10 – Marketing Considerations

Introduction

Marketing plays a significant role in our daily lives. We consume items that marketers have made available every day. When we buy a thing, we pay for marketing. Marketing costs account for half of every rupee spent at the retail level. Marketing is in charge of ensuring client satisfaction and raising our living and quality of life.

As a result, the consumer must eventually benefit from the entrepreneur’s marketing strategy. No buyer will buy a product unless satisfied with its quality and, if necessary, with prompt after-sales support. This unit will assist you in comprehending the different facets of marketing management.

10.1 Choosing a Target Market

A target market is a collection of people who share everyday needs, perceptions, and interests. They have a preference for similar brands and react to market swings in the same way. The target audience is made up of people who have similar viewpoints and preferences.

Individuals in the target market have nearly identical expectations from organisations or marketers.

Obese people worldwide are looking forward to reducing their calorie intake. Marketers recognised this need and created Kellogg’s K Special, which claims to help people lose weight in just two weeks. The target market for the K Special diet is obese people.

Perfumes and deodorants with a strong and long-lasting scent would appeal more to people who sweat a lot.

A company’s choice of target market is crucial because implementing an effective and targeted marketing mix necessitates significant effort and attention.

Target market selection is an essential aspect of marketing strategy, and it usually necessitates extensive research, debate, and evaluation throughout the company.

Small businesses, which frequently lack the means to appeal to big aggregate markets or maintain a diverse range of differentiated items for various customers, might greatly benefit from target marketing. Target marketing enables a small business to create a product and marketing mix that caters to a relatively homogeneous market segment. A small business may carve out a market niche that it can serve better than its larger competitors by focusing its resources on a specific customer base in this way.

For many small businesses, marketing management’s primary job is identifying specific target markets and supplying products and promotions that maximise their profit potential.

For example, a fishing equipment manufacturer would not promote its product to the entire population of the United States at random. Instead, it would perform market research utilising methods like demographic data, market surveys, and trade exhibitions to determine which clients are most likely to buy what it offers. It might then use its limited resources to persuade its target group(s) members to purchase. Advertisements and promotions could be customised for each target market category.

There are countless ways to cater to a target market’s preferences and needs. Product packaging, for example, can be developed in various sizes and colours, or the product itself can be adjusted to appeal to multiple personality types or age groups. Producers can also alter the product’s warranty or durability and give different levels of after-sales care. Other factors, like distribution and sales systems, licencing tactics, and advertising channels, are also significant. The marketing manager must consider these aspects and create a unified marketing programme to appeal to the target customer.

Small businesses are also advised to review their marketing activities regularly to remain current with changing business realities.

For example, new businesses often accept any lawful business to pay the bills and prove themselves as a genuine company. However, long after the start-up has established itself as a valuable part of the local business community, it may continue to rely on these early clients rather than casting its net wider for more promising prospects.

10.2 Marketing Plan

Small businesses might obtain a competitive advantage over larger competitors by customising their products or services to match the specific needs of each consumer. The product/service offered, price, promotion, and distribution can all be used to customise the experience. The marketing mix is made up of the items listed above. Another advantage is that small enterprises provide a more personalised consumer experience.

First and foremost, networking is a marketing approach you should use offline and online. This is quite likely the most significant strategy you can pursue. As a small business, one of your first and most difficult challenges will be getting people to realise you exist. People won’t ask to buy your widgets or hire you for your services if they don’t know you’ve created a small business and have excellent widgets or services to sell, no matter how wonderful and unique they are. As a small business owner, your first task will be to spread the word.

Aside from online and offline networking, advertising your business through advertisements is another way to sell your brand in both settings. Print and flyer ads, stationery, vehicle tags, and window displays can all be used in the real world, while pay-per-click marketing can be used online. Small businesses frequently use growth strategies. One technique to consider for business growth plans is to consider how you will leverage products, markets, or customers:

• Currently available product/market: Market penetration is the strategy of growing your share of existing marketplaces. This could be accomplished by increasing customer awareness of your products and services or attracting new customers. See the Related Items section below for a link to the Factsheet: Planning Marketing Communications for more information on how to plan effective marketing communications.
• Current product/new market: Market development is a strategy for discovering and accessing new markets with your existing product or service line. A new market could refer to a new territory, country, or market segment. See the Related Items section below for a link to the Factsheet: Selecting and Entering New Markets for more information and getting into new markets.
• New product/current market: Product development is a strategy for increasing the value you provide to customers by upgrading or developing existing products and services.
• New product/market: Diversification is a strategy that comes with many costs and dangers. It frequently forces businesses to embrace new ways of conducting business, which has far-reaching implications beyond merely selling new products or services in a new market. As a result, it’s usually a tactic to use when alternative options aren’t available.

10.3 Pricing and Marketing Strategies for Services

Pricing is a crucial marketing function. The exchange value of a product is its price. It is the sum of money or other items required to obtain a product. The exchange of goods for goods is known as bartering. When establishing a marketing strategy, an organisation can compete on price and non-price elements.

10.3.1 Pricing Strategy

1. Pricing strategies are crucial for businesses as they determine how products or services are priced to achieve specific business goals. Here’s a detailed explanation of different pricing strategies, including formulas and examples:
   

   1. Markup Pricing

   Markup pricing involves adding a fixed percentage to the cost of a product to determine its selling price. This is a simple and widely used pricing strategy.

   • Formula:

     $$text{Selling Price} = text{Cost} + (text{Cost} times text{Markup Percentage})$$

   • Example:
     If a product costs $50 to produce and the company wants a 20% markup, the selling price would be:

     $$text{Selling Price} = 50 + (50 times 0.20) = 50 + 10 = $60$$

   2. Target Return Pricing

   Target return pricing aims to set a price that will achieve a specific return on investment (ROI). This strategy is often used by businesses with a clear profit objective.

   • Formula:

     $$text{Selling Price} = frac{text{Total Fixed Costs} + text{Total Variable Costs} + text{Desired Profit}}{text{Number of Units Expected to Sell}}$$

   • Example:
     A company has fixed costs of $100,000, variable costs of $50 per unit, expects to sell 10,000 units, and wants a $20,000 profit. The selling price would be:

     $$text{Selling Price} = frac{100,000 + (10,000 times 50) + 20,000}{10,000} = frac{100,000 + 500,000 + 20,000}{10,000} = frac{620,000}{10,000} = $62$$

   3. Perceived-Value Pricing

   Perceived-value pricing is based on the customer’s perception of the product’s value, rather than the cost of the product itself. Companies that offer premium products often use this strategy.

   • Formula:
     There isn’t a fixed formula, as the price is determined by what customers believe the product is worth. However, it involves analyzing customer perceptions, competitors’ prices, and other market factors.
   • Example:
     A luxury watch brand might price a watch at $5,000, even though the production cost is only $1,000, because customers perceive it as a high-status item worth the premium price.

   4. Value Pricing

   Value pricing focuses on setting a price that reflects the value the customer receives. This strategy is common in markets where customers are highly value-conscious.

   • Formula:
     Similar to perceived-value pricing, value pricing doesn’t have a strict formula. The price is set based on the value the product provides relative to competitors.
   • Example:
     A software company might offer a package at $99 per month because customers find the features and benefits worth more than the price, compared to other software with fewer features but similar pricing.

   5. Going Rate Pricing

   Going rate pricing involves setting a price based on the prices of competitors. This strategy is common in markets with a high degree of price competition.

   • Formula:
     No fixed formula, as it involves matching or slightly undercutting the average market price.
   • Example:
     If the average price for a smartphone in the market is $700, a company might price its new smartphone at $700 or slightly lower, say $680, to stay competitive.

   6. Sealed-Bid Pricing

   Sealed-bid pricing is used in auctions or tender processes, where businesses submit their bids without knowing the bids of others. The goal is to win the contract while still making a profit.

   • Formula:
     Again, no specific formula, but the price is usually determined based on cost analysis, competitor estimates, and the likelihood of winning the bid.
   • Example:
     A construction company might bid $1.5 million for a government contract, estimating that their competitors might bid slightly higher or lower, and ensuring their bid covers costs and desired profit.

   Summary of Formulas:

   Pricing Strategy	Formula
   Markup Pricing	$text{Selling Price} = text{Cost} + (text{Cost} times text{Markup Percentage})$
   Target Return Pricing	$text{Selling Price} = frac{text{Total Fixed Costs} + text{Total Variable Costs} + text{Desired Profit}}{text{Number of Units Expected to Sell}}$
   Perceived-Value Pricing	No fixed formula; based on customer perception and market analysis.
   Value Pricing	No fixed formula; based on customer value relative to competitors.
   Going Rate Pricing	No fixed formula; based on competitor prices.
   Sealed-Bid Pricing	No fixed formula; based on cost analysis, competitor estimates, and bid-winning strategy.

   These pricing strategies help businesses set prices that align with their financial goals, market conditions, and customer perceptions.

10.3.2 Different Pricing Strategies

A few examples of pricing methods are as follows:

1. Premium Rates

When there is a unique brand, use high pricing. This strategy is employed when the marketer has a significant competitive advantage and is confident in their ability to charge a higher price. Cunard Cruises, Savoy Hotel accommodations, and first-class air travel are all offered at exorbitant prices.

2.  Penetration Pricing

The price charged for products and services is intentionally low to acquire market share. When this is accomplished, the price is raised. France Telecom and Sky TV both employed this strategy. These businesses need to attract many customers to make it worthwhile, so they provide free phones or subsidised satellite dishes to entice people to sign up for their services. When many people sign up for a service, the price steadily rises. Rate rates are at their highest when there is a premium movie or athletic event, for example, Sky TV or any cable or satellite business. Therefore, they shift from a penetration method to a skimming/premium pricing approach.

3. Economy Pricing/Cost-effectiveness

This is a no-nonsense, low-cost option. The marketing and promotion costs of a product are maintained to a minimum. Soups, spaghetti, and other supermarket items are frequently labelled “economy brands.” Budget airlines are known for keeping operating costs as low as possible and charging passengers a reduced fare to load an aircraft. The first few seats on a flight are sold for a very low price (almost a promotional price), while the middle bulk are economy seats, with the last few seats on a flight commanding the highest price (which would be a premium pricing strategy). During times of economic downturn, economy pricing sees an increase in sales. It is not, however, the same as a value pricing strategy, which we will discuss shortly.

4. Skimming Pricing

When a corporation uses price skimming, it charges a higher price because it has a significant competitive advantage. The advantage, on the other hand, isn’t always sustained. The high price invites more rivals to the market, and due to the increased supply, the price will indeed decline.

In the 1970s, manufacturers of digital timepieces employed a skimming method. Once other manufacturers are enticed into the market and the watches are produced at a reduced unit cost, other marketing methods and price approaches are adopted. New items were created, and the watch industry established a reputation for being forward-thinking.

5. Pricing from a Psychological Perspective

This strategy is used when a marketer wants the customer to react emotionally rather than rationally. For example, the Price Point Perspective (PPP) is 0.99 cents, not $1. It’s strange how customers use pricing as a barometer for all kinds of things, especially in foreign areas. Consumers may use a choice avoidance strategy when purchasing things in an unfamiliar context, such as when buying ice cream. Would you prefer $0.75, $1.25, or $2.00 worth of ice cream? It’s entirely up to you. Perhaps you’re breaking into a completely new market. Assume you’re buying a lawnmower for the first time and have no experience with gardening tools. Would you always choose the cheapest option? Would you go for the most expensive option? Or would you prefer to use a lawnmower in the middle? In new markets, price may thus be a signal of quality or benefits.

6. Pricing for a Product Line

Pricing for a range of products or services reflects the benefits of different range segments. For example, car washes may cost $2 for a basic wash, $4 for a wash and wax, and $6 for the entire package. Because it gives a range of prices that a consumer considers as fair incrementally — over the range, product line pricing rarely reflects the cost of creating the goods.

If you buy a single packet of chocolate bars or potato chips (crisps), you can expect to pay X, but if you purchase a family pack that is 5 times larger, you can expect to pay less than 5X the price. Producing and distributing huge family packs of chocolate/chips could be prohibitively expensive. Although they price throughout the entire range, it may benefit the manufacturer to sell them individually in terms of profit margin. Rather than single items, profit is made on the entire range.

7. Product Pricing Options

Once clients begin to purchase, businesses will try to increase their spending. Optional ‘extras’ raise the product or service’s overall price. Airlines will charge for extras like reserving a window seat or a row of seats next to one another. Budget airlines, once again, use this tactic when charging extra for extra luggage or legroom.

8. Pricing for Captive Products

Because the consumer has little choice, corporations will charge a premium for complementary products. A razor maker, for example, will charge a low price for the initial plastic razor and recoup its profit (and more) from the sale of blades that suit the razor. Another example is when a printer manufacturer offers a low-cost inkjet printer. In this case, the inkjet firm understands that if you run out of consumable ink, you’ll need to buy more, which can be costly. You have little choice because the cartridges are not interchangeable.

9. Pricing for Product Bundles

In this case, the vendor has combined many things into a single package. This also helps to get rid of old stock. When blue-ray discs and video games near the end of their commercial life cycle, they are frequently offered in bundles. Product bundle pricing can also be seen with the sale of items at auction, when an appealing item may be included in a lot with a box of less exciting items, forcing you to bid for the entire lot. It’s a fantastic technique to move slow-moving items; in some ways, it’s promotional pricing.

10. Promotional Pricing

The use of pricing to advertise a product is pretty prevalent. There are many different types of promotional pricing, such as BOGOF (Buy One Get One Free), money-off vouchers, and discounts. Promotional pricing is frequently a source of contention. Many countries have regulations that dictate how long a product must be sold at its initial price before being discounted. Sales are all about promotional price extravaganzas!

11. Geographical Pricing/Pricing by Location

Varying parts of the world have different prices, known as geographic pricing. Consider the value of rarity or the price rise caused by delivery charges. In some nations, some categories of items are subject to higher taxes, making them more or less expensive, or legislation restricts the number of products that can be imported, boosting prices.

12. Value pricing that is fair and reasonable

This method is adopted when external reasons such as recession or increasing competition drive enterprises to provide value products and services to retain revenue, such as value meals at McDonald’s and other fast-food restaurants. The term “value price” refers to a price that provides excellent value for money, i.e., a price that makes you feel like you are getting many products. It resembles economic pricing in many ways. It is essential not to believe that there is additional value in the product or service. In most cases, lowering the price does not increase the value.

10.3.3 Marketing of Services

Service sectors come in a wide range of shapes and sizes. Courts, employment services, hospitals, loan agencies, military services, police and fire departments, post offices, regulatory agencies, and schools are all part of the government’s service sector. The private non-profit sector is in the service industry with museums, charities, churches, colleges, foundations, and hospitals. Airlines, banks, computer service bureaus, hotels, insurance businesses, law firms, management consulting firms, medical practices, motion-picture corporations, plumbing repair companies, and real estate companies comprise a significant portion of the business sector. Many manufacturing employees, such as computer operators, accountants, and lawyers, are also service providers. They are, in fact, a “service factory” that provides services to the “goods factory.” Not only do classic service firms exist, but new sorts are constantly emerging to meet the requirements of an ever-changing populace.

According to Kotler (1996), service is an important, intangible activity that one party does to another without resulting in ownership of something. Its creation could be linked to a physical product or not. Intangibility, inseparability, variability, and perishability are the four main characteristics of service.

Perishability

This is perhaps the most difficult of all the identified specific characteristics of service items to appreciate. Why? In comparison to physical goods, services are more perishable. But how can the services of an airline, for example, be deemed more perishable than fresh food and vegetable products?

This is because, unlike most tangible things, many services cannot be stored. For example, if an airline does not sell all of the tickets on a flight, those seats or the sales income generated by filling them are immediately and irreversibly gone.

Intangibility

Customers can view, feel, touch, weigh, and sniff physical things in the store before deciding whether or not to buy them.

When compared to selecting a service, such as an insurance policy. You can’t touch, see, or smell the items before deciding. Still, you can certainly make an educated guess based on previous experience, word of mouth, or even the location and decor of the insurance office.

Variability

Companies have increasingly devoted special attention to assuring uniformity in quality, features, packaging, and so on in the production and marketing of physical items. Most people can be confident that every bottle of Coke they buy, even throughout a lifetime, will be the same. On the other hand, the supply of services inevitably includes a significant amount of “human element.”

Indeed, with many services, we only purchase the providers’ expertise. As a result, it is frequently difficult for the supplier and the user to ensure a consistent “product” or service quality.

Inseparability

Service provision and supplier are inextricably linked to service consumption, and the consumer is a fundamental distinguishing aspect of service marketing. We cannot, for example, take a hotel room home to consume; we must “consume” the service when it is provided. Similarly, the hairdresser must be physically present to deliver this service.

This has ramifications for both distribution routes and operational scale.

10.4 Export Marketing

Export marketing refers to selling goods to people in other nations. It entails a long process and formalities. In export marketing, items are transferred abroad according to procedures established by exporting and importing countries. Due to foreign constraints, worldwide competition, lengthy procedures and formalities, and other factors, export marketing is more complex than domestic marketing. Furthermore, when a company crosses national borders, it becomes exponentially more complicated. Export marketing also provides many options for making a lot of money and getting a lot of foreign currency.

“Export marketing” is defined by B. S. Rathor as “the administration of marketing efforts for products that cross a country’s national frontiers.”

Export marketing has a broader economic relevance because it benefits the national economy in various ways. It encourages economic, business, and industrial development while generating foreign exchange and maximising available resources. Every country implements multiple policies to promote exports and meaningful global marketing engagement. Globalization is a fact, and every country must engage for mutual gain.

Every country must open its markets to other countries and try to penetrate their markets as efficiently as possible. This is a standard regulation that every country must adhere to in today’s global marketing climate. The country’s economic progress is jeopardised without such engagement in international marketing.