5

marketing efforts. Attractive strategies – whole marketing plans – are chosen for implementation. Controls are needed to be sure that the plans are carried out successfully. If anything goes wrong along the way, continual feedback should cause the process to be started over again – as a result, the marketing manager is planning more attractive marketing strategies.

The importance of marketing within an organization depends on whether the firm has adopted the social marketing concept, which emphasizes that customer needs must be satisfied in ways that also benefit society. Big and small firms alike practice this philosophy. These efforts include satisfying society’s environmental and social needs for a cleaner, safer environment by developing recyclable packaging, adding extra safety features such as car air bags, voluntary modifying a manufacturing process to reduce pollution or sponsoring campaigns to address social problems. Firms that haven’t adopted this social marketing concept may see marketing as a sales or advertising function only.

Questions for discussion and review

1.Define the marketing concept in your own words.

2.Distinguish between production orientation and marketing orientation, illustrate with examples.

3.Define the role of a marketing manager.

4.Distinguish clearly between a marketing strategy and a marketing mix.

5.Why is the customer placed in the centre of the four Ps – Product, Place, Promotion, and Price?

6.What is the meaning of social marketing concept?

Case study: McDonald’s “Seniors” Restaurant

Patty Maloney is a manager of a McDonald’s restaurant in a city with many “seniors”. She has noticed that some senior citizens have become not just regular patrons - but patrons who come for breakfast and stay on until about 3 p.m. many of these older customers were attracted initially by a monthly breakfast special for people aged 55and older. The meal costs $.99, and refills of coffee are free. Every fourth Monday, between 100 and 150 seniors jam Patty’s McDonald’s for the special offer.

But now almost as many of them are coming every day – turning a fast-food restaurant

6

into a meeting place. They sit for hours with a cup of coffee, chatting with friends. On most days, as many as 100 will stay from one to four hours.

Patty’s employees have been very friendly to the seniors, calling them by their first names and visiting with them each day. In fact, Patty’s McDonald’s is a happy place – with her employees developing close relationships with the seniors. Some employees have even visited customers who have been hospitalized. “You know,” Patty says, “I really get attached to the customers. They are like my family. I really care about these people.” They are all “friends” and being friendly with the customers is a part of McDonald’s corporate philosophy.

These older customers are an elderly group – and very friendly to anyone who comes in. Further they are nearer than most customers, and carefully clean up their tables before they leave. Nevertheless, Patty is beginning to wonder if anything should be done about the growing “non-fast-food” clientele. There’s no crowding problem yet, during the time when the seniors like to come. But if the size of the senior citizen group continues to grow, crowding could become a problem. Further, Patty is concerned that her restaurant might come to be known as an “old people’s” restaurant

– which might discourage some younger customers. And if customers felt the restaurant was crowded, some might feel that they wouldn‘t get fast service. On the other hand, a place that seems busy might be seen as a “good place to go” and a “friendly place”.

Patty also worries about the image she is projecting. McDonald’s is a fast-food restaurant, and normally customers are expected to eat and run. Will allowing people to stay and visit change the whole concept? In the extreme, Patty’s McDonald’s might become more like a European-style restaurant where the customers are never rushed – and feel very comfortable about lingering over coffee for an hour or two. Patty knows that the amount her senior customers spend is similar to the average customer’s purchase – but the seniors do use the facilities for a much longer time. However, most of the older customers leave McDonald’s by 11:30 – before the noon crowd comes in.

Patty is also concerned about another possibility. If catering to seniors is OK, then should she do even more with this age group? In particular, she is considering offering bingo games during the slow morning hours – 9 a.m. to 11a.m. Bingo is popular with some seniors, and this could be a new revenue source – beyond the extra food and drink purchase which probably would result. She figures she could charge $3 per person for the two hour period and run it with two underutilized employees. The prizes would be coupons for purchases at her store (to keep it legal) and would amount to

7

about two thirds of the bingo receipts (at retail prices). The party room area of her McDonald’s would be perfect for this use and could hold up to 150 persons.

Questions for discussion

1.Evaluate Patty Maloney’s current strategy regarding senior citizens.

2.Does this strategy improve this McDonald’s image?

3.What should she do about her senior citizens market – i.e., should she encourage, ignore, or discourage her seniors?

4.What should she do about the bingo idea? Explain.

2. Finding Target Market Opportunities with Market Segmentation

Firms need creative strategy planning to survive in our increasingly competitive markets. The important part of marketing strategy planning focuses on finding attractive target markets. Marketing strategy planning tries to match opportunities to the firm’s resources (what it can do) and its objectives (what it wants to do). How many opportunities a firm “sees” depends on the thinking of top management – and the objectives of the firm. Some want to be innovators and eagerly search out new opportunities or breakthrough opportunities that help innovators develop hard-to-copy marketing strategies that will be profitable for a long time. Others are willing to be creative imitators or risk-avoiding “me-too” marketers. Even if a firm can’t find a breakthrough opportunity, it should try to obtain a competitive advantage to increase its chance for profit or survival. Competitive advantage means that a firm has a marketing mix that the target market segment sees as better than a competitors mix.

There are several types of opportunities a firm can pursue.

Market penetration – means trying to increase sales of firm’s present products in its present markets through a more aggressive marketing mix - through attracting competitors’ customers or current non users, adding more stores in present areas for greater convenience, increasing advertising, cutting prices and offering sales coupons.

Market development – means trying to increase sales by selling present products in new markets. Firms may try advertising in different media to reach new target customers. They may also search for new uses for their product.

Product development – means offering new or improved products for present markets.

By knowing the present market’s needs, a firm may see ways to add or modify product

8

features, create several quality levels, or add more types or sizes to better satisfy customers.

Diversification – means moving into totally different lines of business – perhaps entirely unfamiliar products, markets, or even levels in the production-marketing system. Diversification presents the most challenging opportunities. It involves both new products and new markets.

Market segmentation defines possible target markets. Segmenting means clustering people with similar needs into a “market segment” A market segment is a (relatively) homogeneous group of customers who will respond to a marketing mix in a similar way. There is a logical, seven-step approach to market segmentation. This approach is especially useful for finding the determining dimensions for product types. The steps taken while segmenting markets are the following:

1.Naming the broad product-market. The firm tries to narrow down the marketing focus to product-market areas where the firm is more likely to have a competitive advantage.

2.Listing potential customers’ needs. Write down as many relevant needs as you can

– considering all of the potential customers in the broad product-market.

3.Forming “homogeneous” submarkets – i.e. “narrow” product-markets. Assuming that some people have different needs than others, form different submarkets based on each submarket’ needs.

4.Identifying the determining dimensions that may be the following: behavioral (benefit sought, brand familiarity, purchase frequency, kind of shopping, etc); geographic (region in the country, size of city); demographic (income, sex, age, family size, race, social class).

5.Nicknaming the possible product-markets

6.Evaluating why product-market segments behave as they do. After naming the markets, the firm should think about what else it knows about each segment to see how and why these markets behave the way they do. This may explain why some competitive offerings are more successful than others.

7.Making a rough estimate of the size of each product-market segment. As far as the firm is looking for profitable opportunities, it must try to tie its product-markets to some customer-related characteristics – to estimate the size of these markets. It is necessary for later forecasting and marketing mix planning.

Good marketers should be experts on markets and likely segmenting dimensions. By creatively segmenting markets, they may spot opportunities – even breakthrough