Determining the Significance of the Criteria Describing Enterprise Marketing

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1 Determining the Significance of the Criteria Describing Enterprise Marketing Romualdas GINEVIČIUS Vilnius Gediminas Technical University LT-03 Vilnius, Saulėtekio al., Lithuania and Valentinas PODVEZKO Vilnius Gediminas Technical University LT-03 Vilnius, Saulėtekio al., Lithuania and Adomas GINEVIČIUS Vilnius Gediminas Technical University LT-03 Vilnius, Saulėtekio al., Lithuania ABSTRACT Enterprise performance largely depends on the effective enterprise marketing, which may be achieved only if the effective marketing management is used. The latter involves a possibility of quantitative evaluation of the state of an enterprise at any moment of time. The number of the criteria describing the state of an enterprise is determined by the marketing mix, widely used in developing the marketing strategy, which includes such components as product, price, promotion and place. These criteria are in turn subdivided into subcriteria describing marketing activities. Enterprise marketing is characterized by a great number of various criteria, therefore, multicriteria evaluation methods are well suited for its quantitative evaluation. To use these methods, the significance and weights of the criteria should be known. s determine the criterion weight in two steps. First, the estimates elicited from experts are ranked and their consistency is checked, then, the weights of the criteria are determined. These methods are illustrated with case studies involving real calculations. Keywords: Enterprise marketing activities, Determination of the criterion weights, MCDM.. INTRODUCTION Enterprise performance largely depends on the effective enterprise marketing, which may be achieved only by the effective marketing management. The latter requires a possibility of quantitative evaluation of the state of an enterprise at any moment of time. There are several reasons for this. First, enterprises usually invest much money in marketing, but often do not know what methods may be used for determining its effectiveness. Second, quantitative evaluation of marketing strategies provides a possibility for their improvement. Third, the use of methods of quantitative evaluation of marketing allows managers to analyse its effect on enterprise performance []. Enterprise marketing may be referred to complex phenomena. These phenomena differ from other issues because we can hardly find a single criterion (or value) that could describe all their aspects, which can be observed in reality [, ]. The analysis of the literature on the problem shows that marketing may be described in various terms. The marketing mix is probably the most famous marketing term. Its elements are the basic, tactical components of a marketing plan. Also known as the Four Ps (4Ps), the marketing mix elements are described as follows: ) Product is an article or service that you are selling; ) Price shows how much you are charging your product/service; 3) Promotion means how and what you tell people about your offer, i.e. your product/service and price; 4) Place denotes how and where people can buy your product. Marketing decisions generally fall into the above four controllable categories. These four Ps are the parameters that the marketing manager can control, subject to the internal and external constraints of the marketing environment. The goal is to make decisions that centre the four Ps on the customers in the target market and is similar to the idea of mixing a cake. A baker will alter the proportions of the ingredients in a cake depending on the type of cake he wishes to bake. Möller [3] notes that the wide appreciation of the marketing mix among field marketers is the result of their profound exposure to this concept during the years of studies, since most introductory marketing manuals define it as the heart of their structure [4] and identify the 4Ps as the controllable parameters likely to influence the consumer s buying process and decisions [5, 6]. He also points out that another significant asset of the mix is the fact that it is a concept easy to memorise and apply. David Jobber [7] noted: The strength of the 4Ps approach is that it represents a memorable and practical framework for marketing decision-making and has proved useful for case study analysis in business schools for many years. Enjoying

2 large-scale appreciation, it is not surprising that the 4Ps became even synonymous to the very term marketing, as this was formulated by the American Marketing Association [8]. The development of the marketing mix has received considerable academic and industry attention. Numerous modifications to the 4Ps framework have been proposed and the most concerted criticism has come from the services marketing area. A study by Rafiq and Ahmed [9] suggested that there is a high degree of dissatisfaction with the 4Ps framework. People: all people involved with consumption of a service are important. For example, workers, management, consumers, etc. Process: a procedure, mechanism and flow of activities by which services are used. Physical evidence: the environment in which the service or product is delivered. The one which helps to communicate is tangible and the knowledge of the people around us is intangible. The concept of 4Ps has been criticized as being a production-oriented, rather than customer-oriented definition of marketing [0]. It is referred to as a marketing management perspective. Lauterborn [] claims that each of these variables should also be seen from a consumer s perspective. This transformation is accomplished by converting product into the customer s solution, price into cost to the customer, place into convenience, and promotion into communication, or the 4Cs []. The author of this paper performed an analysis and discovered that most of Eastern and Central European companies (even the most successful ones) are still using the traditional marketing mix of 4Ps. Therefore, the marketing mix consisting of product, price, promotion and place will be analysed further in the paper. The analysis of the experience of the Eastern and Central European countries in the considered area shows that the considered 4Ps model is still widely used for describing marketing there. In general, the criteria describing the particular aspects of marketing may have various dimensions and be oppositely directed [3]. It means that for one criterion the increase of a particular value may show a better situation, while for another criterion the increase of this value may denote that the situation is worsening. To perform quantitative evaluation of marketing, all the criteria expressed in various dimensions as well as the oppositely directed criteria should be integrated into a single generalizing criterion. To solve this problem, multicriteria methods commonly used for quantitative evaluation of socio-economic systems should be applied [4-6]. The application of these methods requires that a set of criteria describing enterprise marketing as well as their values and weights should be defined [7]. A set of criteria describing enterprise marketing may be determined by using the 4Ps model. The analysis of the data on enterprise performance shows that the information about the values of the considered criteria is missing. Therefore, expert evaluation is required to determine these values. Another important problem is associated with the determination of the criteria weights, which completely relies on expert evaluation [8]. Usually, several experts perform the evaluation, therefore, the determination of the criteria weights used in marketing analysis is made in two stages. At the first stage, the estimates elicited from experts are ranked and checked for consistency, while at the second stage the criteria weights are determined.. RANKING OF THE SIGNIFICANCES (WEIGHTS) OF THE CRITERIA DESCRIBING ENTERPRISE MARKETING AND DETERMINING THE CONSISTENCY OF ESTIMATES ELICITED FROM EXPERTS The sets and subsets of criteria describing various aspects of enterprise marketing activities form an hierarchical structure (Fig ). The formation of this structure makes sense, when the number of evaluation criteria is so large that it exceeds the admissible limits, which does not allow an expert to determine the criterion weight accurately [9]. In our case, there are evaluation criteria. This is more than the maximum number of criteria suitable for expert evaluation, which makes 0- criteria [0]. By arranging them into an hierarchical structure, we get that the largest number of criteria describing the particular groups of marketing activities makes nine. Therefore, expert evaluation may be performed rather accurately. The results of expert evaluation is the matrix E= eik i=,..., m; k =,..., r, where m is the number of ( ) the criteria compared and r is the number of experts. At the first stage, the experts rank the criteria according to their significance. Usually, the estimates of various experts differ, therefore, the data obtained in the evaluation can be used in the research if the estimates elicited from all experts are consistent. To determine the consistency of experts estimates, the so-called concordance coefficient W is used. The coefficient is calculated based on the data presented in the matrix of the criterion ranking E. The concordance coefficient was defined by M. Kendall []. Taking into account the judgements of all experts, we calculate the sum ei of the i-th criterion ranks, the mean value e m m r ei eik i= i= k= e = =, () m m and the square sum S of the deviation of the values e i from the mean value e : ( ) e i e S = i=, () The concordance coefficient W is calculated by the formula: S W =. r m m (3) ( ) The concordance coefficient can be practically used if its limiting value, indicating that the estimates provided by the experts may be still considered consistent, is determined. M.Kendall proved [] that when the number of the objects is m > 7, the significance of the concordance coefficient could be determined, using χ criteria. The random value S χ = Wr( m ) =, (4) rm m+ ( )

3 is distributed according to the distribution χ with the degree of freedom v = m. According to the chosen significance level α (which is usually equal to 0.05 or 0.0) we can find the critical value χ kr from the table of χ distribution with the degree of freedom v = m. If the value of χ obtained by formula (4) is larger than χ kr, the estimates of the experts are considered to be consistent. Eleven highly qualified experts evaluated the significance of subcriteria describing the activities associated with each component of the enterprise marketing system (i.e. product, price, promotion, place). Each criterion was assigned the rank which could range from one (if the criterion was important) to m, if the considered criterion was least important (with m denoting the number of the criteria considered). The results of the evaluation of subcriteria describing product are given in Table. Table. The results obtained in ranking subcriteria describing product Range of goods (products) Product design Innovations Quality Brand / trademark Packing (form, size, etc.) Extra services Warranties Based on the data presented in Table, the concordance coefficient W = 0. 59, and chi square value χ = were calculated by the formulas (-4), while the critical value χ kr, taken from the distribution table with the degree of freedom v = 8 = 7 and the significance level α = 0. 05, was equal to The obtained χ value is considerably larger than the critical value, therefore, the estimates of experts are considered to be consistent. The subcriteria describing the second main component of the marketing model price were ranked in a similar way, and the consistency of experts estimates was determined. The results obtained in the evaluation of subcriteria describing price are presented in Table. Table. The results obtained in ranking subcriteria describing price Initial price Special offers / discounts Terms of payment Responsibilities Price differentiation Pricing strategies Crediting, payment conditions Based on the data presented in Table, chi square value χ = were calculated by the formulas (-4). The obtained χ value is considerably larger than the critical value ( χ kr =.59), therefore, the estimates of experts are considered to be consistent. The estimates of the experts referring to subcriteria describing the third main component of the marketing system, promotion, are given in Table 3. Table 3. The results obtained in ranking subcriteria describing promotion Advertising 3 9 Increase of sales, promotion Planning and organisation of business communication Personal communication (relationships) Brand (trademark) management Corporate identity Information and communication with the public

4 Based on the data presented in Table 3, the square sum S = of the deviations from the mean value, as well as the concordance coefficient W = , and chi square value χ = were calculated by the formulas (-4), while the critical value χ kr, as mentioned above, was equal to.59. The obtained χ value is considerably larger than the critical value, therefore, the estimates of experts are considered to be consistent. The results of the expert evaluation of subcriteria describing the fourth main component of the marketing system, place, are given in Table 4. Table 4. The results obtained in ranking subcriteria describing place Place of sales Direct sales Indirect sales Sales online Channels of sales / distribution, mediators Storing of products and equipment Based on the data presented in Table 4, the concordance coefficient W = 0. 7, and chi square value χ = 39.0 were calculated by the formulas (-4). The obtained χ value is considerably larger than the critical value( χ kr =.07), therefore, the estimates of experts are considered to be consistent. 3. DETERMINING THE SIGNIFICANCE (WEIGHTS) OF THE CRITERIA DESCRIBING ENTERPRISE MARKETING When the consistency of expert estimates is proved, it is possible to undertake the task of the second stage of evaluation, i.e. to determine the weights (significance) of the criteria. s evaluated the significances (weights) of the four main components (criteria) of the marketing system [] including the product, price, promotion and place, as well their subcriteria. The indeterminate character of the evaluation values is clearly demonstrated when the range of the assigned values is determined, i.e. the k-th expert predicts the least possible i-th criterion value e ik(min) and its largest value e ik(max). The mean values e ik = ( eik(min) + eik(max) )/ of evaluation intervals ( e ik(min), eik(max) ) correspond to expert evaluation in points. In this case, quantitative evaluation (weight) of i-th criterion significance ω i is obtained by the formula r eik k= ω i =, (5) m r e ik i= k= m ω i = : i= The significance of the four main components (criteria) of the marketing system expressed in per cent, as well as the limits of variation of the estimates provided by eight experts, their mean values and weights calculated by formula (5) are presented in Table 5. Table 5. The estimates of the significance of the main marketing criteria Product (P ) Mean value e k Price (P ) Mean value e k Promotion (P 3) 3 Mean value e 3 k Place (P 4) 4 Mean value e 4 k ; 0;30 5 0;0 5 40; ;70 ;70 40; 45 40; 45 00; ; ; ; ;80 ; ; ; ;70 5; ; 40 30; 40 40; ;90 30; ;00 ; ;00 30;00 40;00 70 ;80 ;80 40; 40;80 Mean values of evaluation intervals.0; ; ; ;73.8 r The sum e ik k= and weightsω i The calculations show that the experts estimate the first criterion (product) as most significant, while the significances (weights) of the three other criteria (price, promotion, place) do not differ considerably. In a similar way, the values of the estimates variation, their limits and weights were calculated by formula (5) for all subcriteria describing the marketing system (Fig.).

5 Fig. Weights of the components of enterprise marketing system described by the hierarchical set of criteria 0.0 Range of goods (products) 0.3 Product design 0.8 Innovations 0.00 Quality 0.4 Brand / trademark Packing (form, size, etc.) 0.09 Extra services 0.36 Warranties 0.87 Initial price 0.8 Special offers/discounts 0.0 Terms of payment 0.78 Advertising 0.69 Increase of sales, promotion 0.9 Planning and organization of 0. Personal communication 0.9 Brand (trademark) 0.33 Place of sale 0.34 Direct sales 0.66 Indirect sales 0.38 Sales online 0.9 Sales / distribution channels, mediators Enterprise marketing system 0.8 Product (P ) 0.40 Price (P ) 0.3 Promotion (P 3 ) 0.55 Place (P 4 ) 0. Responsibilities 0.30 Price differentiation 0.7 Pricing strategies 0.3 Crediting, payment conditions 0.34 Corporate identity 0. Information and communication with the public

6 Given the weights of the criteria, describing the enterprise marketing system, the quantitative evaluation of the state of this system may be continued at some other levels, including the determination of the criteria weights. Then, the appropriate multicriteria evaluation method may be chosen for the final evaluation of the system. 4. CONCLUSIONS The effectiveness of enterprise performance largely depends on its marketing strategies. These marketing activities require proper management, which may be achieved only if their effectiveness can be quantitatively evaluated at any moment of time. Enterprise marketing in the countries of Eastern and Central Europe is usually described by the 4Ps model, including such elements (or evaluation criteria) as product, price, promotion and place. In its turn, each of these components may be subdivided into subcriteria, describing them. Enterprise marketing may be referred to complex phenomena whose multiple aspects can be observed in reality. To perform quantitative evaluation of marketing activities, all the criteria describing them should be integrated into a single generalizing criterion. To solve these problems, methods of multicriteria evaluation can be used, but for this purpose the values and weights of the criteria should be known. The weights of the criteria are determined by experts, therefore, this process consists of two stages. First, experts estimates are ranked and their consistency is checked. Then, the weights of the criteria are determined. In multicriteria evaluation, the weights of the criteria are determined for each set of criteria at any level of their hierarchical system. 5. REFERENCES []. A. Ginevičius, Quantitative evaluation of enterprise marketing effectiveness, Technological and Economic Development of Economy, Vol. 3, No., 007, pp []. R. Ginevicius and V. Podvezko, Housing in the context of economic and social development of Lithuanian regions, Int. J. 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