts, discount coupons, demonstrations, shows, contests etc.
All these measures normally motivate the customers to buy more and thus, it increases sales of the product. This approach of selling goods is known as “Sales Promotion”.
Advertising also help in increasing sales of goods. Thus, advertising can be used as means of communication to inform potential customers about the incentives offered for sales promotion. Sales promotion adopts short term, non-recurring methods to boost up sales in different ways. These offers are not available to the customers throughout the year. During festivals, end of the seasons, year ending and some other occasions these schemes are generally found in the market.
Thus, sales promotion consists of all activities other than advertising and personal selling that help to increase sales of a particular product.
(b) Product mix and product line
A product mix (or product assortment) consists of all the product lines and items that a particular seller offers for sale. Avon’s product mix consists of four major product lines: cosmetics, jewelry, fashions, and household items. Each product line consists of several sublines.
product range/mix -> all products which a company is selling
A product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges. For example, Nike produces several lines of athletic shoes, Motorola produces several lines of telecommunications products, and AT&T offers several lines of long-distance telephone services.
product line -> cosmetics, VW Golf
(c) Departmental stores and super markets
A departmental store is one where the products are sorted and organized for shelf display. It is easy to find a product in such stores, as the products are organized in broad categories and sub-categories. Department stores used to be called “dry goods”. You buy clothes, shoes, jewelry, cosmetics and finer household goods there.
For example:- you can easily find soaps in a departmental store by looking for the toiletries section.
A supermarket, on the other hand, covers a broad variety of products. They may or may not be organized as carefully as a departmental store, as the products may range from groceries to automobiles. The displays are usually more point-of-sale centered, which means products are usually placed on the basis of demand. Supermarkets offer food, pharmaceuticals, magazines and general stuff for the home
For example:- you may find magazines placed prominently in a shelf as you walk in, by the side of a popular brand of perfumes and another shelf of chewing gums.
(d) Quantity discount and cash discount
Discounts are a reduction on the price of the goods or services that are provided by the seller to the buyer. Discounts result in the buyer having to pay an amount less than the listed price for the products, and such discounts are usually offered for to encourage customers to purchase more of the company’s products or to ensure faster payment. The article discusses two types of discounts; trade discounts and cash discounts and explains how these two types of discounts are quite different to one another.
Trade Discount (also known as Quantity discounts)
A trade discount is an incentive provided to a customer to purchase more of a product. There are many types of trade discounts that include discounts for purchasing goods in bulk, discounts provided for new customers, discounts for customers that purchase goods repeatedly, year-end discounts, etc. The aim of offering a trade discount is to encourage the buyer to purchase a larger quantity. Trade discounts maybe offered as a dollar amount reduction from the quoted price or may be provided in the form of a percentage reduction. The trade discount offered will increase in size with the quantity of goods that are purchased; higher discounts are offered for a larger volume of purchases. The trade discount that is offered to one vendor may be different to another since the discount will depend on the type of goods and quantity purchased. Trade discounts cannot be recorded in accounting books. Instead, they are recorded as revenue (the amount that was provided as a discount will be reduced from total revenue).
Cash Discount
Cash discounts are provided to customers either when a customer pays an invoice with a specific period of time, or when the customer makes a cash payment to the seller instead of using checks or credit cards. Cash discounts are stated in contractual agreements and are used to reward customers to make early payments on their invoice. This discount maybe printed on the invoice itself, and once the seller issues the invoice with a standard payment period of 30 days customers can refer to the discount details on their invoice and see how much of the total amount can be saved as a discount when early payments are made. Cash discounts are also used frequently for customers that pay cash instead of using credit cards. For example, gas stations offer discounts on the price for customers who pay in cash since gas stations can save on credit card processing fees when customers pay in cash.
What is the difference between Trade Discount and Cash Discount?
Trade discounts and cash discounts are similar to each other in that they are both offered by the seller to the purchaser, and they both reduce the final amount that needs to be paid. The aim of a trade discount is to encourage customers to purchase a higher volume of the company’s product. The aim of a cash discount is to encourage the buyer to settle the invoice within a specific period of time, also for cash payments, instead of using checks or credit cards. While a trade discount is provided on the purchase of goods, a cash discount is provided at the time the payment on the invoice is made.
Summary:
Trade Discount vs. Cash Discount
• A trade discount is an incentive provided to a customer to purchase more of a product.
• Cash discounts are provided to customers either when a customer pays an invoice within a specific period of time, or when the customer makes a cash payment to the seller instead of using checks or credit cards.
• A trade discount is provided on the purchase of goods, and a cash discount is provided at the time the payment on the invoice is made.
5. Write short notes on the following:
(a) Product life cycle
(b) Price discrimination’s
(c) Intensity of distribution
(d) Micro environment of marketing
(a) Product life cycle
The Product Life Cycle
A new product progresses through a sequence of stages from introduction to growth, maturity, and decline. This sequence is known as the product life cycle and is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix.
The product revenue and profits can be plotted as a function of the life-cycle stages as shown in the graph below:
(b) Price discrimination’s
Price Discrimination
Price discrimination occurs when identical goods or services are sold at different prices from the same provider. There are three types of price discrimination:
First degree – the seller must know the absolute maximum price that every consumer is willing to pay.
Second degree – the price of the good or service varies according to quantity demanded.
Third degree – the price of the good or service varies by attributes such as location, age, sex, and economic status.
The purpose of price discrimination is to capture the market’s consumer surplus. Price discrimination allows the seller to generate the most revenue possible for a good or service.
These graphs show multiple market price discrimination. Instead of supplying one price and taking the profit (labelled “(old profit)”), the total market is broken down into two sub-markets, and these are priced separately to maximize profit. The graph shows how a seller wants to generate the most revenue possible for a good or service. The elasticity of a market influences the profit.
(c) Intensity of distribution
Product distribution intensity refers to the scale of the distribution network as well as the appropriate selection of location. Common questions to be asked include: How many retailers in a particular market should be included in the distribution network? How many wholesalers?
Levels of Distribution Intensity
In intensive distribution, a producer’s products are stocked in the majority of outlets. The manufacturer attempts to get as many intermediaries of a particular type as possible to carry the product. This strategy is common for basic supplies, magazines, soft drink beverages, and snack foods . It provides for increased sales volume, wider consumer recognition, and considerable impulse purchasing. Low price, low margin, and small order sizes often result from this strategy. As a drawback, it can be extremely difficult to stimulate and control the large number of intermediaries.
In selective distribution, the producer relies on a few intermediaries to carry their product. The exact number of outlets in any given market is dependent upon market potential, density of population, dispersion of sales, and the distribution policies of competitors. This strategy is commonly observed for more specialized goods that are carried through specialist dealers, such as brands of craft tools or large appliances. It contains some of the strengths and weaknesses of the other two strategies; however, it is difficult to determine the optimal number of intermediaries in each market.
(d) Micro environment of marketing
A marketing department functions in a sales environment that is impacted by factors external to the organization and therefore beyond its control. These factors are either “macro environmental” or “micro environmental” forces. Macro environmental elements are encompassing; they include such concepts as demographics, economics, social and cultural factors, political and legal factors, technology and the natural environment; micro environmental forces are those that are distinct and individual, such as customers, producers, marketing intermediaries, public entities and the company itself.
Customers
A customer may be an individual or household, an organization that purchases a product for use in the production of other products, or an organization that purchases a product for resale at a profit. This customer factor of a marketing microenvironment can be further divided into business and institutional customers and state, city and municipal governments customers. Marketing specialists, or marketers, develop and market messages to appeal to a company’s individual customers’ needs.
Producers
A company relies on other producers and vendors for supplies and other production factors, such as labor, utilities and equipment required to produce and deliver a product to a customer. As a result, events affecting a producer or vendor also have the potential to impact customer satisfaction, whether those events impact the availability of materials, supply chain costs or product quality. A marketing department formulates its marketing strategy in light of these risk factors.
Marketing Intermediaries
Organizations typically rely on banks, venture capitalists and other sources to finance operations; wholesalers and retailers, warehouse’s and transportation companies to distribute goods; and advertising, market research firms and public-relations firms to market their products. The marketing strategy is defined in part on the degree to which each intermediary can potentially increase or decrease customer satisfaction.
Public’s
“Public’s” are groups that may have a significant impact on marketing activities formulated to contribute to customers’ satisfaction with a product and an organization. For example, satisfied customers are a public that contribute to a marketing program through positive word of mouth. Consumer advocates and watchdog groups are examples of publics that may hinder marketing activities through negative word-of-mouth.
Company
All departments within an organization have the potential to positively or negatively impact customer satisfaction. As a result, a marketing department works closely with the finance, purchasing, research and development, and manufacturing departments, among others, to identify ways that each department can contribute to the provision of exceptional customer value, which leads to superior customer satisfaction.