Company New Marketing Challange - Literature review Example

COMPANY NEW MARKETING CHALLENGE COMPANY NEW MARKETING CHALLENGE Introduction Marketing is an important tool used by companies to among other things, define their markets, quantify the needs of their customer groups, put together value propositions to meet needs of their segments, communicate to customers within the market, and monitor the value delivered to the market (Adcock, Halborg and Ross, 2011). Once all these are done effectively, the resulting outcome is high profitability for the companies involved in the marketing. Unfortunately though, Kotler & Keller (2012) noted that it is not always that the marketing process goes on smoothly as planned. This is because the companies become faced with various forms of challenges that hamper the smooth progressive of activities within the marketing domain. The presence of challenges within the marketing process should however not be a reason a company will fall to continuously embark on marketing. This is because according to Zyglidopoulos (2002), there are a number of strategic interventions that companies and their marketing teams can use to ensure that they successfully overcome their marketing challenges. In this paper, a real world marketing challenge is identified as a company attempted the introduction of a new service line as part of programmes aimed at entering new economic sector. Based on the challenge that was faced, the selection, use and implementation of strategic marketing plan that was used to overcome the situation are also outlined with a justification of the rationale for the selected action plan. Current situation and background to the company The company in question is one that is into the manufacturing and sales of computers, hardware, software, and accessories. For a very a long time, the company’s major market segment has been the corporate world. As a result, the company has for long utilised the business to business marketing model in performing roles related to its core marketing domain (Joyner and Payne, 2002). The type of market segment and the economic sector to which customers within this segment belonged caused the company to use the differentiation strategic option in gaining competitive advantage. As part of the differentiation strategic option, the company always offered the high grade products and services that could be sold to customers at very high prices (Kotler and Keller, 2009). Even though the company was involved in a branded market, the differentiation strategic option was seen to be a very useful way to gain value because the customers were always concerned with getting high grade and quality products than inferior and cheaper products. Lately, the company felt that it had exhausted most parts of its market segment and that the differentiation strategic option was not allowing them to sell as many pieces of products as they envisioned for growth. This led to the need to introduce a new service line which focused more on business to consumer marketing model where individual customers will be targeted rather than corporate bodies (Dev and Schultz, 2013). The new idea also involved the need to focus on those in the lower economic sector. The new service line and the need for it As elaborated above, the need for adopting a new service line within a new economic sector was necessitated because the company had outlived its market maturity on the old segment it used. Zsolnai (2012) attested to the fact that for branded markets, there are times within the segment that the service being offered reaches its maturity stage. Adding to this, Barley and Tolbert (2007) also noted that once market segments reach their maturity stage, diminishing returns sets in, causing the demand for service to go down. It was this effect that caused the company to revise its marketing policy to having a new service line within a new economic sector. The new service line involved the combined use of focus strategic option and cost leadership strategic option. This combination is often referred to as cost focus (Derry, 2011). As part of the new service, basic schools were targeted as the new market segment of the company. The market was specifically focused on schools located at low economic earning sectors. There were two major factors that influenced the need for this new service line. The first is that computers and software services offered by the company were seen to be major needs of the students as part of learning interventions to make them succeed academically. The second reason was that even though the students needed these, most of them did not have the service and products because they could not afford them. The new service line was therefore to sell the products at low prices and also allow for instalment payment. Application of strategic marketing mindset in the introduction of the new service line Ahead of the introduction of the new service, the strategic marketing mindset was thoroughly followed. The strategic marketing mindset presented six major steps through which considerations were made for the adoption of the new service line. The first step was reflective, which allowed the company to focus on new trends in the IT business where the company operated. Goodrick and Salancik (2006) emphasised that in every sector of business, there are trends to doing business that marketers must be aware of, and concerned with. The trends have been noted to affect customers, competitors, technology, and the marketing organisation (Tolbert and Zucker, 2006). In the current situation, the trend of change was noted on customer behaviour and the marketing organisation after several months of reflection. The second step in strategic marketing mindset is what is referred to as worldly. This is the area of strategic marketing mindset where attention is given to global segments and brands, as well as communication (Kotler and Gary, 2011). As far as global segments and brands were concerned, the company saw the need to expand the benefit of its service to people of every economic sector. It was for this reason that the need to target those in low economic sectors was also targeted by the company. Communication however did not influence this stage of worldly. The third step under the strategic marketing mindset was analytical. In this area, the attention of the company was placed on resource allocation, as well as the effectiveness and efficiency of its marketing programme (Reid and Bojanic, 2009). As far as resource allocation is concerned, the company found that there had been an uneven distribution of resources towards the need to taking advantage of the larger market. Because of this form of imbalance in resource allocation, excessive resources were placed on those from well to do economic sectors and corporate institutions. The company therefore ensured that the new service line was introduced amidst the evenly allocation of resources for those in low economic sectors as well. By so doing, effectiveness and efficiency was ensured. The fourth area of strategic marketing mindset focused on responsive marketing. By responsive marketing, the need to learn from the market was emphasised (Goldstein and Lee, 2005). By learning from the market, reference is being made to the use of well calculated metrics in evaluating the outcome of market inputs (Kerin, 2012). For this company, responsive marketing was done by employing the use of research and development, which has been noted to be very effective way of learning about markets of different sizes (Akaah and Lund, 2011). For example, using research and development allows for the use of both qualitative and quantitative approaches to studying the market. There was also the concept of collaboration as part of the strategic marketing mindset employed by the company. Collaborative marketing has been explained to be one which focuses on the need to combining the efforts and ideas of different stakeholders within the company and those outside of it (Tai et al., 2008). In this case, the company focused on three major stakeholders who were customers, channel members and suppliers. The company collaborated with customers by allowing them to freely express their opinions on their exact needs from the company. This made it possible to tailor the new service line in which a ways that directly addressed the needs of the customers. There was also collaboration with channel members who helped the company in measuring the product lifecycle of the old service line that was offered. Then also, there was collaboration with suppliers on how the company could overcome supplier bargaining power to ensure that it could get supplies for the new service line at most affordable prices that would make the cost leadership strategic option possible. Last but not least, innovation and action were combined into a common step in helping the company identify new product development that met the specific needs of the new segment. The action comprised the need to enter the new market segment with the adaptation of the right marketing mix and strategic option. Risk related to the introduction Even though the introduction of the new service line was accomplished following the strategic marketing mindset, there were some risks that were envisioned to be faced as part of the new introduction. The first risk had to do with capital risk, which has been explained to be a situation where the company is forced to spend more than its originally proposed capital budget (McAlister and Ferrell, 2002). Capital risks arise when the company undertaking a service initiative is not guaranteed to get very immediate returns from the investment being made. In the current situation, capital risk is envisioned to be associated with the introduction because of the payment plan that is being used to implement the service line. Even though the company can be guaranteed of long term profitability, this is not certain to happen within the earliest time frame. In such a situation, the company would have to resort to financing modalities including the acquisition of loans and other forms of credit. Since these additional sources of funding come with interests to be paid, they are likely to lead to capital risk, which eventually may lower the profit margin of the company, especially when the right strategies are not put in place to ensure that the company can hedge against the future impacts of the instalment payment plan such as inflation and high interest rate (Bhanji, 2012). There is also the possible occurrence of liquidity risk as part of possible risks that the new service line could bring. Liquidity risk in the IT business can be said to have come about when the company is not in a position to raise sufficient fund to settle financial commitments (Gupta and Donald, 2012). There are a number of factors that can lead to such liquidity risks. Mainly, liquidity risk has been noted to come about when the company fails to trade off assets quickly enough to prevent loss (Joyner and Payne, 2002). In this situation, assets of the company can refer to the products that the company seeks to sell as part of the new service line. Liquidity risk is also likely to arise because the customer segment is quite new. In a very typical market, Tolbert and Zucker (2006) argued that it takes a very long time for customers to adapt to new brands. This is especially when the customers get confused about the business model being used by a company and the company’s overall business idea. Confusion about the brand being introduced can also lead to reluctance on the part of consumers to adapt to the new product. In a situation like this, it is common that liquidity risk will arise because buyers will not buy assets early enough when prices are favourable for the company. Challenge faced among clients The introduction of the new service line did not come without some challenges, particularly on the part of clients who were supposed to be beneficiaries of the programme. Clients got confused of the brand message being sent to them on the need to buy affordable products that also came with instalment payment plan. The confusion that was created could largely be assigned to market maturity as the cause of the problem. It would be noted that for branded markets, price differences are high, as well as product differentiation. As a result of this, clients expected that for the company to guarantee them with the highest form of quality, the prices of products had to be high. The confusion therefore was on the suspicion that the company might be selling inferior or less quality products to them. Meanwhile, quality is an important virtue for gaining competitive advantage on any given market (Meyer and Rowan, 2007). In reality however, the company had made production hedges against the cost of producing a unit of its products, which made it possible to guarantee both quality and affordability. What is more, there was a stereotype about the use of computer products among students, where the perception was that only limited version of services could be offered. This also created confusion among the clients who doubted if they could get the real value from this service line as they had from any other traditional service line. Responding to the Challenge According to Selden (2008), it is not unusual for companies to be faced with challenges such as the ones described above. What may however be problematic is when there are no strategic responses to these challenges. Knowing this, the company can put itself in the right shape to ensure that the challenges are effectively overcome as brand awareness seems to be in risk due to the challenges described above. Excellent companies have been noted to have four major ways in which they respond to challenges. All these four may be applied to the current company in one way or the other. The first of this has to do with concentrating on core by focusing on product or service. In the current instance where brand awareness is in risk because clients doubt the quality of products, it is important to respond through core values focused on the quality of products. As the products are sold within the market segment for some time, it is expected that the consumers will by themselves come to attest to its quality. This will however happen only when the quality can be trusted. It is for the need to build trust in the product that core value will be focused on. The second response will be through building efficiency. This form of efficiency will be sought through the processes available to the customer. Zsolnai (2012) noted that efficiency in process is guaranteed when all forms of wastes are avoided in the information flow of the company. This is noted to be a very good response because it will allow the company to offer tailored services that seek to address client needs and enquiries about the new service line. The third way to respond is through the use of creativity. Petersen (2008) agreed to the fact that in a very competitive business climate, it takes creativity for companies to introduce innovative ideas that ensure that they are able to overcome market challenges and subsequently build competitive advantage for themselves. In the current circumstance, the company would have to respond to its challenge by building and harnessing creativity among its employees. This is because creativity at the workplace has been noted to be a very effective model of innovative nurturing that ensures that a company has all the answers needed for its challenging market. It will therefore be admitted that there is currently a problem but through creativity among employees, it is expected that the employees will approach the challenge head-on. As a way to consolidating creativity, the use of training and development within the organisation is recommended. The last way to respond to the challenge is to understand market needs by inculcating professional marketing. Such acts of professional marketing are expected to be realised once the creativity proposed among employees comes to fruition. It is expected that one way in which professional marketing will be utilised by the company is to go very low to the level of the new target customers and seek from them very specific needs they have about the new service line, for which they would want the company to clarify. Action Plan to restore the damage to the brand The first step on the action plan was to ask the simple question of “what would we like to be?” This question helps in defining the mission or objective that the company wants to pursue. As part of the mission or objective, the company is expected to clearly define its legacy, ambition and opportunity. For most companies, the commonest way to approach this is by the use of a mission statement. In line with this, the mission statement of the company towards the introduction of the new service line is “to reach out to all students with the same opportunity to owe and use IT”. This may be seen as a form of purpose mission statement as it can be said to be ideal for what the company wants to achieve with a specific target segment. It is hoped that this mission statement will spell out what the company wants to achieve with the new service line more clearly. The second step with the action plan has to do with the question of “what is out there?” This question helps to define the segmentation more clearly. What this means is that answering the question of what is out there helps the company to clearly identify its opportunities in terms of potential customers (Temporal, 2005). But to know what is out there, it is important to employ tacit knowledge and market research. Through this, it can be said for this second step that there is a very large customer base in the form of students in low income sectors who have been neglected on the need to have IT infrastructure which they could use to better their education. Very importantly for the company, this segmentation offers a lot of financial profitability because of their number. Even though there may be the challenge with affordability, having the right strategy to sales can help to overcome the challenge. The third step on the action plan borders on the question of “what value can we offer?” Here, attention is given to targeting and positioning within the segmentation as a means of attaining viability, profitability and sustainability. For the current company, the value that can be offered looks at a combined approach of focus and cost leadership whereby the target customers are offered high quality IT products that come with the lowest form of cost that can be identified on the market. Once this value is sustained, the expectation is that the target segment will be broadened so that the profitability of the company can be enlarged. This means that the company’s action plan comes as a two-edged model which has to offer value to the target segment before profitability can be earned. A refusal to acknowledge the role needed to be played by the company will result in a situation where the challenge will remain unsolved. The fourth step with the action plan asks the question of “what are the critical decision points?” As the company seeks to use cost focus it is expected that there will be a lot of decision points that will be considered to ensure that the company does not run at a lost. It is for this reason that Goodrick and Salancik (2006) indicated that the critical decision points of a company is best served when it is made to focus on the areas of business model, synergy and capabilities. Consequently, a critical decision will be taken on production within the company. The ultimate aim here will be to reduce the cost of production by ensuring continuous process improvement. To attain this, the action plan admonishes on the use of the six sigma and lean production models. These models would ensure that all forms of waste within the company are avoided so that it will be possible to cut down on cost per unit production. Once this is done, the strategic option for competitive advantage would not come as a problem to the company. The last step with the action plan asks the question of “how do we implement and evaluate?” This is a very important question that focuses on legacy, ambition and opportunity. The implementation of the action plan will be carried out in a systematic fashion by the use of share responsibility. This way, reference is being made to a rollout programme that ensures that all sectors of the organisation are given roles to play. Shared responsibility will also ensure that all people within the organisation are recognised for what their competencies can help the company to achieve. Once this is done, efficiency can be achieved because it will not be only one person or a few people who will have to take up all the responsibility in rolling out the plan. What is more, such form of shared responsibility will ensure self evaluation among the workers (Derry, 2011). Conclusion The current paper has been useful in establishing the fact that even though the introduction of new service lines may have their own benefits, there are some crucial challenges that they may carry. These challenges are however not there to cause the overall defeat of the introduction of such service lines but to put companies to work as far as the introduction of the right approaches to responding to the challenges is concerned. Once the right form of response is developed, it is possible that the challenges can be overcome so that the company can go back to the original need for introducing new service lines, which is to increase profitability. For the current company, it has been realised that the need to switch from its current segment to a new market segment is a move that guarantees high levels of return. This is because the company has outlined it market maturity on the old segment. Having a new segment that comes with a new strategic option can therefore be seen as a step in the right direction. Until now, the problem of confusion among clients has been realised. It is however hoped that by utilising the action plan which has been enumerated above, this challenge can be overcome and the company will yield the benefits it requires from the new service line. References Adcock, D., Halborg A. and Ross C. (2011). Introduction. Marketing: principles and practice (4th ed.). London: Xavier Thomas. Akaah, I.P. and Lund, D. (2011). The influence of personal and organizational values on marketing professionals ethical behavior. Journal of Business Ethics, 13(6), pp.417-430. Barley, S. and Tolbert, P. (2007). Institutionalization and structuration: Studying the links between action and institution. Organization Studies, 18(1), pp.93-117. Bhanji, S. (2012). "Price Discrimination in Pharmaceutical Companies: The Method to the “Madness”". 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