Research and DevelopmentResearch and Development (R&D) is essential in some business organisations.
The role of R&D is to develop new products that the company can sell to customers or improve processes that will enable a company to produce items more efficiently or to a higher quality standard.
R&D departments are usually found in companies producing leading-edge technology products, such as developing new medicines and new digital technology products, such as driverless cars. Wherever technological change is vital for the industry, large companies may have an R&D department.
Technological and scientific advantages create new opportunities for innovation. Successful companies are those at the ‘leading edge’, and companies that fail to innovate may be left behind by their more innovative competition.
There are three elements to R&D:
General Research
General research is research undertaken to discover new knowledge. It does not have a commercial objective.
Most general research is conducted in universities, government-financed research centres, and other not-for-profit research organisations.
Applied Research
Applied research takes discoveries from general research and considers how the new knowledge can be applied to commercial use, such as creating a new product or production process.
There is no specific product idea at this stage, but research is carried out into how the knowledge could be used to create an innovative product that customers will buy. Applied research ends with an idea for a new or improved product or process.
Development
Development is turning applied research results into a product that can be created and sold commercially (or a process that can be used commercially).
For example, some manufacturers have invested in research into robot-driven vehicles and have since produced early models of driverless cars and drones for delivering mail packages. A product is ready for commercial production and selling at the end of successful development.
Risks and Challenges
Research ideas may be unviable, and many development projects fail to create a successful new product. However, new products that are successfully developed may become a big commercial success.
The development of new products must overcome these challenges:
A new product must comply with any legal requirements, for example, product safety
A newly designed and developed product must be able to do what it is intended to do.
For example, a driverless car must be able to drive around without crashing into other vehicles.
A new product must not have any unintended or harmful side effects.
For example, drug companies spend a significant amount of time and resources to convince regulators that new treatments and drugs they are developing work as intended without harmful side effects.
The product must have commercial potential: customers should be willing to buy it at a price and in sufficient quantities to earn a profit for the company.
R&D in Startups
Startup companies are often founded to undertake R&D and see if a viable product may be developed.
Larger companies may invest in these startups and buy them if their research is successful.
There are several reasons why a company might outsource research activities in this way:
To avoid high costs of research
To save time
To maintain focus on the company’s activities
To acquire expertise.
In some innovative industries, companies may succeed in obtaining financial support from the government, given the importance of their product. For example, to manufacturers of new wind-power technology or military equipment.Purchasing (Procurement)
The purchasing function buys goods and services from suppliers.
Large companies often have a centralised purchasing department. This department will maintain files of approved suppliers and items regularly purchased as standard items so that it can deal promptly and efficiently with purchase requisitions.
The Purchasing Mix
The purchasing department must manage four aspects to provide maximum value to the organisation:
Ensuring sufficient inventory is available to sustain production while minimising holding costs. (e.g. capital tied up, storage facilities, security, insurance, shelf-life, shrinkage).
Ensuring purchased items are fit for purpose, balancing the need for quality with the available budget. Buying inputs of inferior quality may result in defective products, whereas buying inputs of too high quality incurs unnecessary costs which may not generate value.
Ensure maximum value for money from the available purchasing budget.
Managing lead time (time between order and delivery) is critical to efficient inventory control, production planning and minimising costs. Suppliers may be granted integrated access to an organisation’s production and inventory control systems to deliver raw materials “just in time”.
The Purchasing Process
Process step
Description
Example
Purchase Requisition
The buying process begins with the purchasing department receiving a request to purchase, specifying the items to be bought and the quantity.
The company’s purchasing department has been requested to buy 1000 pencils, 1000 envelopes and 500 pads of notepaper.
This purchase requisition should be authorised by a manager with authority to approve it.
Supplier Selection
the buyer may ask several suppliers to submit price quotations and then probably select the supplier quoting the best price.
Alternatively, the buyer may select a supplier from the approved list.
A buyer in the purchasing department decides which supplier to purchase the pencils, envelopes and paper from.
Purchase Order
The buyer places the order with the suppliers when satisfied with the terms of sale.
The buyer agrees to the purchase terms – price, payment terms, quantities, and delivery – and places the order for pencils, envelopes and paper with the chosen supplier.
Benefits of Centralised Purchasing
There are several advantages to having a centralised buying department.
If the organisation places its purchase orders from a central department, the orders will be larger. Negotiating lower prices and bulk purchase discounts for large orders is often possible.
A central buying department can ensure that the specifications for purchased items are standard and that all purchases meet a higher quality standard than otherwise. If purchasing is decentralised, there may be variations in the quality of purchases.
A central buying department can negotiate with major suppliers about changes to the specifications of items the organisation wishes to purchase.
Centralised control over buying may reduce the risk of fraudulent purchases compared with a system where many different operational managers make their purchases locally.
Key Point
Purchasing (Procurement) is a key activity in an organisation’s value chain.
Production
Production is taking raw materials and components and turning these into a finished product that the organisation can sell.
It also includes production planning – what items should be manufactured, when and in what quantities – organising the workforce to get the work done, and controlling the production process to ensure that it is carried out efficiently and that the finished output meets the required specifications and quality standards.
Determinants of Production
How production is managed depends on delivering quality output subject to the four V’s:
Determinant
Volume
The number of units to be produced within a given period.
Affects the deployment of capacity and economies of scale.
Ruger Co has received an order for 10,000 units for delivery in five days and must arrange for production accordingly.
Variety
The variety of output required.
Higher levels of variety and customisation increase cost as there are limited gains from specialisation.
Patrickal Ltd has reduced the number of custom colours and add-ons offered on its products to reduce complexity costs.
Variation
How changes in demand affect production.
The higher the variation in demand, the less efficient production will be.
RFT Co hires only a small number of staff full-time, with the rest based on shortterm contracts, to maintain flexibility for inconsistent demand.
Visibility
The amount of communication and dependency between production units.
Complex production processes and varying input quality require higher levels of visibility.
As the supply of raw materials for W Co’s process has inconsistent quality, good communication is needed from inbound logistics to production to adjust the production process accordingly and maintain output quality.
Aspects of Production
The production department has to requisition the materials and components they need from the stores department and ensure they have enough materials available to complete the job. This is to avoid running out of a particular material or component that would halt production.
This involves planning what work should be done each day or session and what machines to use for each task. Production plans may be based on sales orders or projections to ensure the business can supply orders from customers when they come in.
Production managers should allocate workers to tasks. This is to ensure that there is enough labour available and that labour is utilised as efficiently as possible to minimise cost and maximise output.
Production managers need to monitor the work done and ensure that operations are carried out efficiently, with minimum wastage. This ensures that costs are minimised, and the work is done in as little time as possible.
There should be procedures to ensure that output is produced to the required quality. This may involve inspections or testing of finished output. This ensures that there are few or no customer complaints, which are costly to put right and damage the business’ reputation.
Machines and equipment may break down. Production management is responsible for ensuring that machines are properly maintained to minimise the risk of breakdowns (and thus the risk of time being lost when production cannot be continued) and for repairs when breakdowns occur.
Long-Term Production Considerations
Managers must also deal with long-term production considerations in response to business operating environment changes.
Machines and equipment need replacing at the end of their useful life, or even sooner if new and better machines come onto the market. Production managers need to plan for machinery and equipment replacement.
Production managers must adapt to improvements in production technology and design new production processes to make the best use of new tools and techniques. This may also require re-designing workers’ jobs and changing the factory layout.
Production managers need to work with the Human Resources (HR) department to ensure that the organisation has the workforce it needs and that workers are given suitable training.
One consideration is the shortage of young workers, forcing HR to adapt production processes to be operated by older staff.
When an organisation plans to make a new product, the production department will be involved in planning how the product will be made.
Activity 1
What business processes are available to make production planning more efficient?What other ways are there to organise production?
Service Operations.
Service operations is the provision of a service to customers. Instead of selling products, a service organisation sells services. Services are more complicated to account for than products, but they are an increasingly important part of many economies.
Manufacturing organisations inceasingly provide services to customers as well, including after-sales services and provisions for warranty support.
Characteristics of Services
Characteristic
Example (meal delivery)
Intangibility
A service has no physical form. It cannot be owned or transferred.
A meal delivery service has no physical form.
Inseparability
A service is created and consumed simultaneously.
A meal delivery service is produced and consumed as the transporter delivers the meal.
Variability
A service is variable and has different dimensions for different people.
A meal delivery service changes depending on the needs of each customer (distance, type of delivery, time of day, etc.)
Perishability
A service cannot be stored.
A meal delivery ceases to exist once the meal is delivered and cannot be used for a future meal.
Involvement
The customer may be involved in the service delivery.
The customer chooses the service parameters he wants (where to pick up the meal from, where to deliver, speed of delivery, what time, etc.)
Service Provision Considerations
With service provision (as with the supply of a product), the quality or standard of the service is crucial. Poor service can damage the organisation’s reputation and result in lost customers.
Some services can be complex. Accountancy services and surgery are good examples. The service provider must ensure that its employees are sufficiently skilled to do their work well.
Since services are rarely provided precisely the same way each time, there can be difficulties with deciding on a price.
When service provision involves direct contact between the customer and an employee of the organisation, the interpersonal quality of the service provision and the service provider – friendliness, helpfulness, efficiency and so on – are often critical as it has a direct effect on the quality of the service as seen by the customer.
Some services (such as doctor visits) require confidentiality regarding the personal information of the client and the nature of the service provided.
Some services (airline flights, cinema showings) are time-sensitive, and care must be taken to ensure the service is timely.
Administration and Finance
Administration
Administration means organising and managing. In a business organisation, it is often used to describe activities that do not fit into the other organisation’s functions.
A large organisation often centralises its administration function at the head office, although this is not always the case – especially in multinational companies with operations worldwide.
Examples of administrative activities include:
This may be a separate department, but HR is involved in recruiting staff, keeping employee records and training.
Buildings used by the organisation need to be managed and maintained: activities include building reception, building security, maintenance and cleaning services.
Some companies have a fleet of company cars. These will need to be managed.
There may be a separate IT department, but IT services may be included within general administration.
Accounting and Finance
There is usually an accounting and finance department in organisations above a specific size.
Its activities include:
Budgeting (financial planning)
Raising finance, for example, by arranging loans
Managing cash and preparing cashflow forecasts and statements of cashflows
Making payments to suppliers, employees and others for the organisation
The activities of the accounting and finance functions are discussed in detail in Chapter 18.
Introduction
Definition
Marketing – The management process which identifies, anticipates and satisfies customer needs efficiently and profitably.
Identifying and anticipating customer needs
A starting point for marketing is identifying what customers (or potential customers) need. Market research can be used to gather information about this.
An organisation must also identify what customers will need in the future, especially in a fast-changing business environment.
Changes in economic conditions, consumer tastes and social attitudes, and rapid technological advancement create new opportunities and markets. Marketing is essential to guide the direction of product development.
Satisfying Customer Needs.
Successful business organisations develop products that satisfy customer needs.
Marketing persuades customers to want to buy a product or service because they think it will satisfy a need – and provide them with value – at a price they are willing to pay.
Marketing Efficiently
Customers’ needs must be identified using the organisation’s available resources. Excessive expenditures on marketing may deplete the firm’s resources quickly.
Marketing Profitably
Customers’ needs must be identified and met profitably, meaning revenue earned is higher than marketing expenditure. Marketing should enable a profitable price for goods and services to be made.
Essentially, marketing is about:
Alternative Orientations
Marketing Concepts
Product Differentiation
Most businesses try to obtain a competitive advantage by offering a product or service differentiated from its competitors.
A differentiated product offers a combination of price and product features that rival products do not. For example, smartphone manufacturers may differentiate their products in terms of screen design, screen size and functions, and price.
The role of marketing in differentiation is to persuade customers that the company’s products are differentiated from competitors and will meet their needs better.
Market segmentation
Market segment – A portion of the market with a common attribute.
A market can often be divided into smaller segments by geographical location, socioeconomic group, age or other social or economic factors.
Segmentation allows business organisations to target their products or services more closely to their customers’ needs. For example, retired people may prefer a different type of car to a younger person.
Customers’ needs in each market segment differ from those in other segments.
Business organisations develop different product designs and marketing strategies for each segment.
For example, vehicle manufacturers make family and estate cars, cross-country fourwheel drive vehicles, small-town cars for driving in cities, limousines, and vans or lorries for commercial use, each for a different segment of the overall vehicle market.
Targeted marketing and differentiated marketing
Business organisations can choose between targeted and differentiated marketing when markets are segmented.
An organisation develops and markets its product or service for customers in a particular market segment.
For example, a professional football club will choose to sell its shirts in areas where it has a large number of fans.
The organisation produces various products, each aimed at a market segment.
Car manufacturers provide vehicles for different purposes to meet the needs of different customer types. Each vehicle will be marketed differently to appeal to the particular market segment at which the vehicle is aimed.
B2B and B2C
Some products are sold to business customers (business-to-business or B2B). Others are sold to consumers (business-to-consumer or B2C).
An organisation may sell the same product to both businesses and consumers. However, a different marketing strategy is needed for these different customer types.
For example, marketing computers to businesses will call for a different marketing strategy to marketing computers to home users because their needs are different.
Product Lifecycles
Most products have a finite life, after which customers will no longer buy them, as they will be considered obsolete. The product lifecycle is described by the following stages:
The Marketing Mix (The 4Ps)
The marketing mix is a term that describes the combination of different factors or issues that need to be considered in marketing and to formulate a marketing plan for a particular segment. The combination of elements in the marketing mix will determine whether or not customers buy the organisation’s products or services.
The marketing mix, defined by McCarthy and popularised by Kotler, is known as the 4Ps.
Element
Product
The features of the product.
What is it?
What is its purpose?
What does it do?
How is it designed?
How good is the quality?
Price
How much the company is charging for the product.
What is the price?
How much can customers afford?
Do customers consider the price good value?
How does the price compare to competitors?
What is the demand at that price?
Place
How the product is distributed to customers.
Where can customers buy the product?
How do customers receive the product?
Is the product convenient to buy?
Is the product accessible compared to competitors?
Promotion
Activities that inform customers about the product.
The effectiveness of promotion is analysed using AIDA:
Awareness
Interest
Desire
Action
This is discussed in detail later.
Activity 2
Determine which two elements of the marketing mix each statement applies to:
Statement
Two marketing mix elements
A chocolate bar has distinctive packaging.
Is packaging a feature of product, place, price or promotion?
A washing machine comes with a special offer of free delivery and installation.
Is free delivery and installation a feature of product, place, price or promotion?
A TV advertising campaign advertises significant price discounts for a product.
Is advertising price reductions a feature of product, place, price or promotion?
Activity 3
Identify the marketing mix element each statement describes:
Marketing mix element
Should represent fair value for money to persuade consumers to buy
The activities and methods that are used to persuade customers to buy a product or service
Features – purpose or function, design, quality
How the customer receives the product – where they can buy it, how it is delivered
The Marketing Mix: Product
‘Product’ in the marketing mix applies to services and physical products.
Every product should meet a fundamental customer need.
For example, a telephone service must meet the need to speak to someone from a distance, shoes must protect the wearer’s feet, and food must satisfy a desire to eat.
‘Product’ in marketing is about much more than the primary function of what the product or service does.
Product design and styling
How a product looks can be critical, especially for consumer products such as cars, mobile phones, televisions and furniture
Product quality
Customers are often concerned about product quality. Quality means how well the product meets customer needs and is fit for purpose. It must be able to do what it’s supposed to for a sufficient period.
Product capabilities
Capability and features are essential for items such as computer or mobile phone software, where specialist users may demand additional attributes from their products.
Packaging
The packaging for some products can be vital because it provides protection and promotional opportunities.
Product warranties or guarantees.
These can reassure customers who have bought a more substantial product and may be concerned about the product’s quality or reliability
After-sales service
Providing after-sales service, such as a customer helpline, is also a part of the whole product ‘package’ offered to customers.The Marketing Mix: Price
Price is a customer’s first and last consideration before making a purchase.
The price must be high enough to allow the business organisation to profit, but it must also be set at an amount that will persuade customers to buy.
It may also make an implied statement about the quality of the product. Prices must also seem competitive compared to rival products that other firms are selling in the market.
Pricing Strategies
A low price is set for a new product to attract strong customer demand when it is launched on the market.
Once the product is established in the market and customers buy it regularly, its price can increase.
Varying prices are charged to different customer types for the same product.
For example, a train company may offer cheaper tickets to customers in the afternoon than to customers in the evening.
Some products may be offered at a loss-making price in supermarkets and other retail stores. The aim is to encourage customers to come to the store, where they may buy other (profit-making) products together with the loss-making item.
This pricing strategy is used when customers buy one product and then must buy other complimentary products to continue receiving benefits from their purchase.
For example, a company may set a low price for its razors but then charge high prices for razor blades and shaving foam. The initial low price attracts customers, who are then ‘trapped’ and must buy the expensive follow-on item.
4C Aspect
Cost
The price must consider the costs of the product.
RTS Co sets the price of its products above their total cost.
WRS Co is willing to accept some losses by setting its prices below cost to raise demand and awareness.
Customers
The price must consider how much customers are willing to pay for the product and the price’s impact on demand.
Ruby Co sets its prices high as it only wants to cater to the affluent market segment.
TPS has reduced prices for its product after discovering its demand is elastic.
Competition
The price must consider what competitors charge for their products and what it signals to the market.
PL Co has to set prices similar to its competitors, as only limited differentiation is possible.
FG Ltd sets prices higher than competitors to signal that its products are of higher quality.
Corporate objectives
The price must meet corporate objectives.
BV sells its products at low prices to drive maximum demand to achieve economies of scale.
RW Co offers deep discounts on committed long-term supply contracts to break into the market.
The Marketing Mix: Promotion
Promotion is the aspect of the marketing mix that is most closely associated with marketing in the general public’s mind.
The main aim of each promotion activity is usually to move potential customers through a sequence of attitudes, sometimes known as the AIDA sequence, to an eventual purchase:
Aspect of AIDA
Attract customers’ attention, and increase the spread of knowledge and familiarity with the product.
TRC, a mass market manufacturer, does a comprehensive advertising campaign over all media types to raise awareness of its products.
Walther Co works with popular trade publications and portals to promote its products to business customers.
Generate interest in the product by communicating how it may meet their needs.
RMS Co commissioned advertorials on its products describing how they fix customer problems.
QQ Co works with well-known influencers who showcase its products daily and discuss their benefits.
Create the desire in customers to purchase the product by increasing their perception of its value.
Pualson Co invests in product showcase videos that illustrate the design of the product and its use case.
FGH Co’s sales personnel are trained to read customer sentiment cues and react accordingly by describing the product most attractively.
Persuading the customer to take action to buy the product.
RMS Co often makes time-limited offers to customers, including warranties and risk-free returns to close sales.
Examples of the AIDA sequence are helpful. For example, a salesperson trying to sell an item of equipment to a business customer may visit the customer, describe and demonstrate the product, interest the customer and make an offer that the customer may accept. However, the customer may ask for time to think about it (time to move from interest to desire). The sales representative may revisit the customer and offer a slightly reduced price to make the customer want to buy and agree to buy the equipment.
Another example is when a product is put on display in a store at a special offer price. Customers visiting the store may decide to buy the product and do so on impulse. However, they may be more willing to buy it if they have already learned about it from TV or press advertising.
A consumer would be aware of many aspects of sales promotion for consumer products. Promotion activities are also used for marketing to business customers.
Promotion Activities
Direct selling (face-to-face or by phone)
Advertising on TV and radio, in newspapers and magazines
Online advertising
Brochures and other sales literature
Direct mail (by post or in digital form)
Exhibitions, events, and displays
Sponsorship
Public relations
Branding of products.
The appropriateness of each activity depends on which stage of the AIDA sequence the company is trying to implement.
In some countries, companies face issues deciding where to spend their advertising budget, as the number of people watching conventional broadcast television falls (especially among young people) and the use of mobile phones increases at a fast rate. Companies face the dilemma of spending their limited resources on traditional media (print, television, billboards) or online and social media platforms.
The Marketing Mix: Place
‘Place’ refers to how a product or service is delivered to where a customer wants to buy it.
Choosing suitable methods of getting a product to customers is known as finding ‘channels to market’. The term ‘distribution channels’ is also used.
For example, a variety of distribution channels serve consumers.
Groceries are bought from a supermarket or a specialist shop such as a butcher or baker.
Household items may be bought online from a store that will deliver to the customer’s house.
Certain types of goods may be bought directly from the producer.
Newspapers, candy, and other conveniences may be bought from a street vendor or a railway station stall.
‘Place’, arrangements for distributing products, have become much more varied.
Wholesalers and retailers
Many consumer goods manufacturers distributed their goods through wholesalers to retail stores, where customers could buy them. As some retail organisations grew in size, in particular chains of supermarkets, companies began to distribute directly to retailers.
Home delivery
Manufacturers and retailers have also used delivery direct to the customer’s home. This distribution method has become much more familiar with the growth of online retailing. Customers can buy a product online and have it delivered to their homes.
Click and collect
A problem with home delivery is that the customer is only sometimes at home. So a further development in online selling is for the customer to buy a product online and then arrange to collect it later at a convenient time, either from a retail store or from a collection box in a location they often visit, such as a commuter railway station.
Delivery over the internet
Digital products can be delivered directly to customers over the internet. For example, music and video downloads and streams and electronic books.
Marketing Strategy
Business organisations must plan a marketing strategy.
This involves deciding what aspects of the 4Ps it should use for marketing the organisation’s products or services. This will vary according to the type of products – for example, the marketing strategy for fast-moving consumer goods (FMCG) such as foods, clothing would be different compared to the marketing strategy for consumer durables (items such as washing machines with an extended life and which are bought or replaced only occasionally).
The most suitable methods for marketing FMCG will differ from the most appropriate marketing mix for selling to business customers. Business customers expect direct selling for significant items and will be most interested in what the product can do and how much it will cost.
Example: Reflection
What might be the most critical aspects of ‘price’ for a business customer?
The most important aspect of price is whether it represents real value to the purchaser. Discounts may be offered for a large quantity purchase – for example, paper may be cheaper when bought by the box rather than in small packs.
Another important aspect of price is whether credit terms are offered and at what interest rate (expressed as an annual percentage rate): how much time will be allowed for the customer to pay for items and how much extra they will have to pay for credit. More expensive items like computers and production machinery may be offered with financing to encourage consumers to buy.
What might be the most critical aspects of ‘place’ for a business customer?
Business customers will usually expect the seller to deliver products to their premises or to provide services at a place and at times (for example, a computer company offering online help outside regular business hours) that is convenient to the customer.
What might be the most critical aspects of ‘promotion’ for a business customer?
Business customers are likely to be more interested in price and product features and are less likely to be influenced by promotion into buying the product. However, business organisations do use some promotion for business customers, such as advertising in trade magazines and displaying their products at trade fairs and business exhibitions.
The Extended Marketing Mix: People, Processes, Physical Evidence (7Ps)
The 7Ps of the marketing mix are the original 4Ps (product, price, place and promotion) and three other elements:
The 7Ps are referred to as the ‘extended marketing mix’.
These three additional elements are particularly relevant to business organisations that provide services and are more likely to feature in the marketing mix of service companies than manufacturing companies.
People
People in the business organisation interact with the organisation’s customers, for example, by providing a service or answering a customer’s phone call.
V Co’s team of welltrained customer service consultants help retain repeat customers that are well-served via phone.
RBQ’s services are highly regarded due to their team of skilful technicians that help solve customer problems.
Processes
Processes refer to the procedures or functions used to deliver a product or service to the customer. Automation of operations can be an essential factor in promoting products to a customer.
TP Co’s customer management system makes it easy for customers to renew their subscriptions and maintain excellent service.
The broad coverage of P Co’s network makes it the dominant service provider on the market.
Physical evidence
Physical evidence can be vital for services. It refers to the physical evidence that gives the customer an impression about the service provider, such as the location of the organisation’s premises (for example, in the city centre or a dilapidated back street on the edge of the town), or the uniforms worn by the organisation’s staff.
Parko restaurant is always full of patrons that enjoy admiring its luxurious and unique dining room and the food served.
P Hotel invests significantly in keeping its rooms refreshed, clean and comfortable for its clients.
Example: Failure to Deliver
In March 2008, Heathrow Airport’s new Terminal 5 (T5) opening turned into a complete and utter marketing disaster following significant technical, staff and procedural failures on the first day of its public operation.
British Airways (BA) staff were ill-prepared for the opening because of poor training, low morale and unfamiliarity with the terminal layout and security procedures. This occurred despite the staff warning senior management of their concerns months before the official opening. Although BA is a service-oriented organisation, its staff morale is extremely low (e.g. many staff members feel that they can no longer support the firm when asked to give up rest days to “help out” in emergencies such as that at T5). Reports from passengers of unhelpful and surly BA staff reflected this.
The baggage system (marketed as the most modern worldwide) failed, resulting in many flights being cancelled or leaving without passengers’ luggage (in some cases, it took up to three weeks to reunite baggage with its owners).
Booking in and screening passengers took far longer than expected (again because the staff were unfamiliar with the procedures, the broken baggage system and the lifts), resulting in many passengers missing their flights.
Although passengers were waiting in a beautifully designed building with many shops, there was a distinct lack of seating and catering facilities.
Many passengers considered their experience to have been the worst of their lives, vowing never to fly BA again and to avoid Heathrow Airport if possible.
The complete transfer of BA flights to T5 was delayed by several months, and it was in November 2008 that T5 finally became fully operational.
Activity 4
Match the activity with the element of the marketing mix describing it.
Activity
A bank offers its customers the option of internet banking for their accounts.
An organisation emphasises, through its marketing, the experience and expertise of its staff.
An airline allows customers to buy flight tickets and print boarding passes online.
An accountancy firm has a luxurious reception area and meeting area for receiving clients.
A hotel company trains all its staff to be cheerful and helpful when speaking to customers.
A small start-up IT company uses expensively-designed business cards to give to potential customers.
A company sells its products online and delivers them to the customer’s home. It sends emails to the customer to provide tracking information that informs the customer about the current progress of their order.
A company with a call centre for handling customer calls introduces new equipment into the centre. As a result, it can reduce the time customers spend waiting for their call to be answered.
Relationship of the Marketing Plan to the Strategic Plan
The marketing plan is how the marketing mix elements are deployed to achieve the organisation’s objectives.
Marketing should involve long-term planning and shorter-term planning of the marketing mix. Long-term planning must be consistent with the overall strategic plan of the organisation. However, the strategic plan for the organisation is strongly influenced by marketing factors.
Factor
Mission and overall purpose
Strategic planning should be based on a clear understanding of the organisation’s mission and objectives.
RKS Co is focused on achieving a dominant position within its industry through a growth strategy over the next five years.
Current position
The organisation should assess its current position by considering the business environment, the industry’s competitive forces, and resources and competencies.
RKS Co’s economic environment is in rapid recovery after a recession, and there is a growing demand for its products.
During the recession, RKS optimised its workforce and developed new technologies.
SWOT analysis
The organisation then assesses the opportunities and threats in the environment and the industry and the strengths and weaknesses in its resources and capabilities.
RKS has identified the low-interest rate environment as conducive to its growth plans, enabling it to take up more debt to fund expansion at a low cost.
Direction
The organisation has to consider where it wants to get to over the strategic planning period. This will involve deciding which products or services it should sell and in which markets.
RKS’s growth strategy involves expanding its product distribution into new markets and creating new products to compete in the premium space.
Strategic plan
The organisation then has to devise plans for achieving its objectives (also known as its strategic plan) and getting from its current position to where it wants to be by the end of the planning period.
RKS will measure its performance by revenue growth, market share for new products, and defending its current position in refreshed existing product lines.
A strategic plan typically covers the next five-year period; some organisations may plan for a more extended period, say ten years. The strategic planning period may be much shorter in high-technology and fast-changing industries.
An essential strategic plan element is deciding which products to make and sell, in which markets, and who will be the target customers in the market. These are the issues that are dealt with in a long-term marketing plan or strategic marketing plan. A marketing audit will feed information into the strategic marketing plan.
The strategic plan establishes what the organisation wants to do over the period covered by the plan. The long-term marketing plan must set out how the organisation will use its marketing resources to help the organisation to achieve the strategic plan’s objectives.
