Marketing Management
Introduction
Marketing is the process of building a positive predisposition in a potential customer’s subconscious mind. It is every action and activity that leads to developing a trust relationship and getting a person ready to make a purchasing decision. It starts with defining who you are and what you have that other people need. It is a process of research, planning and communication to reach a specific goal. According to (2003), marketing is the process of creating customers for your services in enough quantity and in a timely fashion to generate profits and be successful. It is an investment in the future of your business.
In the PC business, competition is intense. The biggest players are desperate for new sources of growth. Technological innovations that began as early as the 1600′s – such as the first mechanical calculating device – have ushered our society into what is now called “the information age.”(1986) The microcomputer or personal computer industry has undergone major changes in its market structure. The market structure changed in the computer industry as the PC segment developed (1988). According to (1988), “the industry has grown substantially from its beginnings in January 1975, when the first microcomputer, the Altair 8800, was introduced.” As it is recorded in the history, “during its early development, the industry was dominated by a few small-scale companies, mainly hobbyist-run. Entry into the market was determined by technological innovation and the availability of system-compatible software. Companies tended to design their own software, with little compatibility among systems.” (1988)
The PC market offers few technical barriers to entry. There are existing manufacturers of components and the technology is already widely available. However, although entry seems to be easy, new entrants require sunk entry costs that makes new entrants shy away from establishing such business. With rapid changing market environment of PC market few players survive.
Increased sales in the computer industry have stemmed from the public’s demand for affordably priced computers that are faster and more powerful so that users can retrieve and send data, play games, and run programs. Businesses have found that computers can save them money by automating many tasks and allowing owners to analyze and retain many crucial records. One of the most important advances is the speed at which computers are capable of processing data.
The extraordinary speed of today’s computers is not the only important development. The rapid decrease in cost, spurred on by a fiercely competitive market also is critical. Lower prices of computers occur when new technology is introduced at lower prices, which pushes the prices of existing technology even lower. As each new technological breakthrough makes its way into the market, the previous “best product” becomes very affordable. One company enjoyed an edge in the market when they introduced the next generation in microprocessors. It was not long until competitors caught up and introduced similar microprocessors at lower prices. To stay competitive, manufacturers must quickly slash prices and start planning their next better, faster product. This constant pressure has led the computer industry to reduce prices while continuing to improve their products.
According to (1979), “in the PC market, existing firms have significant advantages over potential entrants.” For example, consumers are more likely to buy familiar brands, and older firms may have long-term contracts with distributors, lowering their costs relative to those of new firms (1979). According to (1984), because of such considerations, new entrants may be forced to search for empty market segments to avoid price wars with more established firms. Hence, incumbents would be expected to distribute their models along the entire spectrum to make entry difficult for new firms ( 1977).
Dell is one of the players in the PC business. In order for the business to success, the company applies some marketing strategies.
Current Marketing Situation
Dell Computer, consistently growing annually, has become the nation’s largest PC supplier. The PC supplier, growing two to three times faster than its rivals, boasts of earnings and unit shipments that is escalating at four times the industry average. Dell’s continued innovation and its unique direct marketing model are credited with sustaining the company’s unmatched success ( 1997). And electronic commerce is emerging to afford the company significant sales gains along with increased distribution and manufacturing efficiencies. Company officials assert that leveraging its build-to-order manufacturing with electronic commerce enables it to compress its supply chain and become much closer to its customers.
Dell Computer may be growing consistently growing however in the business reality there are intense rivalries between the players in the industry which may hinder the continuous success of the company.
Dell has recently focuses on two basic classes of customers which includes the price-sensitive transactional customer, who traditionally received direct mail, and the large corporate relationship customers which are usually serviced by Dell’s sales reps.
The company’s focus is exclusively direct, particularly targeted, product-focused mailings. Dell’s focus doesn’t mean retaining its old direct marketing habits, such as sending a catalog to every prospect and type of customer. The company’s material tended to be generic, cutting across all sectors, sending catalogs to broad audiences. Dell is using direct strategies in a mass way. Dell has segmented its database seeking for value of the customer.
Much of Dell’s success comes from continued innovation and improvement of its direct marketing formula. The latest twist: eye-popping gains in sales, manufacturing and distribution efficiency. The secret: world-class electronic commerce using the World Wide Web and build-to-order manufacturing. By compressing its supply chain, the theory goes, Dell can build a much shorter, straighter and faster line of sight to its customers. As a direct company, Dell knew the market and the customer they wanted to sell to.
Previously, Dell promoted its products by concentrating on extensive marketing campaigns, however Dell has changed its strategy to a direct marketing strategy to understand more its customers and to be able to know their preferences more closely.
Opportunity and Issue Analysis
Dell Computer is a leading company in the computer market. However, with the presence of competitors and in competing in the price war market, this has created a difficulty on the Dell Computer to sustain its previously created competitive advantage. Currently, Computer is facing a tough challenges coming from the new industry standard and the profit of the PC become smaller.
There are three issues in which is hindering Dell’s continued success and sustainable competitive advantage.
Dell is one of the largest players in the PC business, however, with the intense rivalry between the players in the industry, Dells must do something in order to sustain its competitive advantage. Dell should improve its marketing strategies.
Marketing Strategy
There are three components to developing a marketing strategy:
1. Segmentation
In order to understand who you can market your services to you must understand and analyze your industry in your area of practice. The basic question in which companies should as is to “Who can I sell my services to?” Dell’s strategy has started with discovering which market has the greatest appeal to its products.
2. Targeting and Positioning
The second component of the marketing strategy, targeting, defines your competitive scope. Who will you sell your services to?
The final component to a marketing strategy is positioning that asks “”How am I going to sell my services?” This determines how you are going to sell your services. Positioning is the means by which you develop a sustainable competitive advantage.
Previously, Dell’s has forgotten to target its market in which resulted to a variety of consumers that makes its difficult for the company to identify the common needs of the various customers. It also resulted to a difficulty of attaining all preferences of the different types of its customers resulted to unsatisfied customers.
Customers today have evolved and are more demanding. Customers are looking forward to the value for their money. Customers are seeking for more reliable and worthwhile spending for their money. It is not enough that Dell has its most innovative products. Customers are now looking for quality service and added value of products.
From the issues of Dell, it has been acknowledge that the company has its issues on market segmentation and on the differentiation of its products. The best strategy for the company is to segment its market and to differentiate its products.
Market Segmentation
The increasing internationalization of consumers as well as the growth of technology has created important opportunities for marketers to target customers. Market segmentation is, briefly, the subdividing of a heterogeneous market into homogeneous subsets. Market segmentation involves the partitioning of a market into different sector according to the common characteristics. This marketing strategy has been gaining attention due to the realization of marketers of the diverse nature of customers
Today, there is a growing body of evidence suggesting that customers are very diverse. Thus, the heterogeneous nature of the market is a fundamental reality and the idea of recognizing a heterogeneous market rather than a homogeneous market is not insignificant. However, the idea of segmentation in practice is to find groups of customers and prospects who look at the market in the same way. Market segmentation focuses on groups of customers and groups of prospects.
Markets and the customers who make up those markets are not homogeneous ( 1968; 1956). (1956) suggested that segmentation, the division of a market into groups of customers who share certain characteristics or propensities toward a product or service, might be an effective way for an organization to manage diversity within a market.
With the trends of globalization, international segmentation would best suit for Dell Computer. (1972) put forward the argument that segmentation is not just equally important in the international market, but in fact may be more important because international markets are more diverse than domestic markets. The development of international segmentation strategy has been alternately conceptualized as a linear process or as a portfolio of interrelated decisions ( 1981).
International segmentations involves two decision process. (1972) termed the first decision as the “macro” segmentation decision in which countries are classified and targeted based upon national market characteristics. The second decision is to analyze and sub-divide each qualifying target country by customer characteristics to form market segments (1972).
Similar in intent to and (1972), the first decision presented by and (1987) was referred to as “country screening”–selecting countries that qualify as potential markets. The second decision was termed “microsegmentation,” where consumers are classified based upon product predisposition and consumption patterns. Once these segments are identified, it is suggested that firms look for “strategically equivalent” segments across a range of countries that may be served with a common marketing mix. Strategically equivalent segments share a similar predisposition toward at least one type of product and exist in multiple markets. Like and (1972), and (1987) assumed a linear or hierarchical order to the decision steps.
Once segments have been identified, they must be appropriately grouped and managed. A number of authors have suggested that the scale of segment management may be multi-local (country by country), regional (based upon clusters of countries), intermarket (based upon a global customer segment which transcends national boundaries), or global in nature ( 2003; 1987; 1991; 1993; 1994).
Some recent research suggests that a multi-local scale of segment management might enhance market performance (2000). Arnold (2000) uncovered a long-term trend toward higher performance among firms that allowed local control of distribution. “In the long run, multinationals come to see that it makes sense to continue working with independent local distributors who handle sales and distribution system, even after the international companies have taken control of marketing strategy and major global accounts” ( 2000)
But for segmentation system to be both effective and actionable, (1998) suggests that it needs to meet four criteria. First, segments must behave as homogeneously as possible (1998). Many marketers confuse homogeneity with how people look, instead of how they behave. Second, an effective segmentation system must be able to quantify the size of the segment in any market of any size or shape (1998). Geographic-based, quantitative analysis is critical became segmentation is often used to measure market potential. Third, your segments must be locatable, so you can link to both internal and external lists (1998). The success of your retention, acquisition and loyalty programs depends heavily on the ability to use selected segmentation techniques to prioritize names within a list. Fourth, a viable segmentation system must help you to determine the most effective way to reach segments ( 1998). Knowing how segments respond to direct mail, in-store or telemarketing promotions, along with television, radio, newspapers and magazine advertising can be helpful in allocating your media budget and developing targeted campaigns.
Product Differentiation
Today, product differentiation is key to success. There has been a fundamental switch from ‘sell products we develop’ to ‘develop products we can sell’. For current markets we want the focus to be on value, not cost. By increasing our understanding of market needs and value drivers we can tailor our product offerings to meet those needs. Long-term growth may require increasing access to new markets
Differentiation is when one company is able to offer something different, but that difference sets it apart from its competition by the value the target customer places on it, not simply because there is a difference (1987).
A differentiation competitive advantage prescribes that a firm achieve and maintain a means of making its product unique from its competitors’ products (1983; 1989). The advantage of differentiation is based on the additional value the product possesses, for which the customer will pay a premium. While additional value may be created through a variety of means, such as quality, service, brand image, or distribution (1984), superior quality is the means of differentiation which is most often used (1983). Thus, successful differentiation permits a firm to command premium prices (1990) for this additional value. A differentiated product engenders customer loyalty, reducing customer sensitivity to price and protecting the business from other competitive forces which could reduce price-cost margins (1983).
Conclusion
In the intense competition in the PC market, companies must also intensify their marketing strategies. Dell Computer has been through challenges in their business operations and thus needed to change their marketing strategies. With their identified marketing issues, it has been suggested that Dell should have market segmentation and product differentiation.
Credit:ivythesis.typepad.com
0 comments:
Post a Comment