The Product Or Service Itself Marketing Essay

The Product Or Service Itself Marketing Essay Ford Motor Company is one of the worlds largest producers of cars and other vehicles in the world. It owns a number of brands including Ford (of course), Volvo, Jaguar, Aston Martin, Land Rover, Mazda, and, in the USA, Lincoln and Mercury. Ford also has an extensive network of main dealer workshops, the Rapid Fit tyre and servicing chain, and owns the Kwik Fit brand. Ford is also one of the largest providers of automotive financial services. The company makes over 6 million vehicles per year and employs well over 300,000 people worldwide; it has around 25,000 dealers and over 10,000 suppliers. Ford is BIG. However, in recent years, Fords fortunes have been mixed: with increased competition, particularly from the Far East, sales have dipped in some areas dramatically. This paper attempts to reason why this has happened, and suggest ways in which more products and services can be sold to both new and existing customers. Except where specifically referred to, this document primarily focuses on the domestic car market in the United Kingdom. Since the turn of the century, Ford has been trying to turn around a sharp decline in worldwide sales. Every year or two, executives have swapped their roles in the boardroom to and from sales, marketing, finance and operations, and the brand message and sales slogans have been changed at the same time. In early 2009, for example, Ford announced that it was changing its marketing strategy to focus on its core brand and logo, rather than promoting specific models. By December 2009, Ford was working to integrate the companys marketing team members, global agencies and other supplier partners with a common and integrated plan to bring new global vehicles to market. Jim Farley, the companys group vice president of global marketing, confirmed  they were moving toward a new global marketing model and that global coordination would apply to everything from TV advertising to creating single vehicle marketing brochures. Fords new integrated global marketing strategy was deployed at the launch of the 2011 Ford Fiesta at the North American International Car Show in January. The company says it wants to create a more consistent and compelling connection with customers worldwide, while better leveraging the companys global assets and capabilities. The problem with Ford is: they dont have a clear marketing strategy. For some reason, Ford is finding the transition from a production oriented company to a marketing oriented company difficult. The Marketing Orientation The marketing orientation has become common in companies that make things for individual customers; not so common in business-to-business (B2B) companies. Many motor car companies have made the transition successfully, but Ford is not one of them. The Chartered Institute of Marketing defines marketing as: . . . the management process which identifies, anticipates, and supplies customer requirements efficiently and profitably. Probably the most important point when talking about marketing is the following: Marketing is both an important functional area of management and an overall business philosophy which recognises that the identification, satisfaction and retention of customers is the key to prosperity. (Lancaster Massingham, 1993, p.5) Marketing is both a functional area of management and a business philosophy, and can be viewed as follows: A basic concept that focuses on customers. A set of management techniques. As a function, part of marketings role is to identify correctly both the current and future needs and wants of specifically defined target markets. This information is then acted upon by the whole organisation in bringing into existence the products and/or services necessary to satisfy customers requirements. It is the marketing function which forms the interface with the firms existing and potential customers. Marketing provides entrepreneurship by identifying customer requirements, and through marketing the rest of the firm is able to mobilise resources to capitalise on. Although it can be seen that marketing has very important functional role within the organisation, the influence of marketing should not be restricted to the marketing department. A marketing oriented business has implications for the way people throughout the organisation respond to the initiatives that are forthcoming from marketing. Marketing as a Business Philosophy Many successful companies see marketing is the keystone of their business. Such firms do not see marketing simply as yet another functional area of management, but more as an overall business philosophy, and way of thinking about business, and a way of working which runs through every aspect of the firms activities. Hence, marketing is viewed not as separate function, but rather as a profit-oriented approach to business that permeates not just the marketing department but the entire business. Looked at from this point of view, marketing is seen as an attitude of mind or an approach to business rather than a specific discipline. The holistic view of the role of marketing within the firm has been expressed by a leading authority on management thinking, Peter F Drucker (Drucker, 1954, p.56), who stated: Marketing is not only much broader than selling, it is not a specialised activity at all. It encompasses the entire business. It is the whole business seen from the point of view of its final result, that is, from the customers point of view. Concerning responsibility for marketing must therefore permeate all areas of the enterprise. To be really effective, this marketing oriented business philosophy, known as the marketing concept, must pervade the whole company. An integrated approach is required, not just the creation or tweaking of a marketing department. Embracing customer satisfaction throughout the entire organisation is what separates a market-oriented firm from the rest. Having this approach to business drives the marketing oriented company into new activities and new opportunities and away from the narrow preoccupation with selling existing products to existing customers. Marketing cannot begin to be effective within a company unless it has the firm support of all layers of management and penetrates into every area of an organisation. So why, if the marketing concept is so simple and straightforward, has it been only relatively recently that firms have adopted it as a serious business philosophy? Very briefly, its because of the history of industrial development and the way in which business has been done since the Industrial Revolution. Production Oriented Businesses In the beginning, businesses were production oriented. There was virtually a never-ending demand for goods and services. Companies concentrated on production and efficient production in order to bring down costs, and product decisions were taken first and foremost with production implications in mind. This production point of view was workable as long as the sellers market existed. However in the early 20th century the rest of the world caught up with Great Britain and people could buy their goods and services from all over the world. For the first time companies had to compete, and had to differentiate themselves from their competitors. There are still some firms around today who are production oriented and they pay little regard to their customers wants: such firms take the attitude that they produce excellent products and common sense dictates that people will want to buy them. Ford started out as a production-oriented business, and still retains an element of this approach. Customers are, of course, convinced of the superiority of the companys products, and it is a company sales force that convinces them. If consumers are not buying the companys products, and as far as the companies concerned there can only be two possible reasons: 1) the customer is ignorant and does not appreciate a good product, or 2) the sales force is inept. Many companies have produced excellent products, but its not necessarily what customers want to buy. The British motorcycle industry produced fine quality machines, but consumers preferred the styling range offered by Japanese manufacturers. There is no longer a British motorcycle industry. In a production oriented company senior personnel such as the chairman and managing director are likely to have production backgrounds. Such companies are likely to have a small sales department which handles traditional marketing functions such as advertising. The greatest importance is placed on production. Under the production concept the salespersons task is a relatively minor one; he or she has to sell what the firm has produced. The sales area is viewed as a service function, and so the sales manager is not part of top level management. Sales Oriented Businesses In the early 20th century business people began to realise that it was not enough simply to produce goods as efficiently as possible. In order to make profits, these goods had to be sold. Business philosophy in many companies switched from production orientation to sales orientation. The sales force now became the most important people in the organisation. The firm could manufacture the goods, but these goods still had to be sold. The sales concept states that effective demand can be created by sales techniques, and it was thought that the sales department held the key to the firms future prosperity and survival. Techniques were developed that are still used today in modern marketing or, more accurately, selling. In order to achieve a competitive advantage, greater importance is attached to product differentiation and branding. Advertising, sales promotion and other sales techniques were increasingly used to achieve the sales angle. Customer satisfaction was not an issue: the whole ethos was based on getting the sale with the emphasis definitely on using the hard sell. Motor car dealers have a reputation for using sales orientation techniques. They believe that with some young, highly motivated salesman, hungry for success and with a well worked out incentive scheme, they can sell anything. Sales volume is the most important criterion, and planning horizons tend to be relatively short-term. The actual customer, and how customers might perceive the value of the utility or the goods being sold, is of secondary importance. Philip Kotler (reference here) defines the selling concept as: management orientation that assumes that customers will either not buy or not by enough of the organisations products unless the organisation makes a substantial effort to stimulate their interest in its products. Other examples of sales orientation companies would include certain home improvement type companies, such as double glazing or roof repairers, who send people door-to-door to get leads; once they have a lead from an unsuspecting targets, they send round a high-pressure salesmen with a foot in the door approach. A sales approach to business fine for those companies that are here today and gone tomorrow, but not to firms that want to remain in business and build their business on the basis of trust and respect and genuine customer satisfaction. A good high-power salesperson can sell virtually anything to anyone once! For repeat business over the long-term, however, the typical selling mentality of many firms is not enough: a more customer all market-oriented approach is necessary for long-term success. Marketing Oriented Businesses The modern marketing concept appeared in the United States during the 1950s, and since then has been adopted as the central business philosophy by many firms throughout the world. The marketing concept is sometimes referred to as a marketing or customer orientation. The theory is: in order for a firm to survive in the long term and make a profit it must ascertain the genuine needs and wants of specifically defined target markets and then produce goods and services that satisfy customer requirements. It is the customer who takes centre stage under the marketing concept. The satisfaction of customers is seen as the key to prosperity, growth and survival. The marketing oriented firm produces goods and services that customers want to buy rather than what the firm wants to make: the emphasis on the customer buying rather than on the company selling the goods. To progress from a sales oriented company into a marketing oriented company the firm must be able to cultivate a companywide approach to customer requirements. Marketing cannot begin to be effective within a company unless it has the full support of general management and penetrates every area of an organisation, from the lowest to the highest levels. Levitt (Levitt, 1960) has drawn a sharp contrast between the selling and the marketing concept: Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is preoccupied with the sellers need to convert his product into cash; marketing the idea of satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering and finally consuming it. Changing from a sales orientation to a more sophisticated marketing orientation will mean marketing will have much more influence and authority over other departments to bring about integrated co-ordinated marketing. This is the case at Ford: Ford seems to have attempted, half-heartedly, to change, but the sales orientation concept is entrenched, and the sales department, understandably, are reluctant to concede their status or influence. As stated earlier, the marketing concept requires whole-hearted cooperation from everyone within the company Ford needs an exceptional change management strategy to resolve the reallocation of power within the company. To turn around fords fortunes, management must adopt and use the marketing concept as a business philosophy. A change of management labels and titles will not achieve the necessary fundamental change in company attitude it is the companys whole approach to business problems that is the key issue. The adoption of a business philosophy that puts customer satisfaction at the very centre of management thinking is what will that finally convert Ford from a production or sales oriented company to marketing oriented one. Planning and Information Gathering The way to measure how committed a company is to the marketing concept is to analyse how it is planning for the future, particularly the information and procedures on which those plans are based. The focus for information gathering and planning should be based around catering for customer needs and satisfaction. The mistake that many managers make including many within Ford is that they think, by working in an industry for a number of years, they acquire a deep insight into what customers want. They believe, incorrectly, that marketing research would just confirm what they already know, and is therefore a waste of time and money. At the very least, the following questions need to be answered: Who are our customers? What do they buy? How do they consider value? How do they buy? When do they buy? It is essential for a company to plan their marketing based on an actual, accurate understanding of customer wants and needs. This means that processes and procedures must be in place to gather the information required to analyse and interpret these needs. What business are we really in? In a famous article published in 1960 Theodore Levitt, then a lecturer at the Harvard business School, asked the key question that all organisations must answer, What business are we really in? (Levitt, 1960). Levitt gave examples of organisations that have failed to understand the benefits their customers derive from the product offered. In the case of the American railroads, for example, he argued: The railroads did not stop crying because the need for passengers and freight transportation declined. They grew. The railroads are in trouble today, not because the need was filled by others (cars, trucks, air planes, even telephones), but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry incorrectly was because they were railroad orientated; they were product orientated not customer orientated. Other important questions are: what are we selling? And where do our products fit in the marketplace? What is the publics perception of Ford as a brand? 30 to 50 years ago, people bought Ford because a) they were relatively cheap, b) spare parts were readily available, and c) maintenance didnt cost the earth in fact many maintenance tasks could were DIY. What does Ford stand for now? Inexpensive Korean and soon Chinese imports are now the choice for people buying on price considerations, and, as vehicles have become more technology advanced, most maintenance tasks are beyond the scope of the DIYer. The truth is, Ford has lost its way it just doesnt know (or doesnt know how to inform the public) what its cars stand for. As a quick, unscientific, exercise, take a look at these phrases taken from recent motor car advertising and see how many you recognise: Papa! Vorsprung durch technik The power of dreams Va va voom Kinetic design Are there any you dont recognize? Turn the page to see the products they are advertising. Phrase Association Manufacturer (Model) Papa! Fun! Feminine, trendy, young, sporty in a girly kind of way. Renault (Clio) Vorsprung durch technik Quality, precision, technical expertise. Audi The power of dreams Aspirational. Inspirational. Honda Va va voom Fun! Trendy, young, sporty in a way that appeals to everyone. Renault (Clio) again Kinetic design ? Ford Ford Kinetic Design? What does that mean? A European-wide television advertisement backs this up with It looks like its moving even when its not. Is that what you look for in a car? According to the online Cambridge Encyclopedia, kinetic has the following meaning: Energy associated with an objects motion; a scalar quantity; symbol K, units J (joule). For an object of mass m moving with velocity v, kinetic energy K  =  mv2/2. A change in kinetic energy is work done to the object by a force. (Net Industries, n.d.) It just doesnt work, does it? The Marketing Mix There are environmental factors that are outside the control of an organisation, but which nevertheless can affect it. A company is affected by, and therefore must take account of, factors that are environmental and hence outside its control. In order to accommodate these factors, the company must use those elements of which it does have control. The most important of these elements are those that comprise the companys marketing mix. Figure 1: the 7 Ps Neil H. Borden has been credited with coining the term marketing mix (Borden, 1965). It refers to the set of marketing ingredients a company can use to achieve its objectives. Just as a chef can select from a wide range of ingredients and combine them in different amounts to bake a cake, so to the marketer can pick and choose from an extensive set of marketing components in order to find the right combination. The main elements of the marketing mix have become known as the four Ps: Product Price Promotion Place Over time, and with the inclusion of the marketing of services, Bordens four Ps have been extended to 7, with the inclusion of: Physical Environment Process People Within each of these four broad categories of marketing decision variables are many subdivisions, as shown in figure 1. The Research Process While marketing research can be invaluable, it can also be very expensive. There is no point in conducting market research if the value of obtaining the information is less than the cost of obtaining it. Also, market research does have its limitations. There is always a chance at least part of the research is flawed; the aim should be to minimise the occurrence of at least some types of error, including: Sampling errors: specifying the incorrect target population, or selecting an unrepresentative sample. Non-response errors: failing to successfully contact all people in a sample, or not receiving a high enough response rate. Data collection errors: respondents supply answers designed to irritate, impress or please the interviewer. Or questions that lead, or give rise to inarticulate answers, or can be misinterpreted. Analytical and reporting errors: simple human error or bugs in the information-gathering process. Gathering information in this way is known as primary data collection: as already stated it is expensive and can have other drawbacks. It can make sense to use information, called secondary data, which has already been collected, often by specialist organisations who sell it on to 3rd parties. Ford themselves have information on the millions (perhaps billions) of people who own, or have owned, a Ford motor car, as well as all those, not necessarily Ford owners, who have used a Ford-owned garage or service centre. Organisations such as J.D. Power provide extensive feedback from car owners, not only on the cars themselves (both new and second-hand), but on after sales service. Target Marketing Once the research is complete, companies need to identify and attempt to satisfy the genuine needs and wants of specifically defined target markets: it should go without saying that they need to do this more efficiently and effectively than their competitors. Implementing this philosophy means that it is usually not possible especially not in the motor industry to assume that every customer is identical. This assumption would be a product-oriented approach rather than a market-oriented one. An important development in recent years in marketing has been the realisation that many markets are made up of significantly different sub-groups, which could be treated as separate markets in terms of product offering, pricing policy, communication strategy and other marketing mix elements. For example, Ford makes motor cars, but the target markets for the Ford Ka and any type of Jaguar are worlds apart. The tendency, therefore, is to target the most commercially attractive sectors in segments of the market for a product, such as the executive car market or the sports car market. Target marketing is the reason for the market research described earlier: it is the reason for the extensive information gathering. Consumers have become more affluent over the years and have been offered a much wider range of products within a particular market to choose from. For example, there is such a wide range of options available when purchasing a Ford Focus that its almost like buying a custom-built car. To be effective, target marketing needs to be carried out methodically and precisely. Kotler (Kotler, 1991) states that the process of target marketing has three distinct stages: Stage One: Market Segmentation. The overall market is divided into distinct groups of buyers who are likely to respond favourably to different product/service offerings and marketing mixes. The firm determines the most appropriate basis for segmentation, identifies the important characteristics of each market segment, and develops criteria for evaluating their commercial attractiveness and viability. Stage Two: Market Targeting. This is not to be confused with the overall process of target marketing. Market targeting is the process whereby one or more of the market segments previously identified are evaluated and selected. Stage Three: Product Positioning. Even within a given market segment, competitors products are likely to be positioned in a particular niche or position. Product positioning is the process whereby the product or service and all other marketing mix elements are designed to fit a given place within a particular segment. Such a position may be more implied than real. It is how the consumer perceives the product position relative to the competitors products that is important. Companies are now identifying customers whose exact needs can be met more effectively. Thomas Levitt (Levitt, 1974) said that the marketer should: . . . stop thinking of his customers as part of some massively homogeneous market. He must start thinking of them as numerous small islands distinctiveness, each of which requires its own unique strategies in product policy, in promotional strategy, in pricing, in distribution methods, and in direct selling techniques. There has always been some form of market segmentation. The wealthy buy fine wines and fashionable clothes, and poor people buy beer and more functional clothing. But this was by accident rather than design. As companies have come to realise over time, it is unlikely that they can produce one product that will satisfy everyone. You can look at any number of markets to see the huge array of choices within each particular segment. For example, washing detergent from the same brand can be bought in original powder form, liquid, concentrated, tablets, liqui-tabs, and so on. Likewise, Ford sells has a wide range of options and configurations within each marque, so a Mondeo could be a cheap(ish) family car, or it could be a well-respected high(ish) performance sports model, with a plethora of extras. Market Segments There are many variables that can be used in segmenting consumer markets. A combination of them may be necessary to define a specific segment. There are no golden rules when it comes to segmenting consumer markets. Very often it may be necessary to use a combination of variables in order to define a pre-precise market segment. Market segments include demographic variables, the main ones being: age sex family size family life cycle A company called Tesearch Services developed a family lifecycle approach and branded it as SAGACITY. This segmentation approach combines life cycle with income and occupation to define different consumer groups. SAGACITY is a powerful tool for differentiating consumer groups for a wide variety of products and services. The current standard in the UK is to use a mixture of social class and income. Classification is based on the occupation of the notional head of the household. The socio-economic groupings used in the UK are those established by the National readership survey, ranging from class A at the top higher managerial, administrative or professional, down to E at the bottom state pensioners, widows, lowest wage-earners and the unemployed. These are some limitations to geographical or social-class segmentation, so a number of approaches have been developed which are a combination of where the customer lives and a number of sociodemographic variables, such as occupation, home-ownership, family size, and so on. These have become known as geodemographic variables. One of the most popular and powerful of these is the A classification of residential neighbourhoods, or Acorn, system. This system is a method for geographically mapping concentrations of different types of people. The Acorn system, based on census data, has proved particularly useful for direct mail campaigns, but also for deciding on sites for retail outlets and advertising poster locations. Segmentation based on census data and neighbourhoods is effective and a number of similar approaches have emerged. Pinpoint (PIN) analysis uses 104 census variables to define up to 60 neighbourhood types which can further be clustered into 12 main types. Mosaic is also based essentially on census enumeration districts. Education is a popular segmentation type. Education is related to social class group because, usually, the better educated tend to obtain better jobs, and generally earn more. Consumers media habits are also generally related to education. The better educated tend to read the quality broadsheet newspapers such as the Times or the Guardian, and are more likely to watch more highbrow commercial television programmes. Benefit segmentation is when different people buy the same or similar products for different reasons. For example, some people buy cars simply to get from A to B; others for aesthetic reasons; others as a status symbol; others as an extension of their personality; and so on. Hayley (Hayley, 1968) first introduced this approach, based on the idea that consumers could be grouped according to the principal benefits sought. This approach assumes that no single variable is likely to be powerful enough to adequately segment the market on its own; the main variable is the benefits sought. As Hayley states: the benefits which people are seeking in consuming a given product are the basic reasons for the existence of true market segments. Another form of segmentation uses degrees of brand loyalty to separate customer types. Kotler divided consumers into 4 groups in descending order of loyalty: hard-core loyals, soft-core loyals, shifting loyals and switchers, who have little or no loyalty. These are many other types of segmentation, but the samples given here should illustrate the possibilities. Fords recent advertising strategy, both in Europe and the United States, has been to align itself to major sporting events. In recent years Ford has sponsored football tournaments and events, including the UEFA Champions League and the Premier League in the England. This has given the company considerable TV airtime through its association with Sky Sports. However, viewing figures show that, typically, the average top viewing figure a given week is just over 1,000,000, dropping to around 140,000 for the 10th most popular sporting event on Sky. Although the popularity of (first-class) football has increased in recent years, particularly amongst more affluent individuals and, in particular, women, Fords sales figures most certainly have not. In fact, there is no evidence to suggest that Fords allegiance to sporting events have had any effect on sales at all at least not in the UK. While it makes sense to promote the Ford brand, and to promote it globally, perhaps it would make more sense to promote individual marques in their own right. Potentially, Ford has the range of models to sell to people at all stages in their lives from the student in a second-hand Ka, to the executive a Jaguar. What is needed is a marketing strategy that segments the stages in customers lives, with a clear route through to their ultimate aspirational car, whether that be a Focus, Land Rover, or an Aston Martin. The Product or Service Itself For the marketer, the product becomes any good or service satisfies a want or need that is considered together with its perceived tangible and intangible qualities. To the consumer, a product is a series or a bundle of satisfactions. Whatever a company would like its products to be, the real nature of its products li