During the past four weeks, under the creation of a strategic business plan, we reviewed strategic direction, objectives and goals, growth strategies and business portfolio plan. We have now completed the strategic portion of your business plan. (See Mirror Business of April 20). Now we have to move into ‘tactical plan’, the second row of boxes in the figure, designated as section ‘five’ through ‘nine’.
As you can see, the first part of the tactical plan is ‘situation analysis’. Let us see what it is.
Simply stated, situation analysis will define your business in a factual and objective manner. To do it effectively, you must compile historical data for a period of at least three years. Doing so provides an excellent perspective about where your company has been, where it is now and where you want to go as defined in your strategic direction.
Today, we will concentrate on the first of the three-part situation analysis – ‘the Marketing Mix – Product’.
In today’s highly competitive atmosphere, if you want to market your products and services successfully, you need to create an effective mix of: (1) the right product, (2) sold at the right price, (3) in the right place, (4) using the most suitable promotion. To create this type of mix, you have to meet the few conditions: (1) The product has to have the right features - for example, it must look good and perform well. (2) The price must be right. Consumers will need to buy in large numbers to produce a healthy profit. (3) Making sure that the goods arrive when and where they are wanted is also an important operation. (4) Your target group of customers should be made aware of the existence and availability of the product through promotion. Successful promotion helps a firm to spread costs over a larger output.
The product is the central point on which marketing energy must focus. Marketing plays a key role in determining such aspects as: the appearance of the product – (in line with the requirements of the market), the function of the product – (products must address the needs of customers as identified through market research).
Products come in several forms. Consumer products can be categorized as convenience goods, for which consumers are willing to invest with very limited shopping efforts. Thus, it is essential to have these products readily available and have the brand name well known. Shopping goods, in contrast, are goods in which the consumer is willing to invest a great deal of time and effort. For example, consumers will spend a great deal of time looking for bathroom fittings and bathroomware. And also, in the case of specialty goods would be of interest only to a narrow segment of the population—e.g., drilling machines. Industrial goods can also be broken down into subgroups, depending on their uses. It should also be noted that within the context of marketing decisions, the term ‘product’ refers to more than tangible goods—a service can be a product, too.
Products may also be differentiated in several ways. Some may be represented as being of superior quality or they may differ in more arbitrary ways in terms of styles—some people like one style better than another, while there is no real consensus on which one is the superior one. Finally, products can be differentiated in terms of offering different levels of service—for example, automobile seller may offer a guarantee of free, reliable towing anywhere should the vehicle break down.
Whether your company is manufacturing the product or purchasing the product for resale, they need to determine what product features will appeal to their target market. They should ask themselves a few questions: (1) Who is the product aimed at, (2) What benefit will customers expect from it, (3) What will be its advantage over competitor products? Or its unique selling point? And (4) How does the firm plan to position the product within the market?
Let us give you a few planning guidelines which will help you to proceed with the product analysis.
Describe the performance of your product or service by – sales history, profitability, share of market and any other required matrices. Where appropriate, chart sales history with spreadsheets, graphics, etc.
Explain the product’s current position as it relates to market penetration, reputation and competitiveness. Also indicate where the product is in its lifecycle - e.g. introduction, growth, maturity or decline.
Identify future trends as they relate to industry, customers and competition that may affect future prospects.
Describe features and benefits of your product as related to quality, performance, reliability, convenience and other factors important to customers.
List other pertinent product information such as expected product improvements and other additional product characteristics. Add any recent features that enhance the product’s position, particularly any changes that would add superior value to the product and provide competitive advantage.
Although figures vary widely from product to product, roughly a fifth of the cost of a product goes on getting it to the customer. ‘Place’ is concerned with various methods of transporting and storing goods and then making them available for the customer. Getting the right product to the right place at the right time involves a good distribution system. The choice of distribution method will depend on a variety of circumstances. It will be more convenient for some manufacturers to sell to wholesalers who then sell to retailers, while others will prefer to sell directly to retailers or customers. Place refers to where the sales are to be made and how the products will be distributed. It includes: channels of distribution, the extent of market coverage, managing inventories, transportation and logistics. Put simply, place involves all activities that deliver the product to your target customers.
Organisations that facilitate the movement of products from the manufacturer to the final user of the product are known as intermediaries. The common types of intermediaries include:
Retailers: Those companies that sell mainly to consumers and determine the final selling price of the product.
Wholesalers: Those companies that purchase merchandise in bulk from producers and resell mainly to businesses, the government and other retailers.
Agents and brokers: Those firms do not take the title or ownership of goods and services but facilitate the sale of products from the manufacturer to the end user and take a commission upon the sale of goods.
With the rapid advancement of Internet technology and increasing broadband uptake, there is currently a move towards selling goods online particularly with the increased use of e-commerce technology. As the Internet facilitates a geographically dispersed market, firms are now able to reach a wider audience with a low setup cost.
Promotion is the business of communicating with customers. It will provide information that will assist them in making a decision to purchase a product. The showy or exciting display, pace and creativity of some promotional activities are almost alien to normal business activities.
The cost associated with promotion or advertising goods and services often represents a sizeable proportion of the overall cost of producing an item. However, successful promotion increases sales so that advertising and other costs are spread over a larger output. Though increased promotional activity is often a sign of a response to a problem such as competitive activity, it enables a company to develop and build up a succession of messages and can be extremely cost-effective.
(Lionel Wijesiri, a corporate director with over 25 years’ senior managerial experience, can be contacted at email@example.com)