2.2 Assessing the External Marketing Situation in:

Svend Hollensen, Marc Oliver Opresnik

Marketing, page 75 - 88

A Relationship Perspective

1. Edition 2010, ISBN print: 978-3-8006-3722-5, ISBN online: 978-3-8006-4870-2,

Bibliographic information
2.2 Assessing the External Marketing Situation 61 to two and a half to three years as compared to Detroit’s four to over six years. Being twice as fast resulted in the Japanese having more up to date designs that embodied more contemporary and sophisticated technology. The fundamental ingredients of time-base competition are low-cost variety and fast reaction time. Companies using this strategy give attention to reducing the time required to manufacture and distribute their products and cutting the time required to develop and introduce new products. By doing so companies can offer a broader product line, cover more market segments, and rapidly increase the technological superiority of their products. The benefits of these practices can be generically expressed as gains in quicker response time. In essence, time-based competition is a customer-focused strategy. Promptness and variety are the means by which a company can deliver superior value to its clients. However, succeeding at this requires a coordinated company effort. A time-based competitor develops the high degree of internal responsiveness and coordination among different parts of the company that allows it to discern differences among key clients and customize the products and services delivered to each. Thus, the ultimate purpose of the time-based competitor is not maximizing speed and variety, but owning the customer (Stalk and Hout, 1990; Johnson and Busbin, 2000). 2.2 Assessing the External Marketing Situation A marketing-oriented company continually analyzes the environment in which it operates, adapting to take advantage of emerging opportunities and to minimize eventual threats. At the simplest, the whole marketing system can be divided into three levels (see Figure 2.6): The focal company• : Understanding and analyzing the internal situation was dealt with already within this chapter Industry level/value net/micro level• : The focal company’s most important actors/ stakeholders at this level are suppliers, partners/complementors, competitors and of course the customers. Macro level• : The most important changes taking place in the macroenvironment can be summarized in the so-called PEST analysis: P Political and legal factors – E Economic factors – S Social/cultural factors – T Technological factors – In the following we will discuss each of the four elements in the PEST analysis. Later in the chapter, the dimensions of the microenvironment will be introduced and examined. 2.2.1 PEST Analysis The macroenvironment consists of a number of broad forces that influence not only the company but also the other stakeholders and actors in the microenvironment. Traditionally, four forces – political/legal, economic, social/cultural and technological – have Kapitel_2.indd 61 03.08.2010 12:46:32 Uhr 2. Situational Analysis in the Marketing Planning Process62 been the focus of attention, with the result that the term PEST analysis has been used to describe the macro environmental analysis (Jobber, 2010). Political and Legal Factors The political environment consists of laws, government agencies, and pressure groups that influence and limit various companies and individuals in a given society. Political and legal forces can highly influence marketing decisions by setting the rules by which business can be conducted (Kotler and Armstrong, 2009). For example, smoking bans in public places do have substantial effects on the demand for cigarettes. EU – Euro and the Enlargement January 1992 saw the realization of the dream of many Europeans with the creation of the European single market. The single market of over 320 million consumers was formed to allow the free flow of products and services, people and capital between the member states. By January 2002 a single European currency, the euro (€), had been introduced into all but a handful of the EU member states, further facilitating trade and exchange across the old political borders. On 1st May 2004, ten new states were member of the EU: the three Baltic States, Hungary, Poland, The Czech Republic, Slovakia, Cyprus, Malta and Slovenia. That enlargement has significant implications for many organisations, both commercial and non-commercial, as Europe expands. The population of the European Union rises by around 20 per cent while GDP increases by only 5 per cent. Significant differences in labour costs, for example, are likely to raise questions of location for many firms. Industry level: (the value net) Suppliers Partners/ complementorsCompetitors Firm level: Focal company Customers The vertical network Macro level: (PEST analysis) The horizontal network Source: Adapted from Hollensen, 2006, modified Technological factors Socio-demographic and cultural factors Political and legal factors Economic factors Figure 2.6: The three levels in the marketing system/value net: firm level, industry level, macro level Kapitel_2.indd 62 03.08.2010 12:46:33 Uhr 2.2 Assessing the External Marketing Situation 63 Against this background, European companies are affected by legislation at EU and national levels (Jobber, 2010): A major influence at European level is EU competition, which is based on the belief • that business competitiveness benefits from fierce competition. The role of competition policy, then, is to encourage free competition by removing restrictive practices and other anti-competitive activities. This is enabled by tackling barriers to competition through regulations that form a legal framework within which EU companies must operate. In addition to EU laws, companies operating in member states are also influenced by • national laws. This can lead to inconsistencies across Europe. For example, tobacco advertising is illegal in Scandinavia, the UK, Italy and partially in Germany and alcohol advertising is banned on television in France and at sports grounds. Supplementing the efforts of the European Commission are national bodies set up to investigate anti-competitive practices. Self-regulation also occurs at national level, with industries drawing up codes of practice to protect customer interests. Examples of regulatory bodies in the advertising industry include the Deutscher Werberat (Germany), Maknads Etiska Radet (Sweden) and the Advertising Standards Authority (UK). Marketing managers must constantly be aware of the constraints on activities made by the political and legal environment. Above all, companies need to ensure that their activities and strategies are in accord with EU and national laws and codes of practice. Economic Factors The economic environment consists of factors that affect consumer buying power and spending patterns. Nations vary vastly in their levels and distribution of income. Rates of economic growth vary over time and across the globe. While growth is undoubtedly cyclical, the indications are that the developed economies are unlikely to see again the rate of growth experienced in the first decades after the Second World War. The state of national and international economies affects businesses directly in a number of ways, for example, it affects interest rates and hence the cost of borrowing. In times of slow economic growth governments, or their central banks, tend to reduce interest rates to make borrowing cheaper and hence stimulate spending. When economic growth is rapid, concerns for growing inflation, or economic ‘overheating’, lead to increased interest rates to diminish demand. Interest rates have a number of effects in addition to directly raising or lowering the cost of borrowing. In particular they have a psychological effect on the confidence of consumers and businesses, affecting purchasing decisions beyond purely rational, or economic, judgement. Company investment decisions are often delayed in times of relatively high interest rates and that can then have an obvious knock-on effect on suppliers further down the supply chain. Consumers too may holdup purchases, especially where they are made through loans that are increasingly expensive. The housing market, for example, is particularly vulnerable to interest rate changes as the most recent financial crisis displays. Employment and unemployment rates also follow economic and business cycles. In times of economic slowdown firms may find their order books less full and hence be Kapitel_2.indd 63 03.08.2010 12:46:33 Uhr 2. Situational Analysis in the Marketing Planning Process64 forced to follow efficiency gains through ‘downsizing’. The recent recession for exam ple has caused unemployment rates to rise and consumer spending to fall considerably. Although the exchange rates between most European countries are now fixed, the rates at which major currencies such as the US dollar, the pound sterling and the yen are traded are still variable and volatile. Fluctuations in exchange rates mean that the price a costumer in one country pays for a product and/or the money that a supplier in an overseas country receives for selling that product can alter. For example, if the exchange rate between the pound sterling and the euro changes, such that a pound buys fewer Euros, a German car manufacturer who receives payment in Euros will receive fewer Euros if the price of the automobile remains unchanged in the UK. In an attempt to maintain a constant euro price, the German car manufacturer may raise the UK pound sterling price to UK distributors and customers. Consequently, interest and exchange rates can have significant implications for sales revenues and hence the profitability of a company’s international operations (Jobber, 2010). Social/Cultural Factors The social and cultural environment is made up of institutions and other forces that affect a society’s basic values, perceptions, preferences, behaviours as well as population growth, age distribution and other elements, which in turn can affect marketing decision making. Demographic Factors A major demographic change that will continue to affect the demand for products and services is the rising proportion of people over the age of 45 in the EU, and the decline of the younger age group. As a consequence, the rise in over-45s creates significant marketing opportunities because of their high level of per capita income. In 2025, half the population of Europe will be over 45 years old. For the next decade, the world population is expected to grow by an average of 97 million per annum (Brown, 1992). Another demographic change is the increase in the number of retired people in Europe. This is due to the fact that people are living longer and also because of early retirement. Understanding the needs and wants of the over-45s presents an enormous marketing opportunity, so that products can be created and tailored to meet the specific needs of these people (Jobber, 2010). However, around 95 per cent of consumer advertising is aimed at the under-fifties. It is likely that marketers will increasingly start to recognize the potential value of this market and target more offerings and promotions towards them. At the other end of the spectrum the youth market has also become more prosperous and poses new opportunities for marketers. Fashion and music industries have been quick to recognize this pristine affluence. Related to this youth market has been the emergence of the enigmatic ‘Generation X’ consumer who are hostile to business values and traditional advertising and branding, and reject many conventional product offers. The pay-off in understanding the values and preferences of this type of consumer has been substantial for companies such as Nike in clothing. Kapitel_2.indd 64 03.08.2010 12:46:33 Uhr 2.2 Assessing the External Marketing Situation 65 Social Factors A number of major pressures on organisations can be identified. First and foremost, customers are becoming increasingly demanding of the products and services they purchase. Customers demand, and expect, reliable products with quick, efficient service at reasonable prices. Furthermore there is little long-term stability in customer demand. A further social change has been in attitudes to, and concern for, the physical environment. Environmental pressure groups impact on businesses, so much so that major oil multinationals and others spend large amounts on corporate advertising each year to demonstrate their concern and care for the environment. The activities of Greenpeace have begun to have a major impact on public opinion and now affect policy making at the national and international levels. It is to be expected that concern for the environment will increase and hence will be a major factor in managing that prime marketing asset – company reputation (Hollensen, 2006). Cultural Factors Culture is the combination of traditions, taboos, values, rituals and attitudes of the society in which an individual lives. Before an American can be a successful leader among different cultures, he must clearly understand his own culture and be aware of imposing his culture or traditions on those of other cultures. Edward T. Hall has suggested the concept of high- and low-context communication as a way of understanding different cultural orientations. The American communicates in a low-context nature, which means that messages are explicit. Words carry most of the information in communication. In low-context culture exchange partners get down to business promptly. In a high-context culture it takes considerably longer to conduct business because of the need to know more about a businessperson before a relationship develops. In a high-context culture, such as France, Japan, and most of the Middle East, less information is contained in the verbal part of the message. Much more information resides in the context of communication, including the background, associations, and basic values of the communicators (Hall, 1976). In the 1970s, Geert Hofstede developed methods to detect and measure elements of national cultural systems that impact behaviour in business. Hofstede’s research was extracted from an existing bank of paper-and-pencil survey results collected within subsidiaries of the IBM corporation in 40 countries, and covering among others, many questions about values. The survey was held twice, around 1968 and around 1972, producing a total of over 116,000 questionnaires. Theoretical reasoning and statistical analysis exposed the four main dimensions on which country cultures differ according to Hofstede. They were labelled Power Distance, Uncertainty Avoidance, Individualism, Example 1 Foxglo makes energy-efficient light-bulbs addressing social and environmental factors Kapitel_2.indd 65 03.08.2010 12:46:33 Uhr 2. Situational Analysis in the Marketing Planning Process66 and Masculinity. Each of the 40 countries could be given a score on these four dimensions (Hofstede, 1980). Later research, which dealt with Asian culture, added the dimension called ‘Long-Term Orientation’. By learning how each country scored on these dimensions, a human resource (HR) professional can understand the culture of a country and then implement practices that are appropriate for that culture. Hofstede’s five dimensions can be summarized as follows: Power distance• is the extent to which the less powerful members of society accept that power is distributed unequally. Inequality can occur in areas such as prestige, wealth, and power, or in parent-child relationships. Different societies put different weights on status. In corporations, inequality in power is inevitable because it serves an important function and is usually formalized in hierarchical boss-subordinate relationships. Uncertainty avoidance• : This is the extent to which people try to avoid situations where expectations and outcomes are not comprehensible. These are situations where people feel threatened by poorly defined or indistinct conditions and varies considerably among people in different countries. Employees with high uncertainty avoidance would tend not to break company rules even when they think it is in the company’s best interest to do so, and tend to remain within the same company for long periods of time. They prefer to work with I people with long-term associates and friends than with strangers (Gannon, 2001). Individualism• describes the relationship between an individual and the groups to which he/she belongs. Individualism is described by Griffin and Pustay (1998) as a cultural belief that the person comes first. People with high individualism put their own interests and those of their immediate families ahead of those of others. Masculinity• (goal orientation): This is rather aggressive and materialistic behaviour. Hofstede described this dimension as masculinity vs. femininity; in literature, authors referring to Hofstede’s study, tend to call this dimension goal orientation. Long-Term Orientation• : Time horizon of long-term orientation is the extent to which people within a culture have a long-term vs. a short-term outlook on labour, life, and other aspects of society. Asian cultures have long-term future orientations that value hard work, determination and dedication. Other cultures tend to focus on the past and present, with respect for traditions and fulfilment of social obligations. Cultural differences also have significant implications for marketing, especially for business-to-business marketing. Within Europe, cultural variations affect the way business should be conducted. Humour in business life, for instance, is acceptable in the UK, Italy and Greece the Netherlands and Spain but less commonplace in France. These factors of business life need to be recognized when interacting with European business customers (Jobber, 2010). Last, but not least, religions and religious institutions affect markets in a variety of ways as well. Religion is one of the foundations of moral teachings in most civilizations, and as such it defines and informs the kinds of problems faced in the market by buyers (consumers) and sellers (marketers). Marketers need to understand the effects of religion on the kinds of issues they face in business and, more important, how these issues are defined, informed, and regulated by religion. Understanding the relationships between religions and markets should be important to macro marketing since religions affect the foundations of people’s understanding of the world and thus their understanding and acceptance of markets and marketing institutions. Religion affects perceptions of development, quality of life, appropriate standards of exchange, and competition. Kapitel_2.indd 66 03.08.2010 12:46:33 Uhr 2.2 Assessing the External Marketing Situation 67 Technological Factors The technological environment involves forces that create new technologies, generating new product and market opportunities. It is perhaps the most dramatic force now shaping company’s future. The latter part of the twentieth century saw technological change and development impact on virtually every industry. The microprocessor, for instance, has been attributed with heralding the post-industrial age and it is probably this invention above all others that has had the most profound effect on our lives today. Microprocessors have revolutionized data collection, processing and diffusion. They have caused major changes in production technology and have served to increase the rate of technological change. This reduction of commercialization times has, in turn, led to a shortening of product life cycles, with products becoming obsolete much more quickly than in the past. Computer integration of manufacturing and design is helping to shorten product development times. Newer technology has a major impact on particular aspects of marketing. The computers and their extensive availability to management has led to increased interest in sophisticated market modelling and decision support systems. Increased amounts of information can now be stored, analyzed and retrieved very much more quickly than in the past. In 1965 Gordon Moore of Intel predicted the exponential growth in the numbers of transistors that would be possible on integrated circuits. Moore’s Law, as it became known, holds that ‘the processing power of the silicon chip will double every 18 months’. The prediction has proven remarkably accurate. Of course also the Internet – the global electronic communications network – is fast emerging as not simply a new marketing communications vehicle but potentially a whole new way of going to market, which may change the competitive structures of industries significantly. Time and distance are shrinking hurriedly as firms use the internet to market their offerings to truly global markets. One result is that cross-national segments are new emerging for products and services from fast foods, through backs and toys, to computers and automobiles (Hollensen, 2006). Accordingly, technological change can provide ample opportunities for new product generation and also threats to existing markets. Technology also affects the way in which marketing and especially marketing research is carried out. The Internet and mobile phone technology have allowed corporations to use innovative channels of communication and distribution (e.g. music downloads via iTunes) to reach consumers. 2.2.2 External Relationships to Stakeholders in the Value Net The value net or microenvironment consists of the stakeholders in the company’s immediate environment that influences its capabilities to operate successfully in its chosen markets. Marketing success requires building relationships with those actors, specifically customers, competitors, distributors, suppliers and other stakeholders. Since the company has relationships with different types of interdependencies, with different objective for the development of the relationship, etc., it is imperative to differentiate between how different relationships are handled. In particular, the relationships and interactions are typically established with the following actors (see Figure 2.6): Kapitel_2.indd 67 03.08.2010 12:46:33 Uhr 2. Situational Analysis in the Marketing Planning Process68 Suppliers• Customers• Complementors/partners• Competitors• Other external relationships• These relationships will now be introduced and analyzed in more depth. Relationships with Suppliers Suppliers form an important link in the company’s overall customer value proposition system as they provide the resources needs by the firm to produce its goods and services. There seem to be three key strategic issues related to purchasing management (Hollensen, 2006): 1. The decision of whether to make an item in-house or to bur from external suppliers; 2. The development of appropriate relationships with suppliers; 3. The managing of the supplier base in terms of size and relations between suppliers. The first strategic issue is to decide what items to procure. This is defined by the range of the operations that are undertaken in-house by the buying organisation. This determines the degree of vertical integration, which in purchasing terms has been addressed as the make-or-buy issue. What to produce internally and what to buy from external suppliers has been an issue in manufacturing firms for a very long time, despite the fact that it was actually not identified as a matter of strategic importance until the 1980s. It is obvious that buying firms over time have come to rely more on ‘buy’ than ‘make’. Consequently, outsourcing to external suppliers has increased noticeably over time. Having suppliers that compete with one another is one way of increasing efficiency in the purchasing operations. A buying company can switch from one supplier to the other and thus influence the vendors towards improving their efforts. The prospect to play off suppliers against each other in terms of price conditions has been a particularly recommended purchasing policy. The core of this strategy is to avoid becoming too integrated with suppliers, because integration leads to dependence. Customer relationships based on this reason are characterized by low involvement from both parties. The tendency in the overall industrial system towards increasing specialization has called for more coordination between the individual companies. Sequentially, this leads to more adaptation between buyer and seller in terms of activities and resources. These adaptations are made because they improve efficiency and effectiveness. They also create interdependencies between consumer and supplier. Such relationships are characterized by a high involvement approach. Against this background, buyers and suppliers can join forces to improve supply relationship, or even supply network, performance and consequently allow the supply chain to deliver better value to the customer. Lean supply techniques aim to eliminate redundancies in all areas of the business, from the shop-floor to manufacturing processes, and from new product development to supply chain management. Agile supply techniques, on the other band, are directed towards plummeting the time it takes for a supply chain to deliver a good or service to the end customer and are aimed at supply chains that have to respond to unpredictable demand patterns. Both the ‘lean’ and ‘agile’ supply Kapitel_2.indd 68 03.08.2010 12:46:33 Uhr 2.2 Assessing the External Marketing Situation 69 schools have provided a great deal of case evidence that demonstrates that collaboration, in the cause of lean or agile goals, can be effective in reducing costs and/or increasing productivity and functionality. For example, the lean school has referred to the Japanese automobile industry, especially the Toyota Motor Corporation, as an excellent example of lean practice. The agile school has pointed to the production of the Smart Car, a car that offers entire customization, backed up by a service that offers responsiveness to customer demands. However, the idea that partnership constitutes ‘best practice’ ignores two key factors. First, not all transactions will give reason for the resources required for a collaborative relationship. Entering a collaborative relationship will only make economic sense if the expected financial and strategic rewards are supposed to be higher than the costs associated with the establishment and maintenance of such a relationship. Second, not all suppliers that company’s deal with will wish to allocate the resources required for a mutual relationship. The supplier may prefer to allocate resources to other customers – those that it deems more relevant to the achievement of its business goals. Furthermore, even where collaborative relationships are developed, there is by no means one form of collaboration. For example, in some power situations getting suppliers to collaborate will not be possible. In particular, such relationships will differ in both their conduct and outcome depending on the power-dependence relations concerned. As has long been argued in the social science literature, there are four generic buyer-supplier power structures: buyer dominance, interdependence, independence and supplier dominance. There are two basic ways of working in the context of supplier relationship management: arm’s length and collaborative. An arm’s length way of working involves a low level of contact between the buyer and supplier. By low contact, we mean the absence of initiatives that are aimed at cost reduction or functionality improvement. In arm’s length exchanges, the buyer and supplier simply exchange the contractual information that is required for the transaction to occur. For example, information about the placing of the order, the recording of the fulfilment and the settlement of the invoice. A mutual way of working is much more proactive. It involves close communication and is aimed at the creation of supplementary value in a relationship. In this way of working, buyers work in cooperation with suppliers either to reduce the supplier’s costs or to increase the functionality of the product and service offered. The buyer will often closely monitor and measure the performance of the supplier, but will also take on board suggestions about performance improvement that come from the supplier. The buyer will also often get involved in developing the supplier’s skills and capabilities through joint development activities (Hollensen, 2006). Most companies today treat their suppliers as partners in creating and delivering customer value. Walt-Mart goes to large lengths to work with its suppliers. For example, it helps them to test new products in its outlets. In addition, its Supplier Development Department publishes a Supplier Proposal Guide and maintains a supplier Web site, both of which support suppliers to navigate the complex Wal-Mart procurement process. Wal-Mart is aware of the fact, that good partnership relationship management results in success for the company, suppliers, and, ultimately, its customers (Kotler and Armstrong, 2009). Partnering Partnering is a relationship between customer and supplier organisations, whose principal goal is a shared increase in the effectiveness and efficiency of joint responsibilities. Kapitel_2.indd 69 03.08.2010 12:46:33 Uhr 2. Situational Analysis in the Marketing Planning Process70 Sheth and Sisodia (1999, p. 82) suggest that, through partnering, buyers and sellers can gain many of the advantages of vertical integration without the drawbacks associated with acquisition. These advantage include: Lower transaction costs;• Assurance of supply;• Improved coordination;• Higher entry barriers.• This type of cooperation between buyers and sellers may manifest itself in a number of different ways. They may engage in cooperative behaviour and coordinated activities in areas such as marketing, finance, purchasing or research and development (Hunt et al., 2006). Critical to partnering is a good understanding between the partner companies. In particular, a knowledge and acceptance of each other’s organisational cultures is instrumental. Kanter (1994) talks about the need for ‘chemistry’ and ‘compatibility’ when selecting partners and that success will have more to do with people-centred factors than financial or strategic. Although the above mentioned advantages are substantial, there is always a downside to any strategy. Brennan (1997) describes the potential costs to the customer and/or supplier of the partnership approach as: The reduction of ‘marketing incentivisation• ’ normally created by vigorous competition (i.e. the risk that the supplier becomes complacent). The likelihood that external suppliers will be unwilling to bid against preferred sup-• pliers. The risk of becoming heavily committed to the wrong partners.• The sunken costs (related to customer-specific or supplier-specific investment in • physical or human assets) that are more or less worthless outside the partnership. As with any strategy, the costs and benefits need to be carefully considered before progressing to any partnership agreement. Relationships with Customers As we have outlined before, customers are at the centre of the marketing philosophy and effort, and it is the task of marketing management to satisfy their needs and wants better than the competition. In the relationship approach a specific transaction between the focal company and a customer is not an secluded event but takes place within an exchange relationship characterized by mutual dependency and interaction over time between the parties involved. An analysis could not break off at the individual relationship as in the network approach such relationships are seen as interrelated. Thus, the various actors on a market are connected to each other, directly or indirectly. A specific market can then be described and analyzed as one or more networks. An exchange relationship implies that there is an individual specific dependency between the seller and the consumer. The relationship develops through interaction over time and signifies a joint orientation of the two parties towards each other. In the interaction the buyer is equally as active as the seller. The interaction consists of social, business and information exchange and an adaptation of products, processes and routine s to better reach the economic objectives of the parties. Kapitel_2.indd 70 03.08.2010 12:46:34 Uhr 2.2 Assessing the External Marketing Situation 71 Consequently, marketing planning should start at the relationship level. Interaction with the buyers and potential buyers is an important aspect of the planning process. The planning should include objectives and activities regarding the development of the relationships. The objectives should not only be formulated for the business exchange, such as sales volume and type of products, but also for social and information exchange, and for adaptation processes for products and processes (Hollensen, 2006). Although marketing authors acknowledge the benefits of a ‘broadened view of marketing’ there is no doubt that ‘customer markets’ should remain the most important focus. RM focuses not on what you can do to your customer but on what you can do for your customer (Worthington and Horne, 1998) and what you can do with your customer, to ensure customer satisfaction. The goal is to treat your customers as valued partners, to establish their needs and develop their loyalty. Customer Service and RM From the very beginning of RM research, customer service created at the supplier-customer interface has been regarded as a core element in the RM process. Christopher et al. (1991) suggest RM to function as the unifying concept that brought the individual concepts of customer service, quality and marketing together. They suggest that customer service, quality and marketing work in harmony with: customer service levels being determined by research-based measurement of custom-• er needs and competitor performance and of the needs of different market segments; quality being determined from the perspective of the customer based on regular re-• search and monitoring; the total quality concept influencing the process elements (e.g. managing the ‘mo-• ments of truth’ in the service encounter) associated with the marketing concept. Traditional marketing, they suggest, conceived these three elements as independent and the task facing the organisation is to bring about an alignment of these so that the impact upon the customer is more effective. Building Customer Relationships Dwyer et al. (1987) identified five general phases through which relationships evolve with each phase representing a major transition in how parties regard one another (see Figure 2.7). Awareness Exploration Extension Commitment Re-Invention Source: Adapted from Dwyer et al., 1987, modified Dissolution Figure 2.7: Evolution of relationships Kapitel_2.indd 71 03.08.2010 12:46:34 Uhr 2. Situational Analysis in the Marketing Planning Process72 This model may apply to both business-to-consumer and business-to-business relationships. The phases can be described as follows: Awareness• refers to one party’s recognition that the other party is a feasible exchange party. Interaction has yet to take place but there may be considerable ‘positioning’ to enhance each other’s attractiveness. Exploration• refers to the ‘search and trial period’ in the relational exchange. It is in this phase that potential relational partners consider the ‘obligations, benefits and burdens’ of the relationship. This phase is conceptualized in five sub processes: Attraction – Communication and bargaining – Development and exercise of power – Norm development (i.e. normalization of the relationship) – Expectation development (i.e. what do we want from the relationship) – Expansion• refers to the continual increase in mutual benefits. Commitment refers• to the implicit or explicit pledge, made by the partners, to continue the relationship. At this stage the benefits include the ‘certainty’ developed from mutually anticipated roles and goals, the ‘efficiency’ established as a result of bargaining and the ‘effectiveness’ that comes from trust. Dissolution• : The possibility of withdrawal or disengagement is part of the model. Reinventing relationships that have passed their sell-by date may prevent dissolution. As discussed in previous sections, not all relationships are as complex or as highly motivated as those suggested by the relationship formulation process outlined above. All relationships, however, have some elements that are recognizable in this model. Relationships with Partners/Complementors This kind of relationship is based on cooperation between manufacturers of complimentary functions and or products/services. In such an affiliation, each partner has a strategic resource that the other needs and in this way each partner is motivated to develop some kind of exchange process between supplier and customer. For example, partners segregate the value chain activities between themselves. One partner develops and produces a good while letting the other partner market it. The focal company, A, may want to enter a foreign market, but lacks local market knowledge and does not know how to get admittance to foreign distribution channels for its products. Therefore, A seeks and find a partner, B, which has its competencies in the downstream functions, but is rather feeble in the upstream function. In this way A and B can create a coalition where B can help A with distribution and selling in a foreign market, and A can help B with R&D or production. Relationships with Competitors As the marketing concepts states that to be successful, a company must provide greater customer value than its competitors do, marketers must gain strategic advantages by positioning their offerings strongly against competitor’s offerings in the minds of the consumers. Therefore, marketing-oriented companies not only monitor and seek to understand customers but also research competitors and their brands to understand their strengths, weaknesses, strategies, and response patterns (Jobber, 2006). In analyzing competition, a number of factors need to be well thought-out. These range from the number and size of competitors, their capabilities (strengths and weaknesses), their Kapitel_2.indd 72 03.08.2010 12:46:34 Uhr 2.2 Assessing the External Marketing Situation 73 international marketing strategies, their sales volume and relative market share, to the type of competitor, i.e. multinational versus local and their relative resources. The major international competitors, such as Microsoft or Procter&Gamble, have access to extensive financial and other resources. But local competitors should not be ignored, as they have less administrative overhead, lower operating costs, greater flexibility and most likely sophisticated local market knowledge. When competitors are involved in resource exchange alliances, competition implies some issues. The dilemma is that in creating an alliance with a competitor, a company is, in fact making them more competitive. For collaboration to succeed, each competitor must contribute something unique: fundamental research, product development skills, manufacturing capacity, access to distribution etc.. In the RM approach, the market includes both complementarities and substitutes, both cooperating and competing firms. Competitors also strive to develop their networks. Such competitive activity is a key force for change in the networks. Competitors are predominantly negatively connected to each other. They might compete for customers, suppliers or other partners. Opposing firms also often have customers, distributors or suppliers in common. Occasionally, this implies a negative connection, but sometimes, competing firms do not have conflicting objectives vis-à-vis a common counterpart. Interaction among competitors has been treated traditionally within economic theory, and has been explained in terms of the structure of an industry within it operates. It is further argued that intensity in competition is dependent on the degree of symmetry between companies, while the degree of concentration determines whether competitors act in collusion or competition with each other. Variations in patterns of interaction are also viewed via a relational approach to competitive interaction (Hollensen, 2006). Based on the motives for interaction and the intensity of the relationship concerned, five types of interaction are categorized: conflict, competition, co-existence, cooperation, and collusion. Conflict and competition are described as active vis-à-vis competitors, although they diverge in terms of the motives for specific interaction. Conflict represents object-oriented competition, geared to destroying the opposing counterpart. Competition is goal-oriented, directed towards achieving one‘s own goals even though this may have an off-putting effect on other competitors. Co-existent competition occurs when actors do not see one another as competitors, and therefore act autonomously. Understood collusion arises from implicit agreements among the actors to avoid active competition. Finally, in cooperation, the companies involved strive towards the same goals, for example by working together in strategic alliances. The interaction between competitors is changeable and can involve both cooperative and competitive interaction (Hollensen, 2006). Other External Relationships Alliances One current growth area in industry collaboration is in so-called alliances. This is where a group or groups of competitors collaborate to achieve cost and efficiency objectives. At one extreme a strategic alliance can encompass all functional areas; at the other extreme it may be limited in scope to a single function like marketing or value activity (Varadarajan and Cunningham, 2000). Kapitel_2.indd 73 03.08.2010 12:46:34 Uhr 2. Situational Analysis in the Marketing Planning Process74 Alliances can come in all shapes and sizes. They can vary considerably in intensity and duration, may be ‘one-shot projects’, limited but continuous cooperation or take parties so close that the next step is to consider merger (Gummesson, 1999). Legislators Companies have long recognized the importance of maintaining good relationships with legislators. There is, however, a significant difference between the types of relationship permitted with legislators and those between commercial companies. Whereas commercial enterprises are free to establish whatever depth of relationship the parties see fit, relationships with legislators at anything less than arm’s length are perceived as potentially corrupt practice in most developed economies. ‘Lobbying’ is the overriding term often used to describe the methodologies applied to influence government. Although the term implies influence through argument, the general meaning is ‘to influence or solicit’. Lobbying may thus take the form of information transmission (ensuring legislators have the information to make a decision), influence (ensuring that the company’s or industry’s position is clear), general ‘public relations’ activities (e.g. social events) and political party funding (Egan, 2008). Pressure Groups There are a growing number of pressure groups whose actions can influence and affect the commercial viability of a company. They can have a substantial influence with consumers and legislators considerably out of proportion to their size, as companies such as Shell and McDonald’s can testify. Frequently, commercial organisations find themselves in opposition to such pressure groups. Whereas full agreement may not always be possible, maintaining a dialogue with such groups is in the organisation’s best interest (Egan, 2008). 2.3 Analyzing Buying Behaviour on the B2C Market Customer buying behaviour refers to the buying behaviour of final consumers – individuals and households who buy goods and services for personal consumption. All of these final consumers combine to make up the consumer market (Kotler and Armstrong, 2009). Organisational buying, on the other hand, focuses on the purchase of products and services for use in an organisation’s activities. Sometimes, it is difficult to classify a product as either a consumer or an organisational good. Cars, for example sell to customers for personal consumption and organisations for use in carrying out their activities e.g. to provide transport for a sales executive. For both types of buyer, an understanding of customers can be gained by answering the following questions (Jobber, 2010): Who• is important in the buying decision How• do they buy? What• are their choice criteria? Where• do they buy? When• do they buy? Buyer behaviour as it relates to customers will now be examined based upon the first three questions as these are often the most intractable aspects of buyer behaviour. Kapitel_2.indd 74 03.08.2010 12:46:34 Uhr

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Marketing – A Relationship Perspective

Moderne Grundlange zum Marketing

Das Lehrbuch behandelt eines der wichtigsten und aktuellsten Themenfelder des modernen Marketings. Der Ansatz verbindet dabei den klassischen Ansatz der strategischen Marketingplanung und seiner Instrumente mit dem neuen Ansatz des Relationship Marketing. Der ganzheitliche Ansatz des Buches umfasst dabei die aktuellen Marketing-Grundlagen, Praxisbeispiele sowie anwendungsorientierte Fallstudien und eignet sich somit ideal sowohl für Manager und Entscheidungsträger im Marketing-Bereich, Studenten in Bachelor- und Materstudiengängen sowie Dozenten und Trainer.