Business KK

Plan G

TOPIC 3 - MARKETING PLAN

INTRODUCTION

Marketing is a process of developing and implementing plans to identify and satisfy customer needs and wants with
A Marketing Plan is a written strategy for selling the products/services of a new business. It is a reflection of how seri
Marketing Planning involves setting objectives and targets, and communicating these targets to people responsible t

LEARNING OBJECTIVES

At the end of this lesson the leaner should be able to:

Learn the different types of customers.
Understand different business analysis methods.
Determine the market share and how to expand it.
Describe promotion and advertising methods.
Understand the importance of sales and different sales tactics.
Describe distribution strategies
Determine the importance of quality in customer service.

The main elements of marketing planning are - market research to identify and anticipate customer
needs and wants; and planning of appropriate marketing mix to meet market requirements/demands.
Marketing Plan is a very important - you can have the best product in the world but if you have no sales,
you have no business. It gives a guidance on how one will make customers aware of the product or
services the business offers and also details on where will the product or service will be offered. (ie
farmers’ market, farm gate sales, retail, etc). When will you launch your marketing plan?
DIFFERENT TYPES OF CUSTOMERS AND THEIR CHARACTERISTICS

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Business KK
Plan G

Customers play the most significant part in business. In fact the customer is the actual boss in a deal
and is responsible for the actually profit for the organization. Customer is the one who uses the
products and services and judges the quality of those products and services. Hence it’s important for
an organization to retain customers or make new customers and flourish business. To manage
customers, organizations should follow some sort of approaches like segmentation or division of
customers into groups because each customer has to be considered valuable and profitable.
Customers can be classified into following types:
1. Loyal Customers - These types of customers are less in numbers but promote more sales
and profit as compared to other customers as these are the ones which are completely
satisfied.
Characteristics:
 These customers revisit the organization over times hence it is crucial to interact.
 Keep in touch with them on a regular basis.
 Invest much time and effort with them.
 Want individual attention.
 Demands polite and respectful responses from supplier.
 Technically sound
 Have good knowledge about the product.

Note:

Customers play a significant role in any business. To understand customer behavior and to

better allocate resources to different customers to generate the highest profit, it is necessary to
be able to identify and segment different types of customers. By better understanding the
different types of customers, businesses can be better equipped to develop successful strategies.

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 2. Discount Customers - Discount customers are also frequent but they are only a part of
business when offered with discounts on regular products and brands or they buy only
low cost products. Focus on these types of customers is also important as they also
promote distinguished part of profit into business.
Characteristics
 Not loyal but the more the discount the more they tend towards buying.
 Mostly related to small industries or the industries that focus on low or marginal
investments on products.

3. Impulsive Customers- If impulsive customers are treated accordingly then there is high
probability that these customers could be a responsible for high percentage of selling
Characteristics
 They are demanding.
 Not particularly looking for a product and want the supplier to display all the useful
products they have in their tally in front of them so that they can buy what they like
from that display.
 These customers are difficult to convince as they want to do the business in urge or
caprice.
 They don’t have any specific item into their product list but urge to buy what they find
good and productive at that point of time.
4. Need Based Customers- These customers could possibly be lost if not tackled efficiently
with positive interaction. These customers should be handled positively by showing them
ways and reasons to switch to other similar products and brands and initiating them to buy
these.
Characteristics
 Are product specific and only tend to buy items only to which they are habitual
 Have a specific need for them.
 These are frequent customers but do not become a part of buying most of the times so it is
difficult to satisfy them.
5. Wandering Customers- These are the least profitable customers as sometimes they
themselves are not sure what to buy. To win such customers they should be properly
informed about the various positive features of the products so that they develop a sense of
interest.
Characteristics
 These customers are normally new in industry
 Visit suppliers only for confirming their needs on products.
 They investigate features of most prominent products in the market
 Do not buy any of those or show least interest in buying – indecisive and unsure.
 Non-demanding
A business should always focus on loyal customers and should expand or multiply the product range
to leverage impulsive customers. For other types of customers strategies should be renovated and
enhanced for turning out these customers to satisfy their needs and modify these types of customers
to let them fall under loyal and impulsive category.
COMPETITORS’ ANALYSIS METHOD
Competitor analysis provides both an offensive and a defensive strategic context for identifying
opportunities and threats. The offensive strategy context allows firms to more quickly exploit
opportunities and capitalize on strengths. Conversely, the defensive strategy context allows them to
more effectively counter the threat posed by rival firms seeking to exploit the firm’s own weaknesses.
Through competitor analysis, firms identify who their key competitors are, develop a profile for each
of them, identify their objectives and strategies, assess their strengths and weaknesses, gauge the
threat they pose, and anticipate their reaction to competitive moves. Firms that develop systematic
and advanced competitor profiling have a significant competitive advantage.
The following questions will guide in making an effective competitors’ analysis:
• Who are your most important competitors?
• What are their main strengths and weaknesses?
• How can you be different?
• How can your product or service be more competitive?
• What are your competitors’ pricing policies? How do these affect your sales strategies?
• Can you list your main competitors and their estimated market share?

Purpose of competitive analysis

defining a firm’s industry and served market. An industry is a group of companies that offer
products that satisfy similar customer needs. A served market is the portion of the industry that the
company targets.
identifying business opportunities- i.e. new market trends and niches a firm can serve.
providing a benchmark for evaluating the company relative to competitors.
 shortening the company’s response time to competitors’ moves or pre-empting such moves.
helping a firm to gain a competitive advantage.
aiding in the development of strategy and its successful implementation.

The process of competitor analysis

A company can succeed only by designing offers/ products that satisfy target consumer needs better
than competitors. This calls for competitor analysis. The process consists of the following steps;
1. Identifying competitors
A company can define its competitors as other companies offering a similar product/service to the
same customer group at similar prices. There are two ways of identifying competitors;
(a) Industry basis
Many companies identify their competitors from the industry point of view. An industry is a group of
firms which offer a product or class of products that are close substitutes for each other, e.g. the
banking industry, pharmaceutical industry etc.
(b) Market basis
In this case competitors are companies that are trying to satisfy the same customer need or serve the
same customer group. The market definition of competition opens the company’s focus to a broader
set of actual and potential competitors e.g. from an industry point of view coca cola might see its
competitors as Pepsi and other soft drink manufacturers. But from a market perspective the customer
actually wants to quench his thirst. This need can be satisfied by fruit juice, bottled water, beer etc.
2. Determining competitors’ objectives
Companies differ on the weights they put on short term and long term profitability and other
objectives.
Some competitors might be oriented toward satisfying profits (breaking even) than maximizing the
profits.
The company should be able to know the relative importance that a competitor places on current
profitability, market share, share growth, cash flow, technological leadership etc. E.g. a company
pursuing low cost leadership will react more strongly to a competitor’s cost-reducing manoeuvres
than to the same competitor’s advertising increase.
3. Identifying competitors’ strategies
In most industries, competitors can be sorted out into groups pursuing different strategies. A strategic
group is a group of firms in an industry pursuing similar strategy. The company needs to examine
each competitor on the following;
 Product quality
 Features and product mix
 Customer service
 Pricing policy
 Distribution coverage
 Promotion strategy
 R & D effectiveness
4. Assessing competitors’ strengths/weaknesses
The company needs to identify competitors’ resources and capabilities. Knowledge of such resources
can be obtained through conducting primary research with customers, suppliers and dealers. The
company can carry out a customer analysis process as follows;
 Assess the company’s and competitor’s performance on different customer values
against their ranked importance.
 Examine how customers in a specific segment rank the company’s performance against
a specific major competitor on important attributes.
 Monitor changes in customer value over time.
5. Estimating competitor’s reaction patterns
Each competitor reacts differently. Some react to certain types of attacks but not to others i.e. they
may respond strongly to price decreases but may not respond at all to advertising increases. This
depends on their profit and marketing objectives.
6. Selecting competitors to attack or avoid
A company may benefit from some competitors. This may be in the following ways;
  Competitors may help increase total demand
 They share the costs of product and market development
 They help to legitimize a new product/ technology
 They may serve less attractive segments which may accuse the company of ignoring
the segments
Therefore some companies compete “constructively” while others may compete “destructively”.
Companies will often attack competitors who are destructive, small, or weak.

Note:

Industry analysis is also known as Porter’s Five Forces Analysis and

is a very useful tool for business strategists. It is based on the observation that profit
margins vary between industries, which can be explained by the structure of an industry.

Industry-Based Analysis
An “industry” is defined as a group of firms whose products and services are close substitutes of each
other. Industries are primarily classified according to the number of sellers involved and the degree of
product differentiation. Other factors characterizing an industry’s structure are: entry/exit barriers, cost
structure, degree of vertical integration and extent of globalization. Based on number of sellers and
product differentiation, industries are commonly classified as a: monopoly, oligopoly, differentiated
oligopoly, monopolistic competition, or pure competition. Each category is described below.
Monopoly exists when only one firm supplies a given product/service in a certain country or area. A
common example is the distribution of electrical power to residential and commercial customers. Given
that customers have no alternatives, an unregulated monopoly seeking to maximize profits has a
demonstrable incentive to charge a higher price, do little or no advertising and offer minimal service. A
regulated monopoly, on the other hand, is required to charge lower prices and provide more services in
the public interest. Monopolists might be willing to make some investment in service and technology in a
situation where partial substitutes for their products or services are available or when there exists
imminent competition. Electric power generation and distribution are good examples of this behavior,
with recent developments in alternative energy sources and technological improvements in electric power
use.
Oligopoly consists of a few firms producing basically the same commodity, such as Mobil, Shell and
Sunoco, in the fuel industry. It is difficult for any single company to sell fuel products above the going
price unless it can differentiate its product line in some way.
Differentiated oligopoly refers to an industry in which a few firms produce partially differentiated
products, such as Sony, Canon and Nikon in the digital camera industry. Differentiation is based on
specific product attributes such as quality, special features, styling or services. Typically, competitors will
seek to be the leader firm for a certain attribute, attract customers who value that particular attribute, and
charge a premium for it.
Monopolistic competition refers to a situation where several competing firms in an industry are able to
differentiate their offer in whole or in part. Such is the case of supermarket companies like Tuskys,
Naivas and Quickmatt in the supermarket industry in Nairobi, Kenya. In this context, competitors
typically target those market segments where they can better meet the customer’s needs and thereby
command a price premium.

Activity

Pure competition takes place in industries in which many firms offer the same product/service. Because
there is no differentiation among offers, prices are the same for all firms, such is the case of most
agricultural products sold as commodities (e.g. wheat, cabbage, onions). There is no benefit to advertising
and seller’s profits will only be different to the extent that they can achieve lower costs of production or
distribution.

4. Competitor Profiling

Once a firm has identified its primary competitors, it needs to assess and analyze their objectives,
strategies, strengths and weaknesses as well as their competitive reactions.
Objectives ascribed to competitors can encompass profitability, market-share growth, cash flow,
technological leadership, service leadership, etc. Competitors’ objectives are shaped by various
factors, including the firm’s size, history, current management, and economics.
Competitors’ strategies encompass product quality, product features and product mix, target marketing
and positioning, customer service, pricing policy, distribution coverage, sales force strategy, advertising
and sales promotion programs, research and development (R&D), manufacturing, purchasing, financial
and marketing strategies (4Ps: Product, Price, Promotion and Place/Distribution). The more one firm’s
strategies resemble another firm’s strategy, the more the two firms compete. Strategic groups (i.e. firms
focusing on the same target market with the same strategy) should be identified.
Whether or not a competitor can carry out its objectives and strategies depends on its resources and
capabilities. For this reason, the analysis of the corresponding strengths and weaknesses constitutes key
information for a firm analyzing its competitors. The technique typically used to conduct this analysis is
called “SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis”. It involves specifying an
objective and analyzing the internal factors (strengths and weaknesses internal to the firm) and the
external factors (opportunities and threats presented by the external environment) that are favorable or
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unfavorable to achieving the objective .5 OCTOBER 2020
• Internal factors (Strengths and Weaknesses) encompass factors such as: personnel, firm’s culture,
finance, manufacturing capabilities, the 4Ps, etc.
• External factors (Opportunities and Threats) relate to the opportunities and threats posed by the
macro and micro environments. The macro-environment includes demographic, economic,
technological, political, legal, social and cultural factors, etc. The micro-environment includes the
customers, competitors, distributors and suppliers.
Firms can learn about their competitors’ strengths and weaknesses through secondary data, personal
experience and hearsay, but they can also acquire and interpret primary information by conducting market
research. Firms should collect recent data on each competitor’s sales, market share, profit margin, return
on investment, cash flow, new investment, and capacity utilization. Three additional variables that every
firm should monitor with respect to competitors are: share of market (competitor’s sales’ share in the
target market), share of mind (percentage of customers who name the competitor when asked which firm
first comes to mind in an industry) and share of heart (percentage of customers who name the competitor
when asked from whom he/she would prefer to buy a specific product). In general, firms that exhibit
increasing share of mind or share of heart, are positioned to experience an increasing market share and
profitability.
A competitor’ strategies, strengths and weaknesses, to a large extent, determine its reactions to
competitive moves such as price cuts, promotional step-ups, or new product introductions. Some
competitors do not react quickly or forcefully to another competitor’s move; others might react only to
certain types of attacks and not to others; others might react quickly and forcefully to any assault. Finally,
others might not exhibit any predictable reaction pattern.
5. Assessing Market Attractiveness

Before entering a particular market (or market segment), a firm needs to assess its attractiveness.
According to Michael Porter, the attractiveness of a market or market segment, is determined by the
opportunities and threats posed by five key elements: industry competitors, potential market entrants,
availability of product substitutes, buyers’ power and suppliers’ power (Figure 2.)

Five Forces that Determine Market Attractiveness according to Michael Porter

 Industry Competitors (Segment Rivalry): the market (or market segment) is relatively unattractive
if there are already a high number of strong or aggressive competitors. This unattractiveness is
reinforced if the market is stable or already declining, significant production capacity is being
added, fixed costs are high, or if competitors have powerful reasons to stay in the industry. Under
these conditions, price wars, promotion battles and constant new product introductions are the
norm, making competition very expensive. Example: Coke and Pepsi have barely differentiated
products. They are under constant pressure to gain market share. To do so they lower their
prices, resulting in razor thin margins in order to gain a market share of 0.01%. Both companies
reorganize and diversify in order to fund the “Cola Wars”!


 Potential Entrants: attractiveness of a market (or market segment) varies according to the status
of entry and exit barriers. With high entry and low exit barriers, fewer firms can enter the
industry while under-performing firms can exit easily. Profit potential is high and, even though
risk is higher if under-performing firms fight for survival, it is a very attractive option. When
entry and exit barriers are both low, firms enter and exit the industry easily and profits are stable
and low. The worst possible situation is when entry barriers are low and exit barriers are high,
resulting in persistent over-capacity and low earnings for all. Firms should know and keep in
mind that the entrance of new competitors is likely when: there are high profit margins in the
industry, there is unmet demand (insufficient supply), there are no major barriers to entry, there is
future growth potential, competitive rivalry is not intense and/or when gaining a competitive
advantage over existing firms is feasible. Example: INTEL has high fixed costs with plants to
build chips. High break-even volume keeps competitors away. All incremental sales fall directly
to the bottom line.

 Product Substitutes: if there are many actual or potential substitutes for the product, the market
(or market segment) is not attractive because substitutes limit both the price that can be charged
for the product as well as the potential profits. For this reason, firms must monitor the prices of
substitute products. Furthermore, if competition increases or if there are technological
innovations, prices and profits are likely to go down. Example: drugstore internet retailers
sold products below wholesale cost with free shipping to inspire customer loyalty. Strategy
failed as customers could easily replace the offer at the local drugstore when the prices were
raised!

 Buyers’ Power: when buyers possess a strong or growing bargaining power, the market (or
marketsegment) is unattractive. Customer’s bargaining power increases when there are a few
largebuyers, when the product represents a significant part of the firm’s costs, when the product is
undifferentiated, when the cost of switching is low, when buyers are price sensitive, or when
buyers can vertically integrate. To compete in this environment, firms might want to refocus and
target buyers with less power, or develop offers that buyers can’t refuse. Example: WalMart has
forced consumer packaged goods (CPG) companies to use up-to-date information to drive down
prices for its customers. For example, Rubbermaid had the majority of their sales at WalMart.
The resulting reduced margins forced their acquisition by Newell.
  Suppliers’ Power: suppliers have increasing bargaining power when they are organized, when
there are few substitutes for their product, when the product they supply is a key input, when
switching suppliers is expensive or when suppliers can vertically integrate. A segment is
unattractive if suppliers can raise prices or reduce the quantity of product supplied due to their
bargaining power. Example: Increased prices of coffee beans and other raw materials have
led Starbucks to raise their prices to maintain their high margins. But Starbucks has
differentiated their brand enough to create customer loyalty thus: Customers absorb the price
increase!

 Designing Competitive Strategies

The roles played by firms in an industry can be usefully classified into: market leader, market
challenger, market follower or market nicher. A firm can gain further insights about its competitors
and design more effective competitive strategies by identifying its role and that of its competitors.

MARKET SHARE
It is common in many industries to have one firm with a dominant market share. This firm is the
market leader in terms of: prices, new product introductions, distribution coverage, and promotional
spending. Competitors typically challenge, imitate or avoid the leader. Examples of market leaders
include: Safaricom, Coca Cola and Unilever.
Leaders want to continue being the number one firm in their industry. Their typical approach is to
attempt to expand total market, protect their current market share, or grow their market share.

Expanding total market

Market leaders normally gain the most when the total market expands. The key strategies used to expand
the market include attracting new users, identifying new uses for their product and/or inducing current
customers to use more of their product
•To attract new users a firm can focus on consumers who are unaware of the product or who are resisting
buying it because of the price or lack of certain features. Example: Johnson & Johnson was able to
expand the market of its baby shampoo by inducing its use by other members of the family, through
advertising.
• To identify new uses a firm uses its R&D capabilities, new technologies or feedback from consumers
who use the product in different ways. Example: DuPont’s nylon was first used in parachutes, then as
a fiber to make women’s stockings, later as a major component or apparel and more recently in the
fabrication of tires and other items in the automotive industry.
• To induce current customers to use more of its product, a firm develops strategies to convince its
customers to use the product in other occasions and in greater amounts each time. Example: In its
Head & Shoulders shampoo ads, Procter & Gamble indicates its users that the shampoo effectiveness
is higher if applied twice per shampoo occasion.
Defending Market Share
To defend its market share, the best strategy for a leader is to continuously innovate its products, its
customer service, its distribution system and its cost structure (e.g. Coke vs. Pepsi, Unilever vs. Cusson,
EABL vs. Keroche, GM vs. Toyota).

Expanding Market Share

In many cases one market share point is worth many millions of dollars, so leaders can significantly
improve their profitability by increasing their market share. However, the impact of a higher market share
on profitability depends on the strategies used to obtain the additional market share because the added
cost of achieving a higher market share may exceed the added revenue. Additionally, some market
leaders have to be cautious about provoking antitrust actions, of investing more money than the higher
market share is worth or of pursuing the wrong marketing strategies.
Market Challenger

Firms that trail the market leader can be either a market challenger or a market follower. A market
challenger aggressively tries to expand its market share by attacking the leader, other similar firms, or
smaller competitors. However, before embarking on an attack, market challengers need to define their
objective and whom they will attack. Attacking the market leader is risky but the pay off could be
excellent if the leader is not doing a good job of serving its target market. Alternatively, challengers may
choose to attack underperforming firms of similar size which are not satisfying their customers
appropriately, or to grow their market share by attacking/acquiring smaller firms (e.g. firms operating in
local and regional markets.) The most common attack strategies used by market challengers include:
frontal attack, flank attack, encirclement “blitz”, bypass, and guerrilla warfare.
• In a frontal attack the challenger matches the competitor’s marketing mix (product, price,
promotion and distribution). In general, the firm with the bigger resources wins.

• In a flank attack a market challenger focuses on identifying any market gaps generated by either an
underperforming opponent or by shifting market trends. Once identified, the challenger rushes in to
fill the gaps and develops a set of strong market segments. Flank attacks have a higher potential of
success than frontal attacks and are particularly attractive to challengers with fewer resources.
• An encirclement “blitz” attack involves attacking the opponent in several different fronts at the
same time with the objective of taking away a big part of the opponent’s territory. This type of attack
makes sense when the challenger has significant resources and believes the strategy will break the
opponent’s will.
• A bypass attack involves bypassing the opponent and attacking easier markets to broaden the
challenger’s own base. Strategies include: diversifying into unrelated products, diversifying into
new geographical areas and supplanting existing products through the use of new technologies.
• Guerrilla warfare attack implies waging small intermittent attacks to harass and demoralize the
competitor and secure strong footholds. This type of attack is normally used by small firms against a
larger one. However, this strategy needs to be backed by a stronger attack if the challenger is to beat
the opponent.
Market Follower
A market follower is a firm that decides not to attack the market leader or its competitors, usually out of
fear that it stands to lose more than it might gain. Many firms prefer to be a follower than a challenger.
Such behavior is very common in industries in which there is very little opportunity for product
differentiation, service quality is often very much the same, price sensitivity is high and market shares are
very stable. Under these circumstances, most firms present the customer with the same or very similar
products, usually by copying the leader. To survive, a market follower must know how to hold on to its
current customers and how to win new ones.
Market followers are often broadly classified into counterfeiters, cloners, imitators or adapters.
• Counterfeiters duplicate the leader’s product and package and sell it in the black market.
• Cloners imitate the leader’s products, distribution, advertising, etc.
• Imitators copy some things from the leader but maintain some differentiation in packaging,
advertising, pricing etc.
• Adapters either adapt or improve the leader’s products and generally sell them in different
markets. Being a market follower is usually not a rewarding strategy to pursue!
Market Nicher
Instead of being a market follower in a large market some firms choose to be the leaders in a small
market, or market “niche” that doesn’t attract the attention of the larger firms. The key to being a
successful market nicher is specialization, which can be focused on: the end-user (specializes in serving
one type of final customer), the customer size (concentrates in selling to small, medium or large
customers), specific customers (limits its offer to one or a few major customers), a geographic area (sells
only in a certain place, region, area), a product or product line (produces or carries only one product or
product line), the quality-price ratio (operates at the low or at the high quality end of the market), the
service (offers services not available from other firms), the channel (serves only one channel of
distribution), etc.
Market nichers can get to know their customers well enough to meet their needs much better than
competitors while making a high profit margin. However, to increase their survival prospects, market
nichers need to be strong in two or more market niches.

METHODS OF PROMOTION AND ADVERTISING

Promotion in the field of consumer business should be planned extremely carefully, in order to ensure their
acceptance with the retailers, as well as their sales potential and success. Promotion refers to the mix of
promotional elements a firm uses to communicate with its current or potential customers about its products or
services. Promotion efforts can be directed to the ultimate consumer, to an intermediary such as a retailer, a
wholesaler or a distributor, or to both. Promotion is fundamental to the success of your firm because, without
promotion, potential customers won’t know about the existence and benefits of your product or service. Not
even the best product or service sells without some promotional effort!

The word advertising originates from a Latin word advertise, which means to turn to. The dictionary
meaning of the term is “to give public notice or to announce publicly”. Adverting is only one element of
the promotion mix, but it often considered prominent in the overall marketing mix design. Its high
visibility and pervasiveness made it as an important social and encomia topic in Indian society.
Promotion may be defined as “the co-ordination of all seller initiated efforts to set up channels of
information and persuasion to facilitate the scale of a good or service.” Promotion is most often intended to
be a supporting component in a marketing mix. Promotion decision must be integrated and co-ordinated
with the rest of the marketing mix, particularly product/brand decisions, so that it may effectively support
an entire marketing mix strategy. The promotion mix consists of four basic elements.
They are:-
1.Advertising is the dissemination of information by non-personal means through paid media where the
source is the sponsoring organization.
2.Personal selling is the dissemination of information by non-personal methods, like face-to-face,
contacts between audience and employees of the sponsoring organization. The source of information
is the sponsoring organization.
3.Sales promotion is the dissemination of information through a wide variety of activities other than
personal selling, advertising and publicity which stimulate consumer purchasing and dealer
effectiveness.
4.Publicity is the disseminating of information by personal or non-personal means and is not directly paid
by the organization and the organization is not the source.

PRICING STRATEGIES
A price is the amount of money charged for a product or a service, the sum of the values that
customers exchange for the benefits of having or using the product or service. Price is the only
element in the marketing mix that produces revenue, all others are costs. Setting the right price is one
of the most complex tasks. Good pricing starts with customers and their perception of the value of the
product.
Customer value-based pricing: setting price based on buyer’s perceptions of value rather than on
the seller’s cost. The value customers attach to a product might be difficult to measure, so the
company must work hard to establish estimates. There are two other types of value-based pricing:
good-value pricing and value-added pricing. Good-value pricing means offering the right
combination of quality and good service at a fair price. Value-added pricing means attaching value-
added features and services to differentiate a company’s offers and charging higher prices.
Cost-based pricing means setting prices based on the cost for producing, distributing and selling the
product plus a fair rate of return for effort and risk. There are two forms of costs: fixed costs
(overhead) are costs that do not vary with production or sales level. Variable costs are costs that vary
directly with the level of production. Total costs are the sum of the fixed and variable costs for any
given level of production.
The experience curve (learning curve) is the drop in the average per-unit production costs that
comes with accumulated production experience. Put more simply: as workers become more
experienced, they become more efficient and costs drop.
The simplest pricing method is cost-plus pricing or mark-up pricing: it means adding a standard
mark-up to the cost of the product. However, this method ignores demand and competitors prices and
is therefore unlikely to lead to the best price. Break-even pricing (target return pricing) means
setting the price to break even on the costs of making and marketing a product or setting price to
make a target return. The break-even volume is the amount of units that need to be sold to break even.
Competition-based pricing means setting prices based on competitor’s strategies, prices, costs and
market offerings.
 Beyond customer value perceptions, costs and competitor prices, the firm must also think of other
factors. Price is only one element of the marketing mix and the overall marketing strategy must be
determined first. Target costing is pricing that starts with an ideal selling price and then targets costs
that ensure the price is met. Good pricing is based on an understanding of the relationship between
price and demand for the product.

Pricing can differ in different types of markets. In pure competition markets, there are numerous
buyers and sellers that all have little effect on the price. In monopolistic competition, there are many
buyers and sellers who trade over multiple prices. In an oligopolistic competition market, there are
few sellers who are highly sensitive to each other’s pricing strategies. In a pure monopoly, the
company is the only seller and can set any price it desires.
The demand curve is a curve that shows the number of units the market will buy in a given time
period, at different prices that might be charged. The price elasticity is a measure of sensitivity of
demand to changes in price. It is given by the following formula: price elasticity of demand = .

SALES TARGET
A sales target is a goal set for a salesperson or sales department measured in revenue or units sold for
a specific time. Setting up sales targets helps in keep the sales team focused on achieving your goals.
Do you know that you can use many different sales target types to better forecast your revenues in
real-time? Find out below.

A sales target is a sales tool that enables you to easily measure and estimate your opportunity
contribution to your sales goal.

Sales Target Types For Business Sales Success

The sales target examples below calculate and forecast your sales revenues based on the opportunity
value and the following additional set of conditions:
 Sales stage probability of closure – the likelihood of winning the opportunity for that
particular sales step.
 Opportunity ranking – the personal likelihood of winning the opportunity.
 Opportunity pipeline position – the current position of the opportunity in the sales pipeline.
 Opportunity status – the status of the sales opportunity i.e. either it is an open opportunity or
won opportunity.
A business plan must explain the sales target for the business as this incorporates the forecasts that are
worked out in financial term.

SALES TACTICS
There are various sales tactics to use in business. The choice will be depended on the stage at which
the product being sold or marketed it at as per the figure below:
1. Introduction Stage: ‘Build’ Objecive
Sales Objecives:
‐ Build sales volume
‐ Increase distribution
Sales Tactics:
‐ High call rates on existing accounts
‐ High call rates on prospects

Sales call is visiting the customer – high call rates e.g. calling the customer many times in
order to build sales volumes. Visit customers for potential customers leading to reaching the
target market.
2. Growth: Sell a ‘Build’ Objective
Sales Objectives
‐ Build sales volume
‐ Maintain distribution
‐ Focus on service levels
Sales Tactics
‐ Continue high call rates
‐ Focus attention on key accounts
‐ Target competitor’s customers

Service is crucial due to increasing competition emerging in the market and therefore companies
should focus on key accounts – those customers who are providing the most bene.t in which the
company cannot afford to lose. Targeting competitors customers will enable the company to
potentially increase their market share and growth due to gaining more customers from other
competition Sales call is visiting the customer – high call rates e.g. calling the customer many
comes in order to build sales volumes. Visit customers for potential customers leading to reaching
the target market.

3. Growth: Sell a ‘Build’ Objective

 Sales Objectives
‐ Build sales volume
‐ Maintain distribution
‐ Focus on service levels
Sales Tactics
‐ Continue high call rates
‐ Focus attention on key accounts
‐ Target competitor’s customers
Service is crucial due to increasing competition emerging in the market and therefore companies
should focus on key accounts – those customers who are providing the most bene.t in which the
company cannot afford to lose. Targeting competitors customers will enable the company to
potentially increase their market share and growth due to gaining more customers from other
competition.

4. Maturity: ‘Hold’ Objective

Sales Objectives
‐ Reduce costs (e.g. Selling, distribution, etc.) – Target pro1table accounts
Sales Tactics
‐ Call only on pro1table accounts
‐ Consider telemarketing/dropping unpro1table accounts
‐ Consider whether prospecting is sell useful?
‐ Focus on taking share from competitors
There is liable growth and so there aren’t many new customers, the current customers need to be
held through targeting and calling current profitable accounts – this leads to the business
identifying who is the more significant account and therefore who to target in order to ensure
investment is worthwhile. You can hand other non-profitable accounts to telemarketers. Due to
sales being down – companies decide whether to seek prospective customers

5. Decline: ‘Harvest’ or ‘Divest’

Sales Objectives
‐ Clear inventory quickly
Sales Tactics
‐ Quantity discounts to targeted accounts
Other incentives to sell‐through (e.g. Competitions, consumer promotional support, etc).
Harvest – try to get as much as you can from current/old stock as possible quickly. Older
models of products are going for extremely cheap in order to get rid of stock but sell receive
money (harvesting) – laggards are targeted to encourage them to buy the outdated product
because they are late to the technology market.
Tactic - Divest

DISTRIBUTION STRATEGY
A distribution strategy is a method of disseminating goods or services to end-users. Implementing the
most efficient distribution method for your business is key to obtaining revenue and retaining
customer loyalty. Some companies opt to use multiple distribution methods to adhere to different
consumer bases.
Physical distribution represents the way businesses provide goods and services to their customers. In
some businesses, particularly retail businesses, the customer comes to the business. Their locations
maybe important. Several other businesses usually go to the customer (e.g. B2B) The location of their
businesses is not so important.
The designing a Distribution Strategy deals with the following issues:
 Best Channel to deliver product
 Three different distribution systems:
• Retail consideration.
• Channel length.
• Channel exclusivity.
 Choice of channel: Cost/benefit of each alternative. It can be defined as expanding or moving
from one place to another without changing direction or stopping. For example, Bata has no
distribution channel; it sells its products directly to the end consumers.

Why Is Distribution Important?

1. It greatly affects all decisions in the marketing mix, including pricing, promotion, sales and
packaging through its impact on marketing costs and relationships.
2. It creates a mutually dependent commitment between participants through an infrastructure
that is not easily changed and would be expensive to re-create. It becomes a part of the service
delivery structure that the customers become accustomed to and trained in using.
3. Most of the activities for a product manager are usually related to working with the existing
distributors, dealers or agents and perhaps expediting shipments as necessary. However, some
new products necessitate changes in the channel of distribution, or market and competitive
forces will require changes for existing products. This could also be a critical element of the
plan if a product manager is rolling out a product into new regions and/or expanding globally.
4. As a result, distribution strategy becomes an important aspect for the development of the
annual marketing plan and an effective marketing strategy.
5. Whenever a product manager introduces a lower-priced or higher-priced product, or one that
has a different image, it might be necessary to introduce new channels.

Indirect Distribution
It can be defined as means that are not directly caused by or resulting from something. For example,
LG sells its product from the factory to the dealers, and it reaches the consumers through dealers.
Choice of Intermediaries versus Direct Marketing
 Producers may lack financial resources to carry out marketing
 Customer support may be required
 Many firms set up partially owned distribution
 New technologies such as internet and logistics are affecting choice

Choice may also vary with Product Characteristics

 Perishable products - Problem of delay and handling
 Bulky products - Minimize shipping distance
  Non-standard product - Direct sales
 High unit value product (airplanes) – requires dedicated sales force in company
Direct Distribution
Direct distribution is a strategy where manufacturers directly sell and send products to consumers.
There are a few different ways to implement this method. Some organizations may opt to take a more
modern approach and use an e-commerce website where users can make a purchase online. This is an
effective option for companies with a client base that’s moderately knowledgeable about technology,
requests a specific solution to meet needs or is devoted to a particular brand.
Another direct distribution method is through catalogs or phone orders. This option may target an
older customer base or users in specific industries that are attuned to placing orders this way.
One important factor to consider when implementing a direct distribution strategy is the amount of
investment required. For example, manufacturers will need to add warehouses, vehicles and delivery
staff to their portfolio to effectively distribute goods on their own.
Indirect Distribution
The term “middleman” often gets a bad reputation, but in the case of distribution, these organizations
can be helpful in getting goods to consumers. Indirect distribution strategies involve intermediaries
that assist in the logistics and placement of products so that they reach customers swiftly and in an
optimal location based on consumer habits and preferences.
We will discuss the different types of intermediaries and their specific benefits later in this article, but
business needs, targeted clients and type of product are typically behind the reasoning for using this
strategy. Low commitment or routine purchases are often something that customers grab
absentmindedly in a department store without any specific brand loyalty. A tube of toothpaste is a
good example of a routine purchase. For these types of products, an indirect distribution method that
places a large number of items in multiple retail locations may be a company’s best bet.
Intensive Distribution
Products are put into as many retail locations as possible with the intensive distribution strategy. For
example, gum is a product that typically uses this strategy. You can find gum at gas stations, grocery
stores, in vending machines and at retail locations like Target. This method hinges on making a large
number of goods available in multiple locations. These items don’t typically necessitate an involved
purchase decision where the customer does research before making a purchase. Rather, these items
are routine purchases that involve very minimal effort to sell.
Exclusive Distribution
When manufacturers opt for exclusive distribution, they make a deal with a retailer to sell a product
through that specific storefront only and in most cases not sell a competitor’s product. Businesses
may also sell goods directly through their own branded stores, which is another example of exclusive
distribution.
An example of an exclusive distribution deal where Safaricom teams up with a retailer under service
level agreement to offer their products and services.
Selective Distribution
Selective distribution is a middle-ground option between intensive and exclusive distribution. With
this strategy, products are distributed in more than one location, but not as many as with an intensive
distribution strategy. For example, clothing from different brands may be offered selectively. A brand
like Gucci may choose to distribute its items to its own stores in addition to a few selected department
stores rather than placing its products in a range of locations such as Woolworths or Shoprite. This
can help craft an implicit high-end brand message while also increasing the opportunity for shoppers
to purchase one of its products.

CUSTOMER SERVICE STRATEGY

Customer service is the act of taking care of the customer's needs by providing and delivering
professional, helpful, high quality service and assistance before, during, and after the customer's
requirements are met.

Characteristics of Good Customer Service

Customer service is meeting the needs and desires of any customer. Some characteristics of good
customer service include:
 Promptness: Promises for delivery of products must be on time. Delays and cancellations
of products should be avoided.
 Politeness: Politeness is almost a lost art. Saying 'hello,' 'good afternoon,' 'sir,' and 'thank you
very much' are a part of good customer service. For any business, using good manners is
appropriate whether the customer makes a purchase or not.
 Professionalism: All customers should be treated professionally, which means the use of
competence or skill expected of the professional. Professionalism shows the customer they're
cared for.
GENERAL PRINCIPLES OF CUSTOMER SATISFACTION
Certain general principles will sharpen a person’s ability to satisfy customers and thereby improve
customer retention. Satisfaction, however, is considered a minimum expectation. Customer delight
should be the ultimate goal. Customer satisfaction is also highly valued because it breeds customer
loyalty, which in turn is very profitable. A set of key principles follows.
A. Satisfied Employees Provide Better Customer Service Employees who are satisfied with their jobs
are the most likely to satisfy customers. Employees want recognition and compensation that relates to
their achievement of customer-service goals. A case history analysis at Sears found a strong
relationship between employee and customer satisfaction. Employees can control some attitudes and
beliefs related to customer satisfaction.
1. Interest in the work itself
2. A feeling of self-esteem
3. Optimism and flexibility
4. Positive self-image
5. Positive expectations about the job

B. Understand Customer Needs and Put Them First

The most basic principle of selling is to identify and satisfy customer needs. To help identify
customer needs, the customer service worker may have to probe for information. Customers now
have more power because of the availability of information and more competition. Satisfying
customer needs adds value for them.
After customer needs have been identified, the focus must be on satisfying them rather than on
personal needs or those of the company.
C. Focus on Solving Problems, Not Just Taking Orders
Effective selling uses sales representatives to solve problems rather than merely taking orders. The
focus on problem solving enables sales representatives to become partners in the success of their
customers’ businesses. Using this approach, the customer is receiving consulting services in addition
to the merchandise or services being offered.
D. Respond Positively to Moments of Truth
An effective customer contact person performs well during situations in which a customer comes in
contact with the company and forms an impression of its service (a moment of truth). If the customer
experiences satisfaction or delight during a moment of truth, the customer is likely to return when the
need for service arises again. The customer who is angered or frustrated during a moment of truth
will not return.
One way to track moments of truth is to prepare a cycle of service chart. Such a chart summarizes the
moments of truth encountered by a customer during the delivery of a service.
E. Be Ready to Accept Empowerment
A major strategy for improving customer service is to empower customer-contact employees to
resolve problems by themselves. Empowerment refers to managers transferring, or sharing, power
with lower-ranking employees. In terms of customer relations it means pushing decision-making and
complaint resolution down to customer-contact employees. For empowerment to work, the company
must grant decision-making latitude to employees, who in turn must be willing to accept
empowerment.
F. Enhance Customer Service Through Information Technology
Information technology can play an important role in recording customer preferences and
individualizing service. One such application is to use databases to have information on hand about
customer preferences. Sending customers information they are likely to use is another way of
enhancing customer service through information technology.
A major challenge in providing good customers service when using information technology is to
preserve the human touch. For example:
(a) when you respond to a voice-mail outgoing message, leave specific, relevant information, and
(b) use the customer s name when sending e-mail messages.
G. Avoid Rudeness
Although rudeness to customers is obviously a poor business practice, the problem is widespread.
Rude treatment creates more lost business than does poor product quality or high prices.
CREATING A BOND WITH YOUR CUSTOMER
Creating a bond or emotional relationship with a customer helps bring about customer satisfaction
and delight. Warm, constructive customer relationships enhance customer retention. Creating a bond
is aimed at increasing sales, but also enhances service. If the customer relies on and trusts the sales
representative, the customer will perceive the service to be of high quality.
Five key principles are as follows:
1. Create a welcoming attitude, including a smile. (Smile at customers, but not in a sexy manner.)
2. Provide exceptional service.
3. Show care and concern.
4. Make the buyer feel good.
5. Build a personal relationship.
6. Invite the customer back.

III. DEALING WITH CUSTOMER DISSATISFACTION

Most customers put honest effort into preventing customer dissatisfaction. Despite the many efforts to
achieve total customer satisfaction, some customer dissatisfaction is inevitable. One reason for this
dissatisfaction is that mistakes in dealing with customers are inevitable. Three different approaches to
dealing with customer dissatisfaction follow.
A. Deal Constructively with Customer Complaints and Anger Customer satisfaction specialists
recommend the following techniques for dealing with angry customers:
1. Acknowledge the customer’s point of view.
2. Avoid placing blame.
3. Use six magic words to defuse anger. (I understand [that this is a problem]; I agree [that it needs to
be solved]; I’m sorry [that this happened to you].)
4. Apologize for the problems created by you or your company.
5. Take responsibility, act fast, and be thorough.
6. Follow up on the resolution of the problem.
B. Involve the Customer in Working Out the Problem
To minimize the perception of poor service, the customer should be involved in deciding what should
be done about the problem. By involving the customer in the solution to the problem, the customer is
more likely to accept a deviation from the service promised originally.
C. Anticipate How to Handle an Unreasonable Request
The customer who makes an unreasonable demand is usually aware of the unreasonableness, and
therefore may not expect to be fully granted the request. A few of the suggestions for dealing with an
unreasonable request are as follows:
1. Let your customers retain their dignity by stating your position politely and reasonably.
2. Avoid arguing with an upset customer.
3. Appeal to your customer’s sense of fair play and integrity.
4. Be firm by repeating the facts of the situation, but keep your temper under control.
5. Accept responsibility for your decision.
6. Be willing to say no to a customer when it is justifiable.

D. Maintain a Realistic Customer Retention Attitude

Some customers are too unreasonable, and therefore may not be worth keeping. A realistic goal is to
retain as many profitable customers as possible. Airline passengers who engage in air rage are not
worth keeping.
Customer Service Strategy drives the business and therefore it is an important part of the business
plan and this should be continuously reviewed.