Determining What Consumers Want
Plumbing the human mind has to be the final frontier in marketing, as in many other social sciences. For the tool that yields unvarying insight into what human beings really want under all circumstances just does not exist yet.
This is a challenge that renders long and difficult the beginning stages of marketing planning. For this is the stage when one confronts many questions the answers to which underlie every later planning stage. The questions can be as fundamental as asking, “Is there a market for my product idea?” Having seen some other enterprises succeed to some greater or lesser extent, can I gain a fair share for my “me-too” product (or service, which comes to the same thing)? Will an enhanced product improve my chances? Which enhancements or added value (Walters, Halliday and Glaser, p. 825) might be more truly compelling? Or is it a matter of going to market with a similar product and positioning it differently? What about targeting well-chosen market segments instead (Günes and Aksin, p. 355)? Assuming I have the luxury of starting from scratch and being open-minded about what product to launch, how stable are consumers wants and needs in this trying economic environment?
In fact, entrepreneurs and large companies both confront the conundrum of whether or not the enterprise should be a true pioneer with respect to breakthrough ideas R & D has come up with or wait and be an early follower, once the more popular design or dominant business model has taken shape. Is being first in the marketplace, with all the attendant opportunity for market presence and substantial profits, the better choice than being an early follower and therefore being confident of profits because the dominant design has already shown the way to efficiency in product, process, and infrastructure development? Is it not better to prepare adequately during the long gestation period available to a firm while the breakthrough product struggles to build a beachhead and incurs the costs associated with market development?
Resources and Skills Needed to Make the Product
Once it has been established that there is a match between market need and the new product idea, the next series of decisions concern how to produce it and where. Is the market broad based or a geographically well-defined (i.e., limited) niche? If the latter, then the rational decision may be to locate production as close as possible to the primary market. But if there is a good chance that the market can be developed more broadly in future, does that mean there are no limitations on where to locate the main production facility?
The challenge of acquiring the resources and skills necessary to manufacture the product idea opens up a whole new area of decisions. Should all fabrication take place in-house or is it not better to take advantage of the learning curve incurred by others by opting for an assembly operation, as Dell and the Japanese automakers have demonstrated? Are there significant social and political costs to outsourcing production overseas? The trade-off may be tolerable if manufacturing is labour-intensive. But if the operation absorbs enormous amounts of energy, as in the case of an aluminium smelter, does it make economic sense to site manufacturing where governments have chosen the politically-popular path of subsidised domestic energy, e.g. Iran, Libya, Saudi Arabia or Trinidad and Tobago? In the case of an IT or Internet technology venture, is it not more pragmatic to locate near, say, London where the supply of graduates and experienced professionals is virtually limitless? Or is there something to be said for better quality of life in the Midlands or Ireland?
Marketing the Product
After product decisions, price and advertising have to be the more excruciating hurdles in the entire marketing mix. It is hard enough to identify the price points that will achieve a balance between maximising margins and consumer appeal (van Raaij 373). But the most weighty decisions have to do with the advertising concept or strategy (what to say about the product) and how much effort it will take to achieve the marketing goals. The first is crucial because, while advertising and promotions take time to create tangible effects, the initial positioning must be maintained else one risks confusing consumers and affording inroads to rivals. As to budgets, no advertising man ever believes he has enough but the demands of cost-effective marketing and the perennial emergence of “new media” does bring balance to A & P spend decisions.
Distribution
There are three broad categories of “place” decisions. The most basic, incurring logistics costs from plant to market, is unalterably influenced by the decisions (above) on where to locate production. If transport costs are substantial today and expected to become unbearably so over the long term because of unabated OPEC price demands, what is the trade-off between the efficiencies of one central production facility and smaller, more modular plants such as the giants of the beverage industry have learned to do?
The second set of uncertainties apply to early or late followers because these have to do with what it will cost to get a fair share of shelf space in crowded supermarket shelves. Is outright lease of end- or island shelves virtually a necessity? What margins and incentives to the trade will induce prominent placement alongside proven competitors? Are there cross-merchandising opportunities to be had alongside related goods?
Whether market pioneer or follower, the third category of “place” decisions essentially comes down to owning the entire value chain or trusting that wholesalers and jobbers will do just as earnest a job in forging proper retail presence.
Works Cited
- Günes, Evrim D. & Aksin, Zeynep. “Value Creation in Service Delivery: Relating Market Segmentation, Incentives, and Operational Performance.” Manufacturing & Service Operations Management 6.4 (2004): 338-357.
- van Raaij, Erik M. “The Strategic Value Of Customer Profitability Analysis.” Marketing Intelligence & Planning 23.4/5 (2005): 372-381.
- Walters, David, Halliday, Michael & Glaser, Stan. “Added Value, Enterprise Value And Competitive Advantage.” Management Decision 40.9 (2002): 823-833.