Study supplement Advanced diploma in purchasing and supply

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1 Study supplement Advanced diploma in purchasing and supply

2 How to use this study supplement Introduction This guide covers the syllabus content of Marketing for Purchasers, an optional subject in the Advanced Diploma in Purchasing and Supply. Its aim is to provide students with a structure which they can follow and which will guide them through the whole syllabus. The guide is broken down into twenty separate study sessions, each focusing on a specific area of the unit content. The guide will be equally invaluable to all students, irrespective of their method of study. In addition, the guide will also be of use to subject tutors and will help them plan and prepare for course delivery to students. Students will be required to adopt a disciplined approach to ensure that the directed reading (using the recommended study text) is undertaken and all learning activities and selfassessment questions are completed. The guide includes a brief indication of the areas that students should have considered in response to the self-assessment questions. However, it is emphasised that these are not model answers. Students will be expected to provide much more comprehensive answers in the examination. Recommended reading The recommended study text (directed reading) for this unit is Principles and Practice of Marketing by Jobber 6th edition, December 2009 ISBN Published by McGraw Hill. This covers as much of the syllabus content as possible, however at this level of qualification, students are expected to read more widely than from just one source. Further suggested reading is Principles and Practice of Marketing by Adcock, currently the 4th edition ISBN Published by Pearson.Additional texts have also been suggested in each study session to ensure full coverage of the syllabus content and to enable students to study the subject more thoroughly through wider reading. Students should note that in order to undertake a programme of study it will be necessary, as a minimum, to obtain a copy of the recommended study text for the subject. Study session features For consistency and to aid study, the same approach is adopted for each session. Each session includes: This provides a brief indication of the session content. Statements of practice These are taken from the subject syllabus (unit content) and specify the level that students are required to achieve in order to pass the examination. Introduction This provides a summary of the session content. objectives Each session will be broken down into parts, each covering a different area. A learning objective has been set for each of these parts so that students understand clearly what they are expected to achieve before moving on to the next section. activities For each learning objective there is an activity which should be completed by the student. The activities have been created to help the student explore aspects of the syllabus and, in many cases, to consider how the subject is applied in practice. questions Similarly, for each learning objective there is a self-assessment question. These have been designed to test students knowledge and understanding of what they have learned. Outline responses to these questions are contained within the guide. Checklist This provides a very brief summary of any key principles, tools, models and techniques which are relevant to the session and with which the student should be familiar. Directed reading This states the appropriate references to the Senior Assessor s recommended study text for the subject. Recommended further reading This provides the appropriate references to additional further reading text which has been suggested. Additional resources Here the guide will list any appropriate additional information which will be of use to students, eg case studies, articles and websites. CIPS past examination questions Where appropriate, past examination questions which are relevant to the content of the session have been identified. Past papers are available online via the CIPS website. Required academic level Students are reminded that, to pass the examination, they must:- Have appropriate knowledge and understanding of the syllabus content in its entirety. Be able to apply that knowledge and understanding specifically in the context of the questions set in the examination. Be able to analyse and evaluate relevant tools, models, principles and theories. Revision Students are reminded that revision is a key part of preparing for the examination. Therefore, sufficient time for revision must be allowed in the student s study programme. This should be factored in at regular intervals throughout the study period and, particularly, when all study sessions have been completed and prior to the examination. Students are encouraged to practice using past examination questions. It is recommended that this practice is undertaken under mock examination conditions so that students are properly prepared for the examination. CIPS has produced a short booklet Examination techniques a guide for students. Students can obtain a copy of this online from the CIPS website. Getting started Students should obtain, and familiarise themselves with the subject syllabus which is contained in the Unit Content Guide (available online from the CIPS website). Students should also obtain a copy of the recommended study text and, if possible, the recommended and additional further reading. Students should then create an action plan, covering all study sessions and allowing sufficient time for adequate revision. Author profile Colin Linton DipM DipFS MBA MCIPS FCIEA FCIM FCIB Colin is the CIPS Senior Assessor in Marketing for Purchasers. His marketing career spans more than twenty years and he now has his own business as a consultant, trainer and academic. He is a Senior Examiner for The Chartered Institute of Marketing, a Chartered Marketer and a Chartered Educational Assessor. Colin is a member of the CIM Academic Senate, a CIM Trustee and Chair of the CIM Membership Group. 01

3 STUDY SESSION 1 Statements of practice covered: Introduction: The marketing function and its interactions with other departments Evaluate the key components of effective marketing, planning and control within an organisation and develop a marketing and promotional plan Identify how purchasers can contribute towards the effective development of the marketing mix and execution of marketing plans. By the end of this session students should be able to apply relevant theory, tools and models. In addition, they should understand and be able to analyse:- The meaning of marketing The role of the marketing function within the organisation Marketing s contribution within the organisation The concept of marketing and other organisational orientations The relationship between the marketing, purchasing and other functions within the organisation Areas of potential conflict between marketing and other business functions How these conflicts can be managed and resolved. objective 1.1: objective 1.2: objective 1.3: objective 1.4: Define marketing. Describe your interpretation of what marketing is. Examine theoretical definitions of marketing. Explain the contribution of the marketing function within an organisation. Identify a company which you believe is good at marketing and examine what it is that they do well. Explain what value marketing adds to an organisation. Describe the different forms of orientation. Identify three organisations that you are familiar with and identify their orientation. Explain product, production, sales and marketing orientation. Examine the steps an organisation can take to achieve a high level of marketing orientation. Identify an organisation with which you are familiar that has a high level of marketing orientation. Consider the steps that the organisation will have taken to achieve its high level of marketing orientation. Explain the steps required to introduce a high level of marketing orientation within an organisation. 02

4 objective 1.5: objective 1.6: A Checklist: (ie the principles, tools, techniques, models etc that the student should be familiar with by the end of the session) Directed reading (recommended study text) Recommended further reading (additional further reading text) Additional resources The marketing function and its interactions with other departments Explain marketing s relationship with purchasing and other functions Think about the companies where you have worked and the occasions when marketing and purchasing staff could have worked together better. Identify purchasing activities that marketing may also be able to help with. Identify areas of potential conflict between different business functions and how they can be managed Identify an occasion at work when you have experienced conflict between functions due to different priorities. Examine how these conflicts were managed. Consider the main functional objectives and priorities of purchasing, marketing and other functions. Definitions of marketing Business orientations Responsibilities and objectives of business functions. Chapter 1 (Marketing in the modern organization); Pages 3 to 13 Note: The study text only refers to production and marketing orientations and so omits discussion on product and sales orientations. These aspects are covered in detail in the recommended further reading (see below) and via the internet. Chapter 1 (What is marketing) Chapter 2 (Marketing orientations) Market and product orientation The marketing concept Marketing defined CIPS past examination questions May 2009 Question 3 November 2008 Question 3 May 2008 Question 4 03

5 The marketing function and its interactions with other departments Notes on selfassessment questions (SAQ) SAQ 1.1 Marketing academics have devised many definitions for the term marketing. Students are encouraged to research these using the internet and text books. Some commonly quoted definitions are:- Philip Kotler (1999) A social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. Philip Kotler (1980) Marketing is the human activity directed at satisfying needs and wants through an exchange process. David Jobber (2007) The achievement of corporate goals through meeting and exceeding customer needs better than the competition. One of the most commonly used definitions is The Chartered Institute of Marketing s, Marketing is the management process responsible for identifying, anticipating and satisfying customers requirements profitably. SAQ 1.2 Marketing s contribution to an organisation is considerable and includes:- Customer focus Gaining a deeper understanding of customer needs Understanding and analysis of the internal and external environments Understanding, evaluating and monitoring the competition Creating value for customers Building and maintaining customer relationships Allocating resources effectively Growing market share Sales, income and profit growth Identifying new markets. There are many other ways that marketing adds value and students are advised to undertake their own research and to add to the list above. SAQ 1.3 Product Orientation: Focus is on delivering high quality and innovative products. Typically, the product becomes the focus and there is less emphasis on identifying and satisfying real customer needs. Production Orientation: Focus is on the manufacturing process, often economies of scale and mass production. Again, there is less emphasis on the needs of customers and so stocks can build up of products that customers do not actually want to buy. Sales Orientation: Focus is on the sales efforts of the organisation. Significant focus on promotional activities and sales force incentivisation. Customers are encouraged to buy, although there may have been insufficient focus on really understanding the needs of customers. Marketing Orientation: Focus is on the customer the customer is king. Detailed analysis of customer needs which then drives the product development process. Customer focus permeates the whole organisation. Regular feedback from customers is obtained. 04

6 SAQ 1.4 The marketing function and its interactions with other departments Marketing orientation is covered in detail in the recommended study text, see: Case 1.1 Marketing in Action on page 7 Market-driven versus internally orientated businesses on pages 8 and 9 (including table 1.1). SAQ 1.5 Marketing can assist purchasing with: Undertaking internal analysis (eg SWOT) Analysing the external environment Analysing the competitive environment Identifying future requirements (identifying and anticipating future customer needs) Reviewing product portfolios (to identify future changes) Developing specifications. There are other areas too. Students are encouraged to consider this question throughout their studies and to add to the list whenever they identify something covered within the syllabus that could be of use to the purchasing function. SAQ 1.6 Typically: Purchasing: EOQs; cost management and reduction; profit; stock management; standardisation of components; logistics; supplier management Marketing: Wide range of products; competitive advantage; customer relationship management; market share growth; customer service and quality; income; profit Finance: Budget setting and monitoring; funding; reporting requirements; cash flow; income; profit; share holder returns/roi Manufacturing: standardisation; production scheduling; supplies management; quality; cost management; process reengineering. The above is not exhaustive. Students are encouraged to undertake their own research and to consider other functional areas eg human resources, distribution and engineering/design. 05

7 STUDY SESSION 2 Statements of practice covered: Introduction: Marketing strategy Evaluate the key components of effective marketing, planning and control within an organisation and develop a marketing and promotional plan. By the end of this session students should be able to apply relevant theory, tools and models. In addition, they should understand and be able to analyse:- The meaning of strategy The difference between corporate and marketing objectives The relationship between strategy, objectives and planning Key strategic analytical tools (Ansoff matrix and Porter s generic strategies) The different options available to companies to enter overseas markets. objective 2.1: objective 2.2: objective 2.3: objective 2.4: Summarise the concept of strategy and how it relates to marketing planning. Examine the meaning of strategy. Describe the differences between strategy and tactics. Explain Ansoff s matrix and how strategic options can be prioritised and evaluated. Identify a company which has adopted each of the strategies highlighted by the Ansoff matrix. Draw the Ansoff matrix and prepare a checklist to evaluate strategic options highlighted. Explain Porter s generic strategies. Identify organisations which have adopted each of the strategies highlighted by Porter s model. Explain each of Porter s generic strategies. Present SMART objectives. Identify the marketing objectives of the organisation where you work or for an organisation where you have worked previously. What does SMART mean? 06

8 objective 2.5: objective 2.6: Checklist: (ie the principles, tools, techniques, models etc that the student should be familiar with by the end of the session) Directed reading (recommended study text) Recommended further reading (additional further reading text) Additional resources Marketing strategy Define corporate and marketing objectives. Identify an organisation and examine its likely corporate objectives. Describe typical corporate and marketing objectives. Analyse options for entering overseas markets. Identify international companies which are operating in your domestic market. What has been their strategy for entering the market? Identify the recognised options for entering overseas markets. Strategy versus tactics Corporate and marketing objectives (SMART) Ansoff matrix Porter s generic strategies Methods of entering international markets. Chapter 2 (Marketing planning: an overview of marketing); Pages 38, 39, 41, 42, Chapter 10 (Managing products: product life cycle, portfolio planning and product growth strategies); Pages Chapter 19 (Analysing competitors and creating competitive advantage); Pages Chapter 23 (International marketing); Pages Chapter 21 (Marketing planning) pages Chapter 25 (International marketing). Case study Strategy (includes SMART objectives) Case study Strategic growth (includes use of the Ansoff matrix) Case study Strategic direction CIPS past examination questions May 2009 Question 2 May 2009 Question 3 November 2008 Question 5 November 2008 Question 6 07

9 Marketing strategy Notes on selfassessment questions (SAQ) SAQ 2.1 Strategy is long term (usually 5 years plus) and encapsulates the organisation s mission statement. Its focus is on direction and the appropriate utilisation of available resources. It involves considering what markets to operate in and the nature of the business that the organisation wants to be involved in. Strategic decisions are made by the organisation s board/executives. Tactics are shorter term activities, actions and plans (usually for execution within 12 twelve months). These activities are more operational in focus and may form part of a larger plan. Tactical decisions will have less impact on the organisation and will usually be made by management. SAQ 2.2 There are various criteria that could be used to evaluate strategic options, and these would vary by the nature of the organisation. Typical examples include:- Strategic fit Suitability Feasibility Return Costs Capability. There are other criteria that could also be considered. Students should develop their own list based on the criteria that their own organisation, or one with which they are familiar, might use. SAQ 2.3 Michael Porter identified three generic strategies which an organisation could adopt in order to achieve sustainable competitive advantage. The three strategies are: Cost Leadership the organisation aims to be the lowest cost producer in the market Differentiation the aim is for the organisation to be different from its competitors. The challenge here is for an organisation to find a source of differentiation that is sustainable Focus by focusing on the needs of a specific target market (often referred to as a niche market strategy). SAQ 2.4 Objectives should meet the SMART criteria: Specific Measurable Achievable Realistic Timebound. 08

10 SAQ 2.5 Marketing strategy Typical corporate objectives might include some of the following: Profitability and other financial measures Global expansion Shareholder returns Sustainability aspects Number One employer. Typical marketing objectives might include some of the following: Profit/income growth Market share growth Customer retention/acquisition Customer satisfaction Brand awareness/recognition Lead/sales generation. Students should consider the corporate and marketing objectives of their own organisation, or one with which they are familiar. SAQ 2.6 The main methods are: Indirect exporting - via an intermediary who then sells the goods into the overseas market Direct exporting - either directly to customers in the overseas market or via an intermediary based overseas. This approach may involve the use of agents, distributors, licensing, franchising or direct marketing Direct investment either via joint venture or through creation of a wholly owned subsidiary. 09

11 STUDY SESSION 3 Statements of practice covered: Introduction: objective 3.1: objective 3.2: objective 3.3: objective 3.4: The marketing planning process Evaluate the key components of effective marketing, planning and control within an organisation and develop a marketing and promotional plan Identify how purchasers can contribute towards the effective development of the marketing mix and execution of marketing plans. By the end of this session students should be able to apply relevant theory, tools and models. In addition, they should understand and be able to analyse: The role and importance of marketing planning How marketing planning can contribute towards an organisation s profitability and other key objectives The challenges which are commonly encountered by marketers when developing marketing plans How to develop a marketing plan (each of the stages of the planning process) How purchasing can support colleagues in the marketing function in the marketing planning process. Identify the benefits of marketing planning. For a plan you have written consider the reasons why you wrote it and what you used it for. Describe how marketing planning can help contribute to an organisation s profitability. Describe the most common challenges and issues encountered when preparing marketing plans. Identify a time when you have been involved in planning and when things did not go as well as you had hoped. Consider the causes. Identify the most common challenges encountered when writing a marketing plan. Explain the stages of the marketing planning process. Obtain a copy of a marketing plan from your organisation (or for another organisation via the internet). Compare its structure with the typical areas highlighted within the marketing planning process. Describe the typical contents of a marketing plan. Assess the contribution of the purchasing function in the development of marketing plans. For the organisation where you work, or for one with which you are familiar, identify the contribution of the purchasing function to the development of the marketing plan. If there was none, or very little, how could the plan have been improved by such a contribution? Look at the contents/framework of a typical marketing plan and describe how purchasing might be able to add value. 10

12 Checklist: (ie the principles, tools, techniques, models etc that the student should be familiar with by the end of the session) Directed reading (recommended study text) Recommended further reading (additional further reading text) Additional resources The marketing planning process The marketing planning process The marketing mix. Chapter 2 (Marketing Planning: an overview of marketing). Chapter 21 (Managing marketing implementation, organization and control). Chapter 21 (Marketing planning). Guide to the marketing mix Case study - Developing a marketing plan Case study - Applying the marketing mix CIPS past examination questions November 2008 Question 5. May 2008 Question 6. November 2007 Question 6. Notes on selfassessment questions (SAQ) SAQ 3.1 Marketing planning contributes towards profitability in a number of ways, including: Sets direction Enables appropriate allocation of resources Monitors the external environment Enables plans to be adjusted to meet changes in the market Leads to greater understanding of customer needs Identifies suitable target markets Analyses competitors Segments and tailors the marketing mix, ensures focus, and avoids waste. 11

13 SAQ 3.2 The marketing planning process There are numerous challenges, including: Insufficient budget Internal conflicts with other functions Incorrect assumptions Keeping pace with the external environment which is continually changing Keeping abreast of customer needs and wants Monitoring competitor activities New entrants Managing stakeholders. SAQ 3.3 Typical contents include: Analysis Marketing objectives Definition of target markets and customers Strategies Tactics (the marketing mix) Monitoring, control and feedback mechanism. SAQ 3.4 Purchasing can provide useful input throughout the process, for example: Leveraging knowledge of supply markets as part of the analysis stage Setting profit objectives through more effective purchasing, costs can be reduced and, therefore, profitability increased Identifying and assessing new market opportunities Ideas for new products Product design/specification development Negotiating/tendering for supplies needed in product development and ongoing manufacturing Financial analysis in developing pricing Identifying and managing channel intermediaries and options Purchasing marketing services. 12

14 STUDY SESSION 4 Statements of practice covered: Introduction: Environmental analysis and the marketing audit Evaluate the key components of effective marketing, planning and control within an organisation and develop a marketing and promotional plan. By the end of this session students should be able to apply relevant theory, tools and models. In addition, they should understand and be able to analyse: Environmental analysis The marketing audit Competitor analysis. objective 4.1: objective 4.2: objective 4.3: objective 4.4: Explain the importance of analysing an organisation s environments. What are the constituents of the environments which impact on the company where you work, or have worked? Discuss why it is important for organisations to regularly assess the environments which influence their activities and strategies. Evaluate an organisation s macro environment. Identify how economic and political changes have influenced an industry where you live. Describe the main macro environmental factors. Evaluate an organisation s micro environment. Identify the elements of the micro environment which are relevant for the company where you work, or have worked. Identify why it is important to understand the micro environment. Apply SWOT analysis Conduct a SWOT analysis on two different organisations which operate in the same sector. objective 4.5: Explain how the findings of a SWOT analysis should be used for planning purposes. Analyse an organisation s competitive environment using Porter s Five Forces model. Consider and describe the competitive environment of an organisation with which you are familiar. Apply Porter s Five Forces model to an organisation or industry of your choice. 13

15 objective 4.6: Environmental analysis and the marketing audit Explain the main sources of competitor intelligence. Make a list of how the purchasing function can assist in competitor analysis. Identify the sources of competitor intelligence. Check list: (ie the principles, tools, techniques, models etc that the student should be familiar with by the end of the session) SWOT analysis Porter s Five Forces Model PESTLE analysis Directed reading (recommended study text) Recommended further reading (additional further reading text) Additional resources Chapter 3 (The marketing environment). Chapter 19 (Analysing competitors and creating competitive advantage). Chapter 3 (The marketing environment). Chapter 5 (The competitive environment). Case study - Environmental analysis Case study - SWOT analysis Case study Managing external influences Case study - PEST analysis CIPS past examination questions May 2008 Question 5. November 2007 Question 2. Notes on selfassessment questions (SAQ) SAQ 4.1 Organisations should regularly assess the environments which influence their activities and strategies because those environments are continually changing. It is important for organisations to identify these changes and adapt their strategies and plans accordingly otherwise they will become out of touch with the market and fall behind competitors. 14

16 SAQ 4.2 Environmental analysis and the marketing audit The most common tool for describing an organisation s macro environment is PESTLE analysis. The elements are:- Political Economic Social/cultural Technological Environmental (ecological) Legal and regulatory. SAQ 4.3 SAQ 4.4 SAQ 4.5 SAQ 4.6 Macro environmental factors, by and large, impact most organisations. An organisation s micro environment will be more specific to its operations and activities and will include aspects such as competitors, customers and stakeholders. In the same way that the macro environment is continually evolving and changing, an organisation s micro environment will also change shape over time. So it is vital that organisations correctly identify and regularly monitor their micro environment to ensure that sustainable competitive advantage is achieved and maintained. It is also vital that organisations keep up to date with changes in customer needs and wants, so that an appropriate marketing mix can be maintained. SWOT analysis plays a key role in planning. It is important that organisations are able to identify and monitor their strengths and weaknesses. Within planning, the organisation should seek to address identified weaknesses and exploit the weaknesses of their competitors. Similarly, it should develop plans which maximise its own strengths and seek to develop these into aspects of unique advantage (versus competitors). Threats should be identified and appropriate actions taken to minimise the potential impact of these. Finally, plans should focus on those markets where there is significant opportunity for the organisation. Where such opportunities exist, resources should be directed accordingly to activities which will leverage the maximum potential. Porter s Five Forces Model is clearly set out in figure 19.1 on page 775 in the recommended study text. Apply this to an organisation/industry with which you are familiar. There are many sources of competitor intelligence:- Competitors marketing literature Competitors marketing activities Competitors websites Marketing research Sales staff Interviewing new staff who have previously worked for competitor organisations Customers who also deal with competitor organisations. 15

17 STUDY SESSION 5 Statements of practice covered: Introduction: Understanding organisational buying behaviour Assess how marketers develop a detailed understanding of customers and apply segmentation techniques. By the end of this session students should be able to apply relevant theory, tools and models. In addition, they should understand and be able to analyse: The nature and characteristics of organisational markets The main differences between organisational and consumer markets The organisational decision making process The concept of the DMU (decision making unit) and the roles of individuals within a typical organisational DMU. objective 5.1: objective 5.2: objective 5.3: objective 5.4: Describe the characteristics of organisational markets. From a marketing perspective, examine the main characteristics of organisational markets. Make a list of the differences between organisational and consumer markets. Analyse the stages in the organisational decision making process. As a purchaser, write down the stages that you will go through when purchasing goods and services. Identify each of the stages of the organisational decision making process. Evaluate the roles of individuals in organisational buying. Using the company where you work, or have worked, as an example, make a list of the key roles in the organisational buying process. Explain the roles that would typically make up the DMU in a large organisation. Assess the influences on organisational buyer behaviour. Using the company where you work, or have worked, as an example, make a list of the things that influence the way that you purchase. Assess the main influences on organisational purchasing. 16

18 Checklist: (ie the principles, tools, techniques, models etc that the student should be familiar with by the end of the session) Directed reading (recommended study text) Recommended further reading (additional further reading text) Additional resources CIPS past examination questions Understanding organisational buying behaviour The organisational decision making process Individuals within the DMU Influences on organisational buyer behaviour. Chapter 5 (Understanding organisational buying behaviour) Chapter 7 (Organisational buyer behaviour) N/A May 2009 Question 4 November 2007 Question 6 Notes on selfassessment questions (SAQ) SAQ 5.1 Typically, organisational markets (compared to consumer markets) are:- Larger Individual transaction values tend to be higher Total acquisition costs are higher Decision making is more complex The buying cycle takes longer Recognise the importance of adopting a professional approach. SAQ 5.2 SAQ 5.3 The typical stages are shown in figure 5.1 and examined in detail on pages of the recommended study text. Typical roles within an organisational DMU include:- Users those who are the end-user of what is being purchased Influencers those who in some way can influence the nature of what is being purchased, eg a technical advisor/expert Initiator someone who starts of the process by identifying the need to make a purchase Decider someone involved in making the decision about what to buy and who from Approver someone who is involved in the sign-off process, eg a budget holder Buyer someone who is involved in the purchasing process, eg takes part in negotiations Gatekeeper someone who controls and directs the flow of information, or provides access to information/people, eg the Managing Director s Personal Assistant. 17

19 SAQ 5.4 The objectives and scope of storage and distribution There are many influences on organisational purchasing, including:- Size of organisation Age of organis ation Industry sector Knowledge/experience of purchasing and other staff Policies and procedures Strategy Objectives Pricing External factors (PESTLE) The competitive environment Organisational culture Negotiating power Relationship with suppliers. 18

20 STUDY SESSION 6 Statements of practice covered: Understanding consumer buying behaviour Assess how marketers develop a detailed understanding of customers and apply segmentation techniques Introduction: By the end of this session students The nature and Influences of consumer buyer should be able to apply relevant theory, tools and models. In addition, they should understand and be able to analyse:- characteristics of consumer markets The consumer decision making process behaviour. objective 6.1: Describe the characteristics of consumer markets. Examine the main differences Describe the differences objective 6.2: between how you purchase things for yourself and how you purchase on behalf of your organisation, or an organisation where you have worked. between consumer and organisational markets. Analyse the stages in the consumer decision making process. Think of a significant item that you have purchased. Describe the decision making process that you went through. What are the various stages of the consumer decision making process? 19

21 Checklist: (ie the principles, tools, techniques, models etc that the student should be familiar with by the end of the session) Directed reading (recommended study text) Recommended further reading (additional further reading text) Additional resources Understanding consumer buying behaviour The stages in the consumer decision making process Influences on consumer buyer behaviour Maslow s hierarchy of needs. Chapter 4 (Understanding consumer behaviour). Chapter 6 (Buyer behaviour). Consumer behaviour Consumer behaviour CIPS past examination questions May 2009 Question 4 November 2008 Question 4 May 2008 Question 1 November 2007 Question 6. Notes on selfassessment questions (SAQ) SAQ 6.1 Typically, consumer markets (compared to organisational markets) differ because : They are smaller Individual transaction values tend to be lower Total acquisition costs are lower The buying cycle is shorter Purchases can be more emotionally driven Purchases can be based on impulse. 20

22 SAQ 6.2 SAQ 6.3 The objectives and scope of storage and distribution The recognised consumer decision making process is set out and examined in the recommended study text in figure 4.2 and on pages There are many influences on consumer buyer behaviour, including: Cultural Social Personal Psychological Motivational Economic Marketing. SAQ 6.4 A key goal of marketing is to influence customers and to motivate them to buy the organisation s products. It does this by: Positioning Branding Understanding customer needs Developing sources of competitive advantage Segmentation Tailoring the marketing mix so that it is focused on meeting the needs of customers Emphasising value for money Association with celebrities and famous personalities. 21

23 STUDY SESSION 7 Statements of practice covered: Introduction: Segmentation, targeting and positioning Assess how marketers develop a detailed understanding of customers and apply segmentation techniques. By the end of this session students should be able to apply relevant theory, tools and models. In addition, they should understand and be able to analyse: Segmentation Targeting Positioning. objective 7.1: objective 7.2: objective 7.3: objective 7.4: objective 7.5: Define segmentation, targeting and positioning and describe their benefits to marketers. Describe the main customer segments which are targeted by the organisation where you work, or have worked. Describe positioning and its importance to marketers. Evaluate the criteria for an effective segment. For your own industry/sector explain the differences in the segments to which companies market. Write a short checklist to be used as criteria for choosing effective market segments. Apply the methods of segmenting consumer markets. Identify ways that consumer markets where you live could be broken down into smaller groups for marketing purposes. Summarise the main methods used by major organisations to segment consumer markets. Apply the methods of segmenting organisational markets. Make a list of ten different companies, near to where you live or work, and break them down into smaller groups which share some common characteristics. Summarise the most common methods used by major organisations to segment organisational markets. Explain target market strategies. The company where you work has recently appointed a new Head of Purchasing. She has asked you to write a short briefing paper explaining your company s main target markets. Describe the three main target market strategies. 22

24 objective 7.6: Checklist: (ie the principles, tools, techniques, models etc that the student should be familiar with by the end of the session) Directed reading (recommended study text) Recommended further reading (additional further reading text) Additional resources Segmentation, targeting and positioning Describe how positioning relates to competitive advantage. Describe how the company where you work, or have worked, is positioned in the market. A colleague has asked you to explain the concept of competitive advantage. What would you say (in no more than 200 words)? Bases of segmentation for consumer markets Bases of segmentation for organisational markets Positioning/perceptual maps Target market strategies. Chapter 8 (Market segmentation and positioning) Chapter 8 (Customers, market segmentation and targeting) Chapter 5 Pages Case study - Segmentation Case study - Competitive advantage Notes on selfassessment questions (SAQ) SAQ 7.1 Positioning is vital to effective marketing. A product s position is the place that it occupies in its given market as perceived by consumers in its target market. Positioning is undertaken relative to competitor products and will be influenced significantly by the marketing mix. Positioning can be influenced by real product/service differences or just through perception. It is important because it has a major impact on key decisions, for example pricing, and can have a major influence on demand levels for the product/service. It will also influence marketing and other costs. 23

25 SAQ 7.2 Segmentation, targeting and positioning In order to be effective, segments must comprise customers with similar characteristics and be: Measurable Substantial Accessible Actionable. In addition, other criteria could be considered, for example: Strategic fit Alignment with available resources Fit with brand and positioning Potential for competitive advantage. SAQ 7.3 Typical methods (or bases ) of segmentation in consumer markets are: Geographic Psychographic Demographic Geo-demographic Benefits-based. SAQ 7.4 The most common methods of segmenting organisational markets are by: Sector Business type Geography Age of business Size of business Product usage Approach to purchasing. SAQ 7.5 The three main target market strategies are: Undifferentiated marketing there are few/no differences in customer characteristics and so one product and marketing mix can be used for the whole market (ie mass marketing) Differentiated marketing used where customers can be grouped into sub-sets which share common characteristics and the company develops separate marketing mixes for each distinct group Concentrated marketing where a company has special expertise in one specific segment. SAQ 7.6 The concept of competitive advantage is critical to effective marketing. The following aspects should have been considered:- Undertake SWOT competitive advantage should link in with the organisation s strengths and identified opportunities To be effective, competitive advantage must be sustainable Relationship between competitive advantage and positioning Competitive advantage is in the eyes of customers (must relate to aspects which are of importance to customers, eg service, price, quality) Competitor analysis is important Need for benchmarking against key competitor organisations. 24

26 STUDY SESSION 8 Statements of practice covered: Introduction: Managing and developing products Apply the marketing mix to a range of organisations and determine how the marketing mix elements can be integrated to achieve business objectives. By the end of this session students should be able to apply relevant theory, tools and models. In addition, they should understand and be able to analyse:- The concept of product management The importance of managing products The tools and techniques used in managing product portfolios The development of new products. objective 8.1: objective 8.2: objective 8.3: objective 8.4 Explain the concept of product management. You have just joined a company and discover that they have no knowledge of the concept of product management. Write a short briefing for management and staff which sets out the key points about the concept and its importance. Why it is important to manage the product range? Describe the components of a product. Take a product that you have purchased recently and make a list of its attributes. Prioritise the value to you of each of the attributes. Identify the three recognised components of a product. Assess the role of branding in product management. Identify alternative branding strategies. Identify three products that you have purchased recently. Make a list of what the brands mean to you and how they influenced your choice. Evaluate the main tools used in managing products. Identify three products that you have purchased within the last year or so and plot their position on the product life cycle. Draw the Boston Consulting Group (BCG) matrix and explain the four product types that it reveals. 25

27 objective 8.5: objective 8.6 Checklist: (ie the principles, tools, techniques, models etc that the student should be familiar with by the end of the session) Directed reading (recommended study text) Recommended further reading (additional further reading text) Additional resources The objectives and scope of storage and distribution Describe each of the stages of the new product development process. You are taking part in a creative thinking session on ways to identify new and enhanced products. What would be your contribution? Identify the stages of the new product development process. Describe the concept of product adoption. Describe the diffusion of innovation concept. Identify a product which has been adopted by certain types of customers at different speeds and make a list of the reasons why. Boston Consulting Group Matrix Product Life Cycle The diffusion of innovation concept New product development process Components of a product. Chapter 9 (Managing products: brand and corporate identity management). Chapter 10 (Managing products: product life cycle, portfolio planning and product growth strategies). Chapter 11 (Developing new products). Chapter 11 (Products and services the acceptability factor in marketing). Chapter 12 (Branding and building relationships with customers). Chapter 20 (Product policy and new product development). Case study - Product development Case study - Product launch Case study - Product life cycle Case study - Branding CIPS past examination questions May 2009 Question 6. November 2008 Question 1. May 2008 Question 2. November 2007 Question 3. May 2007 Question 6. 26

28 The objectives and scope of storage and distribution Notes on selfassessment questions (SAQ) SAQ 8.1 It is important to manage an organisation s product range for many reasons, including: To maintain a balanced portfolio of products (eg at different stages of the life cycle) To keep the range in line with changing customer needs To keep the portfolio competitive To maximise income potential To control costs To focus resources on the most profitable products To identify when to withdraw unsuccessful products To ensure the portfolio adapts in line with changes in the organisation s operating environments (micro/macro factors). SAQ 8.2 There are three components: Core/basic satisfies the essential customer need Physical/actual the tangible product features Augmented additional added value elements. SAQ 8.3 Students answers will vary depending on the examples that they have chosen. Branding is designed to impact on the customer in many ways and so students may have considered some of the following: Recognition of the brand Value Perceived quality Price Positioning versus competitor products. SAQ 8.4 SAQ 8.5 SAQ 8.6 The Boston Consulting Group matrix is shown in the recommended study text in figure 10.2 and the model is discussed on pages The new product development process is shown in figure 11.2 in the recommended study text and is examined in detail on pages Students answers will vary depending on the product they have chosen to use as their example. The concept is examined in detail in the recommended study text on pages

29 STUDY SESSION 9 Statements of practice covered: Introduction: Pricing tools and techniques Apply the marketing mix to a range of organisations and determine how the marketing mix elements can be integrated to achieve business objectives Identify how purchasers can contribute towards the effective development of the marketing mix and execution of marketing plans. By the end of this session students should be able to apply relevant theory, tools and models. In addition, they should understand and be able to analyse: The role of pricing and its importance within the marketing mix The concept of elasticity Different approaches and to pricing Pricing strategies How pricing can be adapted throughout the stages of the product life cycle and for BCG product categories How purchasing can contribute towards pricing decisions. objective 9.1: objective 9.2: objective 9.3: objective 9.4: Assess the importance of pricing. Make a list of the factors that you would consider when deciding whether or not the price of a product is reasonable. Identify the role of pricing in product positioning. Analyse the factors that influence product pricing. Identify two brands of a similar item (eg cars) and consider why the pricing of each might be different. Describe elasticity and its impact on product pricing. Examine the main approaches to pricing products. Identify three suppliers of the same (or similar) products and assess their approaches to pricing. What is the difference between penetration pricing and skimming? Apply pricing strategies to the various life cycle stages. Based on a product with which you are familiar, describe the various product life cycle stages. A small electrical product has just been launched at a price, to consumers, of Consider, with reasons, why this price may vary during its life cycle. 28

30 objective 9.5: objective 9.6: Checklist: (ie the principles, tools, techniques, models etc that the student should be familiar with by the end of the session) Directed reading (recommended study text) Recommended further reading (additional further reading text) Additional resources The objectives and scope of storage and distribution Describe the different pricing strategies that could be applied to products within the BCG matrix categories. Identify different products with which you are familiar and which apply to the four product categories identified by the BCG matrix. Identify the different pricing strategies and approaches that should be applied to products within the four BCG matrix categories. Examine the contribution of the purchasing function on product pricing. Consider the contribution of the purchasing function helping marketing colleagues to reduce pricing. For your own organisation, assess the extent to which purchasing has been involved in pricing decisions. If it has not been involved consider how it could have made a positive contribution. Pricing approaches and strategies. Chapter 12 (Pricing strategy). Chapter 14 (Affordable offerings price and value). Elasticity of demand explanation Pricing approaches and strategies CIPS past examination questions November 2008 Question 2 May 2007 Question 4 29