Tag: Product

Wha’s Like Us?

Over the Christmas period, I took my usual trip to my parents in Scotland.  It was there that I noticed three linked news stories.  The first related to a medical research project aimed at the reduction of type 2 diabetes.  Patients diagnosed with type two diabetes were placed on a strict diet rather than being prescribed drugs.  The results of the survey were startling with the vast majority of patients reversing their diabetes symptoms.

Type 2 diabetes is often the result of obesity and poor diet.  It appears that if a patient sticks to the diet they are given, there is a good chance that they will not require a lifetime on prescribed drugs.

Scotland, particularly the west of Scotland has horrific statistics for obesity, poor diet and early death.  This has a direct impact on the health service and if the incidence of type 2 diabetes can be reduced it will have a direct implication on health service budgets.

The second two stories related to the sugar tax which was introduced in the 2016 budget. The tax is aimed at soft drinks containing high levels of sugar.  As a marketer what interested me was the way two soft drinks producers reacted to the new tax, Coca Cola and A.G. Barr.

Barr’s produce Irn Bru, famously “Made in Scotland from Girders”; in truth, made in Scotland using a staggering amount of sugar.  In response to the new tax, Barr’s announced that they would changing the secret recipe of Irn Bru to reduce the sugar content.  This announcement has led to Irn Bru addicts stockpiling cans and bottles of the beverage.  A petition has received thousands of signatures and asks that Barr’s increase the price of Irn Bru to cover the tax rather than reduce the sugar content.    One comment on the petitions states that the recipe shouldn’t be changed as it is only the high sugar content of Irn Bru that cures an individual consumers hangover.  Wha’s like us indeed!

Coca Cola, in reaction to the sugar tax, have announced that they will not be changing their recipe but that Classic Coke would be sold in smaller bottles and at a higher price.  A 1.75 litre bottle of Coke will be reduced to 1.5 litres and will cost 20p more.

It must be noted that, in Scotland, Irn Bru outsells both Coca Cola and Pepsi.

The sugar tax is an attempt by government to ‘nudge’ consumers into making healthier choices.  One of the first acts of David Cameron as Prime Minister was to set up a cabinet office team (now a semi-privatised business called Behavioural Insights) to apply nudge theory to public policy.  The team’s work is based on the work of Richard Thaler, a behavioural economist whose nudge theory won last years Nobel prize for economics.  The aim of nudge theory is to use economic and other factors to achieve the unforced compliance of political and economic aims.  rather than banning high sugar content in soft drinks, the sugar tax makes them more expensive.  Consumers, hopefully, will balk at the high price of the drinks and select cheaper, healthier options instead.  That, or fearing lower sales revenue, manufacturers will change their formulations.  Another example of behavioural economics are the plastic bag levy.

When preparing a strategic marketing plan, it is important that businesses undertake an analysis of the market environment.  This takes in two levels of interaction, with the macro-environment and the micro-environment.  The micro environment, often expressed in terms of Porter’s five forces, includes stakeholders such as consumers.  The macro-environment, often expressed in terms of the acronym PESTEL, includes wider political, sociological and economic factors.

The sugar tax should be included in such an environmental analysis.  Clearly it is politically motivated, it is aimed at changing societal norms, it has an economic impact and there will be a reaction from consumers (such as the petition).  It will also have an impact on those firms supplying sugar to the soft drinks trade.  A significant quantity of the sugar in soft drinks is corn syrup.

Clearly, faced with the same problem, Coca Cola and A.G. Barr have come up with different strategic solutions.

Coca Cola is a worldwide brand and he classic Coke recipe is the same in every country.  A.G. Barr is a regional soft drink manufacturer.  Barr’s market is predominantly the UK and the vast majority of sales of Irn Bru take place in Scotland.  It is unlikely that Coca Cola would want to produce one recipe of Classic Coke for the UK market and a different recipe elsewhere in the world.  Coca Cola’s reaction to the sugar tax is to reduce the quantity in bottles and to raise their price.

Barr’s have taken another route to compliance, rather than raise the price of Irn Bru, affecting sales in their main market, they have chosen to alter their secret recipe.

What must be taken from these two different positions is that marketing strategy may be different for firms operating in the same market and facing the same issue.  When deciding on strategy, you must consider a wide range of individual factors impacting your business.  Just because one of your competitors takes a particular course of action, that does not mean such a strategy is right for your business

What is Marketing?

Over recent weeks, I have seen a number of recruitment advertisements from small and medium-sized firms advertising roles described as marketing assistants or marketing executives. When you read the job specifications for these posts, you tend to find that the jobs contain work tasks more usually associated with graphic designers, web designers or sales representatives.
I know that distinguished marketing academics and professionals are regularly frustrated at their profession being incorrectly defined in this way.
So what is marketing?
The Oxford Dictionary of Marketing describes the function as follows:
Marketing is a formal business discipline originating in the USA at the turn of the 20th century. The profession, it is argued has gone through five stages:

  1.  The Age of Production:  This stage began shortly after marketing being formally defined and ended in the 1930s.  At this stage, marketing activity was constrained by the limitations of production.  The focus in companies was to produce as much as possible; as efficiently as possible.  Marketers focus was in ensuring the widest possible distribution of the products produced.
  2. The Age of the Product:  Marketing’s focus was not on cost leadership or distribution but on ensuring that the product itself would attract customers.  The focus was on product attributes, quality, performance and design.  Many of these concepts remain in modern marketing.
  3. The Age of Sales:  Here the focus was on pushing whatever the company had to sell.  This was the era of aggressive promotion as evidenced in the television series Mad Men.  Corporate thinking was that if you pushed any product hard enough it would sell.  Such sales tactics, the hard sell, could be risky as it could put consumers off and possibly drive them into the hands of competitors.  This developmental stage lasted until the late 1950’s.
  4. The Age of the Customer:  Some marketing academics believe we are currently coming to the end of the age of the customer which began in the 1960s.  This era places the customer at the centre of all marketing activity.  rather than making a product and then trying to find customers to buy it, products are specifically designed to meet the needs of distinct customer groups.  Critical to this era is customer segmentation and market research.
  5. The Interactive Age: This is the age of networking, massive choice, content sharing and content acquisition.  The aim is to let your customers become your marketers.  Many marketing academics we are at the start of this age with the rise of social media.  However, it must be stressed that interaction should not be only through electronic means.  It is still important that businesses interact with their target customers by more traditional methods.

Marketing is no longer the simple facilitation of commercial exchanges and transactions between producers and consumers.  Every contact a business has with its customers is a marketing dialogue, from initial sales calls to after sales service and the investigation of consumer complaints.

Marketing’s initial focus was on the producer not the customer.  It was getting the right products to the right consumer at the right price.  It was assumed that the producer controlled the market.  This assumption is no longer valid.

Take the example of the market for milk.  it is not the producer, the farmer, who controls the market for milk; it is the retailer in the form of the large supermarket chains.

Many of the advertisements for marketing jobs that I see still seem to treat marketing professionals as if they are working in the age of production or the age of sales.  Many see marketing as a subset of sales or as a subset of promotion.  In truth, sales and promotion are subsets of marketing.

Some firms, such as Hewlett-Packard see marketing not as the responsibility of a silo department but as a responsibility of everyone within the organisation, from the CEO down.

Marketing’s role is to develop a market-centric or customer-centric attitude throughout an organisation.  It is therefore imperative that marketing is closely linked to your overall business strategy and that it is central to the functionality of the senior management team.

Finally, lets look at the definition of marketing strategy.  The Oxford Dictionary of Marketing gives the following definition.

Marketing strategy is a series of planned choices about which part of the market to focus upon and how to compete within that target market.  These choices are based upon a thorough analysis of the ways and means of addressing target markets and customers.  Market segmentation and positioning are key to the development of a marketing strategy and it should put a customer focus on the overall strategic goals of an organisation.

Segmentation and positioning demand the development of a distinctive marketing mix.  Products and services must be designed with distinct customer groups rather than treating the market has homogeneous. Positioning ensures that your products are given a unique place in the minds of consumers which is distinctive from that of your competitors.

Marketing strategy is about making the most of your company’s strengths whilst exploiting the weaknesses of your competitors.