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Introduction

The American Marketing Association (1960, pp. 9-10), stated one of the first definitions of a brand. They stated that a brand was “a name, term, sign, symbol or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors” (AMA, 1960, pp. 9-10).

Unfortunately, due to this definition being very product-orientated with a lack of definition for visual features, it was heavily criticised by a various amount of academics (Arnold, 1992; Crainer, 1995). Since then, the definition of ‘brand’ has been adapted to a more modern form. Many research academics offer a variant of the definition (Aaker, 1991; Doyle, 1994; Kotler, et al., 1996; Stanton, et al., 1991), with most of these using the revised version provided by Bennett (1988, p. 18) “a brand is a name, term, design, symbol or any other feature that identifies one seller’s good or service as distinct from those of other sellers.”

There have been a vast variety of other brand definitions, with some being more customer-orientated and others being more product orientated, but Bennett provides a simple and sophisticated definition on what a brand is.

A strong brand can offer a variety of benefits for a company as it can be used to differentiate between competitive offerings. This can allow a brand to become a critical factor for the success of a company. The majority of companies will seek to maintain an incredibly strong and positive brand that can identify with customers on a personal level.

This report will conduct an in-depth exploration into the various factors that constitute a successful brand, and how a company can build a strong brand. With brand image being such an integral force on a company’s success, it is imperative that they successfully create and manage their brand. A variety of factors that can impact on the creation and maintenance of a brand will be explored, included brand identity, brand image, brand equity, brand congruence, co-branding and the evaluation of brand performance.

Brand Identity

A company should be have a clear, defined strategy on what their brand identity is meant to be. Kapferer (2012, p. 156) provides an excellent framework that allows a company to measure and decide on their brand identity. It measures brand identity on six levels, these are;

Physique
Relationship
Reflection
Personalit
Culture
Self-Image

A company may seek to favour some of these factors more than others, or they will attempt to balance their brand identity amongst all of the factors. This is largely dependent on the industry in which the company operates. A company like Apple may focus on self-image, relationships and personality, whereas Marks & Spencer’s would be more concerned with self-image, relationship and culture.

Furthermore, Aaker (1997) conducted a detailed study to define five brand characteristics that can help develop a company’s brand identity or personality. The definition of brand personality is “the set of human characteristics associated with a brand” (Aaker, 1997, p. 347). The use of brand personalities has become more common because consumers often associate brands with human personality traits. Aaker (1997) defined the five brand characteristics as;

Sincerity: Down-to-earth, honest, wholesome and cheerful.
Excitement: Daring, spirited imaginative and up-to-date.
Competence: Reliable, intelligent and successful.
Sophistication: Upper class and charming
Ruggedness: Outdoorsy and tough.

Brand characteristics can be used “to compare personalities of brands across product categories, thereby enabling researchers to identify benchmark personality brands” (Aaker, 1997, p. 354).

Brand Image

A company’s brand image can be measured through a variety of channels. One of these channels is in a literal sense, and is through the use of a logo. The American Marketing Association defines a logo as (AMA, 2015) “a graphic design that is used as a continuing symbol for a company, organization, or brand. It is often in the form of an adaptation of the company name or brand name or used in conjunction with the name”. Furthermore, Budelmann, et al., (2010, p. 7) define a logo as “a graphic representation of a brand…a logo is a picture that represents the collection of experiences that forms a perception in the mind of those who encounter an organization”. A logo can be used to portray a brands identity through the use of imagery, and allow a company to spread their brand awareness via a constant icon.

However, brand image is not only related to a company logo. It is also how consumers perceive a product or service that a company has to offer (Levy, 1978). This is strongly related to the brand identity or personality traits that a company attempts to adopts. However, the brand identity will be what the company is trying to achieve, whereas brand image is generally in regards to the consumers perception of a brand (Dobni & Zinkhan, 1990).

Brand Equity

A company’s brand equity can be measured through a variety of methods. Feldwick (1996) identifies three main factors on how a company can measure their brand equity. These are; stating the total brand as a separable asset on the balance sheet, the level of strength of a consumer’s attachment to a brand and a description of the beliefs the consumer has about a brand. Different companies will measure their brand equity in different ways. Activision Blizzard value the goodwill of their company at approximately ?7bn (Blizzard, 2014, p. 93), which will include how much they believe their brand equity to be.

Keller (1993) takes a more consumer-based approach to brand equity, suggesting that brand equity represents a condition where the customer is familiar with the brand, and recalls a favourable, strong brand association. This approach would be more concerning to a brand manager, as they would have to build a brand that is attractive to the target audience of the company. Furthermore, it would also mean that the company should be offered positive service quality, as brand equity can be heavily dependent on a consumers’ past experience with a company. This attitude allows brand equity to be very subjective and personal, meaning it is hard to measure or manage by a brand manager.

Co-branding

Co-Branding is a relatively recent branding strategy, with its original formation thought to be in the 1990s. One of the first research studies to be conducted on co-branding was by Norris (1992) who investigated brand alliance within the field of brand ingredients.

As competition becomes even stronger within markets, and with the introduction of more and more companies, the use of co-branding is becoming a more prominent strategy for companies to undertake (Washburn, et al., 2004). Co-branding strategies are being implemented through a variety of markets, from Betty Crocker and Hershey’s to Dell and Intel processors.

A co-branding strategy “represents a long-term brand alliance strategy in which one product is branded and identified simultaneously by two brands” (Helmig, et al., 2008, p. 360). Furthermore, there are four fundamental characteristics that compose co-branded products, these are:

Participating brands should be independent before, during, and after the offering of the co-branded product (Ohlwein & Schiele, 1994).
The co-branding strategy should be implemented on purpose (Blackett & Russel, 1999).
Co-operation between two brands should be visible to potential customers (Rao, 1997).
One product must be combined with two other brands at the same time (Hillyer & Tikoo, 1995).

If all four of these core characteristics are successfully implemented in a co-branding strategy, then it can provide a variety of benefits for all organisations involved. A co-branding strategy helped Kwik Shop stores appeal to all age groups and to “offer a range of healthful to indulgent eating options” (Odesser-Torpey, 2015, p. 1). This is because it teams up and ‘co-brands’ with a variety of restaurants across Iowa. This co-branding strategy helped the company grow its revenues, along with improving their brand image and spreading brand awareness. This would be a great success for any brand manager, however deciding on which companies to co-brand with, and how to successfully implement the strategy can be very difficult.

There has also been a growing interest in the co-branding of corporate brands and social or cause-related brands (Simmons & Becker-Olson, 2006; Dickinson & Barker, 2007). This is because a cause-related brand can bring a corporate brand “a Fair Trade value, a safety and ethical guarantee that they are beyond the level corporate brands can usually offer” (Senechal, et al., 2013, p. 367). Many brand managers will use this strategy to simplify the company’s co-branding strategies, as being associated with fair trade usually offers an instant positive reception and increased brand awareness.

The main purpose for companies to pursue a co-branding strategy is to increase customer awareness and perception of certain products. Prior research has concluded that pre-existing attitudes of one brand can be passed on and related to brands within the co-branding alliance (Simonin & Ruth, 1998). Dickinson & Barker (2007) highlighted that the existence of such a positive transfer between brands is one of the key motives for a company to follow a co-branding strategy.

Evaluation of Brand Performance

Although a brand manager may be able to successfully identify the company’s brand identity, and successfully market this brand image, they must also be able to monitor and evaluate their brand performance. There has been a direct link between brand performance and an increase in market share, premium pricing strategies and an increase in customer loyalty (Chaudhuri & Holbrook, 2001). This highlights the significant impact that branding has on a company’s financial and operational success.

Brand performance is generally measured through two methods, brand profitability performance and brand market performance. Profitability performance tries to relate a brand to revenues, whereas market performance is how the brand has impacted market share or sales volume (Chirani, et al., 2012). However, a company can combine both of these factors by monitoring market share, price and distribution coverage as indices for brand performance. If a brand is performing successfully then a company would expect an increase in market share and profitability.

There is definitely a variety of factors that can be accounted for by brand performance, and all have an intrinsic part to play in a company’s success. It is for this reason that a company will hire a brand manager to construct, maintain and monitor a brand profile, in the hopes of increasing profitability and market share.

Conclusion

There are a variety of frameworks and theories that a brand manager can utilise to successfully create a strong brand for a company. With branding being strongly linked with market and financial performance, it is imperative that a brand manager use these theories to their advantage. Furthermore, they can systemically go through the various theories to build and monitor a strong brand.

The brand identity and personality is the first stage to achieving this, and should be decided by the managers of a company. These traits would be heavily dependent on the products a company make, or the market they operate in. A brand manager will want to ensure that the perceived brand image of a company is in-line with the brand identity that managers were wanting to achieve. As the brand identity should be a reflection of the products that a company produces, this should already partly be met. However, the brand manager should ensure that all marketing activities are also centred on promoting the appropriate brand image to coincide with the desired brand identity.

After a brand manager has devised a successful brand image, they should continue to monitor the brand’s equity and performance. The brand equity can be measured via the balance sheet, but should primarily be valued based on consumer perceptions. As brand equity is heavily tied to customer experience, all employees of a company should ensure they are providing the highest degree of quality possible. Furthermore, a brand manager can also review the performance of a brand through market share and generated revenues. This is because a strong brand has strong ties to customer loyalty, which in turn should generate significant revenues for a company.

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Why is it important for an international marketer to study culture? Outline the main techniques available for undertaking cultural analysis?

Where once marketers of goods or services may have targeted customers only in their domestic market, the globalisation of the business environment through improved technology, reduction in trade barriers and emergence of large multinational corporations (Palmer & Hartley, 2002), means that the marketers of today may have the option to consider marketing internationally. It is posited that an international firm is one that expands from its domestic market into new markets, using its existing capabilities, and this differs from a multinational corporation (MNC) which may have units acting autonomously in several countries (Miroshnik, 2002). Globalisation is not a new concept, and has been seen as the standard for some time (Levitt, 1983).

Entry into a new international market is both an opportunity and a risk and may be achieved through a number of means, including exporting, direct investment, licensing, joint ventures and strategic alliances, each with varying levels of risk that the company must weight up prior to entry (Palmer & Hartley, 2002). Once an entry decision has been made, it is posited that cultural analysis of the target country is imperative for this to be undertaken successfully (Morden, 1995). Management styles, strategies, technologies and structures appropriate to one culture, may be detrimental to the brand when used in a different culture (Miroshnik, 2002). The international marketer must consider what adaptation, if any, is required to its marketing mix (Palmer & Hartley, 2002) and may use cultural analyses to determine to what extent current marketing programmes can be utilised, or how appropriate they would be to the new market (Kotabe & Helsen, 2001). Indeed, recent studies appear to favour adaptation to the new culture, thus the interest of the international marketer in culture and its consequences continues to increase (de Mooij & Hofstede, 2010).

It is suggested that the behaviours modelled by an individual will be the result of the prevailing cultural values within their society, their social class, reference groups (e.g. family and friends) and their individual physical and psychological attributes (Palmer & Hartley, 2002, p 382). Notable contributors in the field of cultural knowledge include Hofstede, Hampden-Turner and Trompenaars (Morden, 1995).

Of use for the international marketer wishing to analyse the culture of a new country versus its domestic market are conceptual models which identify, classify and measure culture as specific dimensions, enabling a comparison to take place (Miroshnik, 2002). Herskovits’ (1989) five dimensions of culture are material culture, social institutions, men and universe, aesthetics and language and language (Miroshnik, 2002).

Material culture concerns consumer demand, including quality and attributes of goods/services required and encompasses both economics and technology; the former looks at how a country makes use of its capabilities and technology concerns its production of goods and development techniques (Miroshnik, 2002). An understanding of material culture will be imperative for the international marketer in its marketing mix decisions; while considering whether the product/service meet local demands for quality and attributes, or whether there exists a capability for the product/service to be produced in the country. Many brands will adapt their product to suit the culture in that country, even if only slightly, an example would be Coca Cola and McDonald’s who adapt their products/menus to suit local tastes; McDonald’s also consider the experience, for example, in France where fast food was not as consistent with the culture of enjoying and taking time over food (Palmer & Hartley, 2002).

Social institutions include decision making, leadership styles and social class (Miroshnik, 2002). Social class may be particularly important to the international marketer, for example the Hindu caste system remains relatively stable throughout a Hindu’s life, with less likelihood of movement between social classes than in western societies and overall it is posited that those within a particular class will share common attitudes and behaviour patterns (Palmer & Hartley, 2002). An understanding of the class system in the target country, and its similarities/differences to current countries will be paramount.

Man and universe comprises religion and superstition, this could be very important to the marketer as religions, beliefs and practices can vary greatly between countries, for example superstitions are integral to Russian culture and religion is intrinsic to Arab and Asian business (Miroshnik, 2002). To be unaware of cultural sensitivities around this area could be detrimental to any international marketer.

Aesthetics involves folklore, music, arts and visual/aesthetic/symbolic norms and whilst this dimension could be glossed over as simplistic or superficial, aesthetics can be extremely important to a culture and thus to the international marketer, for example it would be inadvisable to use a bat within branding in Russia as it is considered bad luck (Miroshnik, 2002).

Finally, language as a dimension is to consider the nuances of what is said, unsaid, plus non-verbal communication (Miroshnik, 2002).

Hofstede cultural dimensions

The assumption that an employee working for a multinational with its own organisational culture will adopt that culture, rather than retain their individual pre-existing culture, was found not to be the case by Hofstede (1983), Miroshnik, 2002). Hofstede’s four dimensional model of national culture, introduced in the 1970’s, may be used to analyse cultural differences; it is posited that this allowed culture to be unwrapped from a single dimension into multiple dimensions (Minkov & Hofstede, 2011). The dimensions are power distance, individualism-collectivism, masculinity-femininity and uncertainty avoidance (Hofstede, 1983). Hofstede’s cultural model shares similarities with the work of Trompenaars (1993) and the GLOBE study (House et al, 2004), a strong inducement for international marketers to use Hofstede’s cultural dimensions to analyse cultural distance is the large number of countries measured, enabling easy comparison (de Mooij & Hofstede, 2010).

Power distance relates to the way the society deals with power distance including the importance and respect allotted to superiors, and conversely to subordinates (Hostede, 1983), also attitudes to inequality (Hofstede, 2006b). Luxury brands may be important in high power distance countries, as their acquisition would demonstrate to others that they are required to show deference (de Mooij & Hofstede, 2010).

Individualism/collectivism concerns personal goals as opposed to collective or group goals (Hostede, 1983). Self-actualisation is important to consumers in individualist cultures and brands that help the consumer to promote their sense of self may do better than in collectivist cultures, where identity is linked to the social system they belong to (de Mooij & Hofstede, 2010). The more direct communication style suitable for an individualist culture may be deemed inacceptable in a collectivist culture, and they may respond more favourably to marketing that promotes collective benefits and family harmony (de Mooij & Hofstede, 2010). Of the four dimensions, Hofstede states that it is this dimension which has lessened in its impact, for example Japanese youth are more individualistic than their parents whilst they continue to mirror their parents in the other dimensions (Hofstede, 2006a).

Masculinity-femininity classifies the cultures relative importance of what may be considered as more male characteristics such as advancement and success versus more traditionally feminine characteristics such as being nurturing (Hostede, 1983). The Netherlands have a more feminine culture with both men and women valuing the softer skills; this can impact upon marketing strategy as more feminine cultures may wish to communicate differently than masculine cultures (Hofstede, 2006a), for example a tour operator using travel agents or call centres more heavily in feminine cultures to allow more opportunity for direct communication. Also, it is posited that household chores such as shopping will be shared more in feminine cultures, thus the marketer must consider who will be making the buying decision; perhaps that target audience will be different from the domestic market. In masculine cultures, status brands may symbolise success and achievement (de Mooij & Hofstede, 2010).

Uncertainty avoidance deals with anxiety relating to the unknown and the extent to which consumers within the culture would seek to avoid this uncertainty (Hostede, 1983); this would also include the expression of emotion and control of aggressive behaviours (Minkov & Hofstede, 2011). In high uncertainty avoidance cultures, the ‘seal of approval’ from experts may be welcome within marketing, additionally this may impact upon the types of product that will be more successful in the country, for example, preventative medication is more prevalent in high uncertainty avoidance cultures (de Mooij & Hofstede, 2010).

Hofstede added a fifth dimension in 1991, long versus short term orientation which relates to gratification deferment (Hofstede, 2006b) and cultural focus on the past, present or future (Minkov & Hofstede, 2011), thrift may be more important to long term orientated cultures (de Mooij & Hofstede, 2010) which could affect pricing decisions for international marketers.

Hofstede’s dimensions are not without their critics; criticisms include incorrect characterisation of dimensions (Jacob, 2005) and that the dimensions are out of date with a lack of societal range in the sample (McSweeney, 2002)however Hofstede posits that the adoption of his dimensions into the mainstream as a cornerstone of cultural research (Minkov & Hofstede (2011) has its disadvantages, namely that they may not be used as originally intended- as a means to discover differences in national culture (Hofstede, 2002).

Like Hofstede, Trompenaars also looked at time orientation and individualism/collectivism, yet Trompenaars looked at a further five dimensions, namely universalism/particularism, affective/neutral relationships, specificity/diffuseness, achievement/ascription and internal/external control (Trompenaars, 1996)., Criticism of this typology hinge on its reduction of acomplex construct such as leadership style to two dimensions when the respondent may use both leadership styles in different circumstances, or indeed a different style altogether, but is forced to choose from one of two given styles (Jacob, 2005).

The conceptual work of Hall (1976) considers cultures as being either high or low context, as a continuum of how much context matters in the culture, and may be used as a tool for international marketers to understand cultural differences and the management implications of the same (Kim et al, 1998). It is posited that a high context culture would have strong respect for social hierarchy, bonds between people would be strong, people may be more self-contained with feelings and messages may be simple but with deep meaning, examples of countries with a high context culture include Japan, China and Korea (Kim et al, 1998). In high context cultures personal relationship may be important in the business to business relationship (Kim et al, 1998), which would have important implications for the marketer, for example, how the relationships could be developed. Conversely, the low context country would be a more individual culture, messages may be more overt, and bonds between people may be more fragile and breakable should they be considered to be untenable; countries such as Switzerland, Norway and Sweden are considered to have low context cultures (Kim et al, 1998). The marketer in a low context culture may not have as much trouble acquiring customers, as they may have in retaining them.

With the wealth of information gained from the various means of cultural analyses, the international marketer will then need to consider the impact upon its marketing strategy. Using Hofstede’s terminology, they may be currently marketing in an individualist culture and attempting to persuade through marketing, but it is suggested that this would be quite wrong if they were attempting to begin to market to a collectivist culture where inducing positive feelings about the brand and building trust would be paramount (de Mooij & Hofstede, 2010). What the international marketer should seek to achieve is congruence in the brand’s marketing set against the cultural norms of that country (de Mooij & Hofstede, 2010).

However, the international marketer must also take on board that culture will never be a ‘one size fits all’ descriptor for a country, as there will most likely be subcultures, for example the UK, with its distinctive subcultures (Palmer & Hartley, 2002). Additionally, people may be members of more than one cultural group at one time- the traditional family culture, work culture, and perhaps even a different cultural group of friends (Jacob, 2006).

Culture surrounds the consumer; to develop international marketing strategy without an understanding of it would be foolhardy (de Mooij & Hofstede, 2010), equally, the international marketer undertaking cultural research based upon a single model of cultural analyses, subsequently assuming cultural homogeneity could be equally set upon the wrong path (Jacob, 2006). What is clear is that culture is by no means a simple concept, and is one that would require extensive research on the part of the international marketer.

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Introduction

The development of e-marketing has been one of the most important and influential trends in the field of business, marketing and Information Technology offer the past decade. It has revolutionised the manner in which certain businesses market their products and the advent of social media offers the potential to revolutionise the manner in which businesses and consumers interact in the future. This essay will evaluate the impact of e-marketing upon businesses and will do so in three clear sections. The first section of the essay will define the concept of e-marketing and the second section will examine how e-marketing helps businesses to reach their customers. The third and final section will highlight some of the most important advantages and disadvantages of e-marketing. The conclusion will argue that the impact of e-marketing upon businesses has been largely positive and that despite a number of potential problems e-marketing offers exciting new opportunities for business growth and development.

Defining the concept of e-marketing

In the first section of this essay it is important to clearly define the concept of e-marketing. This is a vital task, because in order to be able to fully understand how e-marketing affects businesses and their customers it is important that the notion of e-Marketing is first of all adequately defined. Patricelli argues that e-marketing is a general term used to denote a wide array of different Internet-related activities. These include “website building and promotion, consumer communications, e-mail marketing and newsgroup advertising” (Patricelli 2002: p.141). However, the term e-marketing has developed enormously over the past decade and today it encompasses a far wider range of activities and one of the most important of these is the use of social media in order to advertise online. Pride settles on an altogether more comprehensive definition of e-marketing, stating that he understands the concept as referring to the “strategic process of creating, distributing, promoting and pricing products for targeted customers in the virtual environment of the Internet” (Pride 2010: p.70). E-marketing is best understood as a broad concept and one that has gained additional platforms in recent years with the advent of smart phones and tablets such as the iPad. As a result, the notion of e-marketing is defined most clearly when it is understood as referring to the creation, distribution, promotion, pricing and communication of products across the entirety of the Internet and the wide variety of platforms that constitute the Internet in a modern context.

How does e-marketing help businesses reach their customers?

E-marketing helps businesses reach their customers in a wide variety of different ways. Boone claims that the Internet offers businesses the chance to reach their customers in a number of unique ways and that one of the most important of these is the global reach of the consumer base that the Internet is able to provide. According to Boone, “the net eliminates geographic protections and limitations of local businesses and it gives smaller firms a wider audience” (Boone 2011: p.105). It is for this reason that the Internet is often seen as being inextricably linked to the wider force of economic globalisation, which some economists see as being responsible for the increasing retrenchment of the nation state and the rising power of non-state actors such as multinational corporations (MNCs). The ability to reach customers connected to the Internet anywhere in the world is seen as an enormous benefit to businesses in their quest to reach, attract and retain customers. Another way in which e-marketing helps businesses to reach their consumer bases is the extent to which it is able to further personalised marketing. It allows businesses to create products that “meet customer specifications” and in recent years the advance of this type of marketing in particular has been seen as perhaps the most significant long-term development in the course of e-marketing (Boone 2011: p.105). Through the use of social media, for example, business analysts believe that corporations may well be to harness enough information in order to tailor products, services and critically search engine results in such a way that consumers will be automatically attracted to them, because the products and services shown will be of interest either to them personally or to their close friends on social networking websites. However, even in the absence of such sophisticated targeting techniques certain websites such as Amazon have made great strides in personalising content to individual users, as Chaffey explains. “Amazon is the most widely known example where the customer is greeted by name on the website and receives recommendations on site and in their emails based on previous purchases” (Chaffey 2009: p.32). Boone argues that e-marketing offers other important ways for businesses to reach their customers including the use of interactive marketing and integrated marketing. Interactive marketing is a form of marketing in which the advertising process is driven by buyer-seller communication and where the “customer controls the amount and type of information received from the marketer” (Boone 2011: p.106). Integrated marketing refers to a type of marketing strategy in which all promotional and communication efforts are combined in order to create a unified and consumer-centric promotion campaign. It is clear; therefore, that e-marketing offers a wide variety of different ways for businesses to reach consumers.

What are the advantages and disadvantages of e-marketing for businesses?

E-marketing has a number of important advantages that make the adoption of e-marketing approaches and strategies attractive for businesses. One powerful argument in favour of e-marketing revolves around the cost and speed of this approach to marketing and Jones argues that these two factors in particular set e-marketing apart from other marketing approaches. “There is much evidence that makes a case for marketing electronically because of the cost-benefit ratio and the speed-to-market advantage” (Jones 2008: p.304). However, it is important to understand that e-marketing is only a cheap option when one considers it in the context of the size of advertising budgets that large firms used to have in relation to television and radio advertising. Whilst small e-marketing campaigns may be cheap, any larger scale campaign is likely to still incur a significant cost, but some of the other most important advantages of e-marketing ensure that this approach to advertising has become increasingly popular in recent years. These advantages mainly revolve around the ability of this form of marketing to collect information and deploy it in unique ways.

The increased ability to garner data and critically the ability to analyse this data in relation to consumers is something that offers businesses many valuable insights into not only their marketing campaigns, but also their business strategies as a whole. In fact, in certain cases e-marketing has developed to such an extent that certain businesses are able to make vast profits by offering comparisons between different websites, websites that are commonly referred to as comparison websites. These companies have no discernible products of their own and instead they offer a service in which they “are uniquely equipped with product listings, consumer reviews, store ratings, and personal shopping lists that offer creative shopping options to consumers on the Internet” (Lebson 2011: p.10). Examples of such comparison websites include Money Supermarket, Compare the Market and Go Compare and once these businesses have built their infrastructure their business model revolves almost exclusively around collecting consumer data and maximising SEO (Search Engine Optimisation). Comparison websites are therefore in one sense one of the most pure examples of e-marketing, because their business models rely almost exclusively upon effective e-marketing to target customers. E-marketing offers further important advantages including the ability to reduce costs via the use of automation and software programs and also allows marketers and consumers to interact in a far faster fashion than would be the case when using traditional means of communication. However, the analysis above has already touched upon one significant advantage of e-marketing that has great potential to evolve substantially in the future. The use social networking and social media in particular offers enormous potential to marketers and opens the door to revolutionary changes in the way customers and businesses interact with one another. The impact that social media websites such as Facebook and Twitter have had upon the way in which people use the Internet has been evident in the past few years and Rana argues that the user-driven, community orientated way in which social media communicates leads to a different type of Internet, full of organic content and user-friendly websites (Rana 2009: p.255). Businesses are thus far only scratching the surface of how to exploit such new opportunities, but Facebook for example offers an advertising service that allow businesses to target individuals based on a range of different criteria. Such adverts therefore are targeted at particular consumers in a much more focused way than even adverts traditionally used on Google, known as Google Ads (Facebook, 2011).

However, despite the numerous advantages of e-marketing businesses must be aware of the fact that e-marketing also presents businesses with a number of potential pitfalls. Certain businesses such as the comparison websites listed above rely completely upon the Internet to the extent that without technology they would actually have no business. Clearly, the Internet will not go away, however the dependency upon technology is something that can cause Internet-centric businesses major problems and also make them vulnerable to a wide range of different cyber attacks (Liebsch 2009: p.87). Another disadvantage of e-marketing has become particularly apparent in recent years and is inextricably connected with the rise of social media. Whilst social media has the potential to offer many e-marketing benefits, businesses must also beware of the danger that poor reviews and poor customer service can have upon their operations. The opinions of one disgruntled customer can go viral at lightning speed and therefore irrevocably undermine a particular business, product or service in an instant. This type of increased transparency also manifests itself in other ways and leads to a situation in which consumers are empowered to search for the lowest prices from a wide range of different online businesses. The fact that the Internet offers an almost unlimited consumer base is one of its clear advantages, but its global reach also affects the competition that businesses experience and as a result online businesses are likely to face stiff competition and many other companies highly competent in their e-marketing expertise. As a result, companies must focus upon distinctive e-marketing strategies and campaigns that differentiate themselves from their competitors in order to be able to cope with the extent of the competition that can be found online in today’s marketplace.

Conclusion

In conclusion, this essay has clearly shown that e-marketing impacts upon businesses in a number of important ways. When used effectively, e-marketing campaigns and strategies have the potential to reach customers in a speedy and low-cost manner and can provide promotion for a wide range of products and services. E-marketing also offers businesses the opportunity to garner data about their consumer base to an extent that has hitherto been very difficult to achieve via traditional marketing methods. The development of e-marketing and social media advertising has led to examples of businesses in recent years that appear to little more than categorise and filter information relating to products and services on the Internet, taking a small cut from any transaction that may occur as a result. However, despite the global reach, speed and the extent of information that can be gained from e-marketing there are a number of important disadvantages to this type of marketing that businesses must bear in mind. The technology driven approach of e-marketing leaves certain businesses vulnerable and overly-dependent upon technology. It also empowers dissatisfied consumers to a far greater extent than ever before and can lead to bad reviews that have the potential to greatly destabilise certain e-marketing campaigns and operations. However, despite these problems it is reasonable to conclude that e-marketing is on the whole a positive development for businesses and that despite certain dangers its impact upon businesses has been largely positive.

Bibliography

1. Boone, L., 2011. Contemporary marketing. London: Cencage
2. Chaffey, D., 2009. Internet marketing. London: Pearson
3. Facebook, 2011. Facebook Adverts. http://www.facebook.com/advertising/?campaign_id=214294157440&placement=exact&creative=5811616952&keyword=facebook+ads&extra_1=66df06ba-739c-b0c8-f265-00003f94ac68 Accessed 05/01/2012
4. Jones, S., 2008. Business-to-business. London: Maximum
5. Lebson, S., 2011. Intellectual property operations and implementation in the 21st Century. Oxford: Blackwell
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8. Rana, N., 2009. E-marketing intelligence. London: E-Marketing Intelligence

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There are many academics that suggest the correct way to conduct market research (Lockett & Blackman, 2004; Beall, 2010), but in truth, there are a variety of different ways that are effective dependent on the situation. Kolb (2008) states the research process is comprised of four steps, which are; determining the research question, choosing the research approach, planning the research method and implementing the research. This highlights the importance that planning has in the market research process, as physically implementing the process comes after extensive planning and preparation.

This report will critically discuss the above four stages to conducting effective market research. An in-depth analysis of each stage will be conducted, to understand how each factor within the process affects the overall shape and effectiveness of market research.

Determining the Research Question

This is the first step to conducting effective market research and can often be rushed by many companies. As most organisations are eager to implement the process, they can be quick to decide on the research questions. However, it is imperative that the company or researcher decides on a clear research question, as the research question guides and centres the overall shape of the market research. Furthermore, it is absolutely crucial to the rest of the research process. Answering the wrong question can waste tremendous amounts of resources for a company, and make the market research completely ineffective (Springett & Campbell, 2006).

One of the main reasons for companies choosing the wrong research question is because they make false assumptions (Kolb, 2008). This means, to avoid false assumptions from being made, that a company will have to take the time to think critically about what the issue is, or what they are trying to understand through the implementation of market research. As previously stated, the research question should not be rushed, as it is a crucial step for implementing effective market research. This can be overcome by basing assumptions on previous research or experiences, which will guide the company to an educated and precise research question (Swartz, 2001). Some internal research data that a company could use are; sales receipts, complaint information, databases, orders or financial analysis. Furthermore, the research could show a variety of different problems, which could then be condensed into one research question to provide precise and effective market research (Martin, 2007).

Research Approach

Kolb (2008) states there are three different research approaches. These are; descriptive research, exploratory research and causal research. The approach that a researcher will take will be largely dependent on the research question, as they differ quite significantly.

Descriptive research is “concerned with the present and attempts to determine the status of the phenomenon under investigation” (Singh & Nath, 2010, p. 195). In essence, this will be used by a researcher or company when they want to discover specific details about something, such as consumer average spending. This is because it will analyse statistical data, and is most commonly in the form of surveys. A survey is most commonly used because it can obtain results of a large sample to draw conclusions that can be generalised amongst the population.

However, descriptive research is often expensive and time-consuming. This is because of the large amount of data that needs to be collected and analysed (Kolb, 2008). Furthermore, the type of research that surveys provide is often limited, as it only measures a small percentage of the population. It can also be an inconvenient approach to research, which makes it difficult to conduct research effectively. Consumers value their time, and generally do not want to spend it filling out surveys. However, online channels are minimising the inconvenience of surveys, and making a descriptive approach, once again, an effective method of conducting market research (Kolb, 2008).

Exploratory research is “about putting one’s self deliberately in a place – again and again – where discovery is possible and broad, usually (but not always) non-specialized interests can be pursued” (Stebbins, 2001, p. vi). This type of research could be used to measure consumer attitudes, opinions or beliefs towards a brand. These studies vary in size, but will usually be smaller than descriptive research. To conduct exploratory market research effectively, the researcher must explore deep into consumer’s emotions and attitudes, which would be hard to do with a large sample. The focus is more on choosing the right participant, and not trying to conduct the research on a large amount of people. Furthermore, it usually comes at a lower cost to a business, and doesn’t take quite as much time. However, it still suffers with inconvenience, as it can be hard to find participants to conduct the research with (Stuart, et al., 2002).

Causal research is a research approach that focuses on investigating into cause-and-effect relationships. That is to say, it will measure one variable with another and how these variables interact with each other (Brains, et al., 2011). Furthermore, it can be used to give insight into strategic change that a company may wish to pursue. This is because it can investigate whether the change will be beneficial or not for a company. However, it can still be used to research the effectiveness of change after it has happened. Causal research is often used as a preliminary approach, with the results being made more conclusive with the use of descriptive or exploratory research (Brains, et al., 2011).

It is imperative that a researcher or company knows what research approach it wants to take. As stated, it is largely dependent on the research question. However, if a company takes the wrong approach to answer the research question than they will not conduct effective market research, as they would be using the wrong tools and values to gather the data. Kolb (2008) compares choosing a research approachto a car mechanic, if a mechanic was fixing a car, he would choose a wrench, not a spatula. Furthermore, similarly to how the research question shapes the research approach, the approach will also have a significant impact on the research method. This highlights the important of each stage, and why planning and preparation is crucial to successful market research.

Research Method

There are two methods to market research; quantitative and qualitative. These methods differ greatly; quantitative research is an “approach for testing objective theories by examining the relationship among variables…which can be measured…so that numbered data can be analysed” (Creswell, 2014, p. 4) and qualitative approach will “allow a researcher to examine people’s experiences in detail, by using a specific set of research methods such as in-depth interviews or focus groups…” (Hennik, et al., 2011, pp. 8-9). More recently, especially in larger studies, these methods have been combined to form a mixed-method approach. This is a method which “combines elements of qualitative and quantitative research approaches for the purpose of breadth and depth of understanding and corroboration” (Johnson, et al., 2007, p. 123). What method a researcher or company will take is largely dependent on the situation. If a company wishes to understand consumer perceptions then they may prefer a qualitative study (Brunso, et al., 2002; Knox, 2000), whereas measuring consumer average spend would primarily be quantitative in nature (Muijs, 2010). Which method a researcher will conduct must be decided, as it will influence the approach and philosophy the research will inherit. Furthermore, it will also be a determining factor on the form of market research, such as via questionnaires, focus groups or interviews (Muijs, 2010).

Qualitative research will primarily take on an interpretivist philosophy, and an inductive approach. An interpretivist philosophy gives importance to human belief, and focuses on evaluating a small sample in detail to understand the views of many (Easterby-Smith, et al., 2002). Furthermore, an inductive approach “begins with the collection of data, rather than with a theory, and uses data to identify regularities or themes, or to suggest theories…” (Hayes, 2000, p. 789).

On the other hand, quantitative research will generally take on a positivist philosophy, and will also usually take on an inductive approach. A positivist philosophy is quite different to interpretivist, because it focuses on the collection of large amounts of data and quantifying the data with thorough statistical analysis (Lee, 1991). Using the examples above, if a company wanted to conduct effective market research to analyse consumer average spend, than they would conduct quantitative research with a positivist and inductive approach. This is because the researcher will collect a large sample of data to statistically analyse the average spend of a company’s consumers. Doing interviews would be small-scale and ineffective as it wouldn’t represent a large enough sample.

As previously mentioned, the research method will be a determining factor for what tool to use to conduct the research. Quantitative research will usually take the form of a questionnaire, which is a “survey instrument used to collect data from individuals about themselves, or a service or product…each respondent is exposed to the same questions…to ensure the differences can be interpreted as reflecting differences” (Siniscalco & Auriat, 2005, p. 3). On the other hand, qualitative research is usually in the form of focus groups or interviews, which are “a form of group interview that capitalises on communication between research participants in order to generate data” (Kitzinger, 1995, p. 299). This shows the disparity that exists between the different methods, and why a researcher must be clear on what their research method. Trying to obtain data using the wrong research method will yield negative results and will more than likely cause the market research to underperform.

Implementation and Findings

After the planning and preparation has been conducted, the market research, such as questionnaires or focus groups, can be implemented and analysed. Physically conducting research is perhaps the most complex stage of the market research process, but is made significantly easier through rigid planning and preparation (Craig & Douglas, 2005). Furthermore, this stage may consist of going out into the field to collect results, or simply waiting for participants to fill out a survey. It can be both the longest, or shortest, stage of the marketing process, with it being made significantly more effective with proper planning.

All the data collected would be analysed by whatever means appropriate. If a survey was used then the most effective method would be through the use of statistical software. However, qualitative research, such as focus groups, will primarily be analysed by the researcher or company, which will allow them to interpret the data how they sit fit. This can raise issues of bias, which is the extent to which researchers or participants may seek to influence the process of data collection, analysis and findings (A Bryman, 2008). However, if the company wishes for the market research to be conducted effectively, then it will be sure of eliminating all possible threats of bias.

Furthermore, this would be the stage where secondary research could be used, as it would help supplement the primary market research. Secondary research is “the re-analysis of data for the purpose of answering the original research question with better statistical techniques, or answering new questions with old data” (Glass, 1976, p. 3). The use of secondary research is usually decided by the researcher, but generally helps fortify any of the findings from the primary research ensuring that the market research is more effective and thorough.

Conclusion

From the discussion of how to conduct effective market research, it becomes quickly apparent that the most vital stage to conducting market research is the planning and preparation stage. A company must clearly define what there aims and objectives are, as it will help shape and design the overall market research process. There are a plethora of alternative methods to conducting market research, but each different method has its merits. A survey will not explore in-depth attitudes of consumer behaviour, but it will gauge a good understanding of average spend.

Utilising the wrong tools, approaches or philosophies to answer the research question will end up with ineffective market research being conducted, with the company losing substantial amounts of resources. Furthermore, the planning and preparation stage is so important because it will make the physical conduction of the research much easier. If a company knows what they are trying to discover, in what method, and with what tools, than they will be able to conduct the most effective market research in the most efficient manner.

Bibliography

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Hayes, N., 2000. Foundations of Philosphy. 3rd ed. London: Thomson.

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Johnson, R., Onwueghuzie, A. & Turner, L., 2007. Toward a definition of mixed-methods research. Journal of Mixed Method Research, 1(2), pp. 112-133.

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Knox, B., 2000. Consumer perception and understanding of risk from food. British Medical Bulletin, 56(1), pp. 97-109.

Kolb, B., 2008. Marketing Research: A Practical Approach. 1st ed. s.l.:SAGE Publications.

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This essay explores the need for customer relationship management systems. It begins by explaining how the organisational environment has changed and the pace of change is accelerating. It then considers how a better understanding the customer contributes to organisational success. Following this, it defines what is understood by ‘CRM’ or customer relationship management, and finally it considers the importance of using technology effectively when designing a CRM system.

The emergence of CRM is a response to a changing global environment, as Court (2004:4) observed twenty years ago, large companies used one of very few television channels to reach 80% of the US population, but the media explosion would require them to advertise across 20 channels to reach the same. Furthermore, brand loyalty is in decline, and product life cycles are shortening: customers are becoming more indifferent to marketing messages since “customers, whether consumers or businesses, do not want more choices. They want exactly what they want, when, where and how they want it – and technology now makes it possible for companies to give it to them” (Pine et al, 1995:104). This belief forms the very basis of the purpose of CRM – that customers have hidden or overt preferences that marketers can reveal by building a learning relationship (Mukerjee, 2007). Thus, it involves not only attempting to interpret the needs of customers based on their buying behaviour but predicting their future needs.

However, there remains no universal definition of CRM – some distinguish between customer relationship management and others argue the M refers to marketing (Gamble et al, 1999) and as a result, different approaches to CRM have been identified.

A strategic approach is a core customer-centric business strategy which aims to win and keep profitable customers whereas an Operational approach focuses on the automation of customer-facing processes such as selling, marketing and customer service. A third approach is analytical in nature: focusing on the intelligent mining of customer-related data for strategic or tactical purposes and finally, a collaborative approach applies technology across organisational boundaries with a view to optimizing company, partner and customer value (Buttle, 2009).

These different approaches when combined, however, do enable firms to explore their relationship with the customer in a more holistic way. Thus CRM is not merely a matter of database marketing, nor just a marketing process of segmenting the market and acquiring customers or any single IT initiative or loyalty scheme (Buttle, 2009). Firms must be driven by a desire to be more customer-centric if they want to compete effectively and thus, CRM can be thought of as “a core business strategy that integrates internal processes and functions, and external networks, to create and deliver value to targeted customers at a profit. It is grounded on high quality customer-related data and enabled by information technology” (ibid, 2009: Loc 852).

A strategy is the long-term direction of an organisation and operates on three main levels. Firstly, it is concerned with the overall scope of an organisation and how to add value to the organisational as a whole, or the corporate-level. Secondly, at a business level: how the business should compete in their particular market. And thirdly, how the components of an organisation deliver effectively the corporate-level strategies in terms of resources, processes and people (Johnson et al, 2014:7).

Therefore, a CRM approach must devise clear objectives to be achieved and which are measureable. Clearly one of those objectives is profit but clearly linked to this is sustainability. Mukerjee (2007) argues that this requires a firm to have four capabilities. The firm must have the technological capabilities to enable the desired functionality for the CRM practice. Secondly, its people must have the skills, abilities and attitudes responsible to generate CRM and implement initiatives. Thirdly, it must focus on the processes that the company has identified to enable the CRM initiatives to be fulfilled, including its transactional interactions with customers, and finally the firm must identify the right approaches to acquire the knowledge and insight into enhancing the customer value by developing stronger and deeper customer relationships with the right set of customers.

Thus ‘finding the right set of customers’ is the starting point for CRM. The IDIC model devised by Peppers and Rogers (1996) suggest firms must first identify who its customers are and build a deep understanding of them. Then, the firm must identify which customers have the most value now and which will offer the most for the future. Following this, the firm must interact will customers to ensure an understanding of customer expectations and their relationship with other suppliers or brands, and finally the firm must customise the offer and communications to ensure the expectations are met.

The next step is building a relationship with the customer. Buttle (2009: Loc 1082) defines a relationship as distinct from a transaction: The latter is a one off, but the former is a more enduring social construct, but emphasises trust and commitment. Thus a CRM system must continually strive for improved customer retention as well as recruiting new customers who have future profit potential. A useful tool for exploring this is customer portfolio management.

A portfolio segments customers into mutually exclusive customer groups which are clustered on the basis of one or more strategically important variables. This allows for different groups to manage in different ways as it recognises differing needs, preferences, expectations, but also enables analysis of revenue and cost profiles. Clusters can by consumer type, e.g. other businesses (B2B) or ultimate consumer (B2C). And each sub-group can be further categorised, e.g. business type, or through psychological, geographical, demographical and behavioural clusters (Jackson, 2015).

Then it is to appraise the value of such groups. It is a mistake to value according to revenue or volume since they take no account of the costs to win and keep the customer, it must be related to profit (Ambler et al, 2004). Such comparisons can then be modelled on a bivariate grid, and then combined again, for example, ‘attractiveness’, or kept separate, and adding a third dimension (trivariate grid approach) for example, assessing against the company and network fit: the operational, marketing, technological, people and other competencies and liquidity a company has, or can develop, to exploit the segment (Buttle, 2009).

Thus the portfolio approach provides a sense of focused decision-making that can take into account a number of variables and classifications and assist with forming the strategy of the organisation from a corporate prospective. It provide the ‘vision’ of the organisation. It follows, then, that the business and operational CRM strategies can then focus on the ‘how’ to implement CRM systems.

This starts with determining priorities to determine the goals and objectives. Chan (2005) believes that in order to successfully build a customer-centric organisation, all the organisational interactions with the target customers must be tracked whether it is at a primary stage, e.g. marketing, during the interaction, or following the interaction. One approach to this is Value Chain analysis.

Porter’s (1985) Value Chain identifies nine ways that company create value, and classifies them as primary or secondary, as the diagram below demonstrates:

Value is created by companies managing each component more efficiently and effectively, and in particular improving the co-ordination of these activities across the business. The competitive position is strengthened by understanding which of these are especially significant to customers, how rare and difficult to mimic these core competencies are, as well as any other factors which support the organisation in achieving its goals (Johnson et al, 2014).

These other factors include understanding the role that the organisational stakeholders, including suppliers, customers, owners, partners and employees contribute (Buttle 2009). He (ibid: Loc 9638) argues that the relationship between suppliers is particularly critical. The organisation, therefore, acts as a link between the suppliers and customers, and for the customer-centric organisation that relationship between the suppliers and customer must de-emphasise the short-term, opportunistic behaviours to maximise immediate profit but rather stress the long-term mutually beneficial gains.

Furthermore, companies need to keep adding value to retain customers in order to sustain competitiveness, and potentially leap-frog rivals. There are several approaches that organisations can enhance customer value, for example, product and service innovation, finding complete solutions, lowering costs, using more efficient technology and removing ‘pain points’ – simplifying or removing those activities which a customer must endure to get the value (Mukerjee, 2007). Shaw and Ivens (2002) believe that it is the latter issue that is the main focus for CRM: understanding the customer experience rather than just the customer.

Firms can make use of a number of methods for investigating customer experience, including ‘mystery shopping’ and experience mapping, a process to chart and improve what happens at every point the customer interacts with the organisation; process mapping (Buttle, 2009). Another approach is to study the customer activity cycle, which involves breaking down the process into basic elements and collecting data at each point in the cycle (Vandermerwe, 1993).

Thus, CRM systems make use of sophisticated analytical tools, and these must be supported by CRM technologies. CRM technology must be able to meet a wide-range of functions, not just to capture data, but assist with assimilating that data into databases, which must be robust, scalable and secure (Mukerjee, 2007). Furthermore, such technologies must be accessible to all stakeholders, meaning they cannot be difficult to navigate or configure. They must also be able to operate across any communication channel and integrate with other systems to contribute to a single view of, and for, the customer (Buttle, 2009) who lists many well-known CRM solution providers, for example Oracle, SAP, salesforce. Com, Microsoft and E.piphany (ibid: Loc 8026).

Therefore, when designing a CRM systems a thorough understanding of the interconnectivity of the customer, the suppliers, the technology, analytical tools and the firm’s strategy is required and needs to be constantly monitored, as the model below demonstrates:

Adapted from: Buttle (2009: Loc 2863)

Earlier in this assignment, ‘finding the right set of customers’ was suggested as the starting point for CRM system design, and thus it is appropriate to return to this in order to stress the importance of the cyclical and interconnectedness of CRM when designing a system. The activity of ‘finding the right set of customers’ means right now and in the future in order to devise an appropriate strategy, and do so profitably. This process is known as data mining. Buttle (2009) defines data mining as “the application of descriptive and predictive analysis to support the marketing, sales and service functions”. Data mining provides answers to questions that are at the heart of CRM and therefore when designing a system, it is important to understand that CRM is a holistic approach.

Another key consideration when designing a CRM system is that it should assist the organisation in its quest to keep abreast of and prepare for changes in current trends. Traditional marketing methods have been challenged in recent years by changing social trends, the reduction of governmental controls, rising income levels, threats from rivals, an increasingly sophisticated customer who has greater access to information (Mukerjee, 2007). All of this, has contributed to the shortening product life cycle, which as substantially increased the pressure on firms to not just acquire customers but retain them.

Any system that is designed must also be implemented. Narver et al (1998) state that customer orientation is a type of organisational culture, therefore before embarking in CRM, the organisational culture must be ready and able to fulfil the CRM objectives. The organisation, or rather the people within it, must be able to respond quickly, and the company able to support, train and hire people with the necessary attitude, skills and abilities in order for them to contribute to CRM. Furthermore, the company may have to radically reconstruction its entire systems, particularly the structural design of the organisation in order to change the culture from resistant to embracing change.

This assignment has explored the notion that CRM is a holistic approach which assists the organisation in not just responding to its environment but to also compete against rivals. Customer relationship management cannot deliver its promised benefits without appropriate customer-related data, which in turn must be analysed using a wide-range of tools in order to meet the strategic, operational, analytical and collaborative CRM purposes. To design a CRM system means putting the customer at the heart of the organisation and adapting and sustainably exploiting all the resources available in order to meet their needs.

References

Ambler, T., Kokkinaki, F. and Puntoni, S (2004) Assessing marketing performance: reason for metrics selection, Journal of Marketing Management, Vol. 20, p 475 – 98.

Buttle, F. (2009) Customer Relationship Management, Abdingdon:Routledge.

Chan, J.O. (2005) Toward a unified view of customer relationship management, Journal of American Academy of Business, Vol 6 (1), p 32 – 38.

Court, D.C (2004) A New Model of Marketing, McKinsey Quarterly, Vol 4, pages 4 – 6

Gamble, P, Stone, M, and Woodcock, N (1999) Customer Relationship Marketing: up close and personal, London: Kogan Page.

Jackson, J. (2015) Marketing, E-bookPartnership.

Johnson, G., Whittington, R., Scholes, K., Angwin, D. & Regner, P. (2014) Exploring Strategy, Harlow: Pearson Education.

Mukerjee, K (2007) Customer Relationship Management, New Delhi: PHI Learning.

Narver, J, Slater, S and Tietje, B (1998) Creating a Market Orientation, Journal of Market Focused Management, Vol 2, p 241 – 255

Peppers, D and Rogers, M (2004) Managing Customer Relationships: a strategic framework, London: Piatkus.

Pine, B, Joseph, I.I, Peppers, D and Rogers, M (1995) Do you want to keep your customers forever? Harvard Business Review, Vol 73 (2) p 103 – 114.

Porter, M (1985) Competitive Advantage: creating and sustaining superior performance, New York: Free Press.

Shaw, C and Ivens, J (2002) Building great customer experiences, Basingstoke: Palgrave MacMillan.

Vandermerwe, S (1993) Jumping into the customer activity cycle: a new role for customer services in the 1990s, Columbia Journal of World Business, Vol 28 (2), p 28 – 66.

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This question will be answered in three distinct sections. In the first section the major differences in the evaluation of goods and services will be outlined and in the second section the reasons behind these differences will be examined further. In the third and final section it will be important to concentrate upon the impact that the differences between goods and services will have upon concept evaluation techniques and/or methods. Throughout this investigation we will refer to the case of the Concept Development Corporation and consider this case study in order to further elucidate upon this investigation.

It is important to begin this investigation by answering the first question, namely what are the major differences between the evaluation of tangible goods (like toys) and services? The vast majority of money in an economy is spent on either goods or services and therefore it is important to be aware of the differences between the two concepts. Firstly of all, goods are an entity that can be consumed by the customer. An example of a good is a book or food. In the case of a book, the customer can consume the product on many occasions, in the case of food only once. However, both books and food are united in the sense that they are tangible goods that a customer can use. It is the tangible nature of goods that is often used in order to define goods and as Adil points out, “goods are real things that people can touch and use” (Adil 2006: pp.4). Services, on the other hand are defined as something that a person does for another, for example, fixing another person’s car or completing some handiwork in the house would be classed a service. In contrast to goods, services tend to be defined by their intangible nature, because the product one receives is not something one can physically grasp, but rather it is the provision of something that one needs by another person. As Berry points out, “whereas goods are first produced, then sold and then consumed, services are first sold, then produced and consumed simultaneously” (Berry 1985: pp.34). It is clear that there are important conceptual and practical differences between goods and services. Kerr also focuses upon the intangibility of services as their defining feature and argues that as the ubiquitous haircut example illustrates, services tend to have an intangible quality and often (though not always) require the physical presence of both client and service provider” (Kerr 2008: pp.151). However, the difference between tangible good and intangible services are not the only theoretical and practical differences between the two concepts. Firstly, services are often an input into the production process, as the examples of telephone services or accounting illustrate. Due to the fact that such input services can be vital to the development of certain parts of the economy, one could argue that without adequate input service provision certain parts of the economy may never grow at all. “Countries with inefficient service provision, thus tend to have lower productivity in the manufacturing, agriculture and government sectors” (Kerr 2008: pp.151). Adequate service provision can, therefore, at times be vital in developing an economy in a manner that goods cannot be. Another important difference between goods and services is that “services tend to be differentiated products, whereas some goods are homogenous in nature and other goods are differentiated” (Kerr 2008: pp.151). As one can see, therefore, there are a number of important differences between the evaluation of goods and services.

It is important now to move on to discuss why these differences between goods and services exist in the first place. As has already been noted above, the major difference between goods and services is the fact that goods are tangible products whereas services tend to be intangible in nature. The differences between the two concepts is clearly illustrated by the example of the Concept Development Corporation. Crawford and Di Benedetto ask the reader to imagine a scenario in which a group of talented and creative friends decide to embark upon a business venture in which they can put their skills to effective use. “So, they quit their jobs, pooled their savings, rented a small, three-room office, hired a couple of people, coined the name Concept Development Corporation and started serious work” (Crawford & Di Benedetto 2006: pp.189). They quickly realised that they were far more effective at creating ideas than evaluating them and they came up with two product ideas that exemplify the differences between goods and services outlined above. The first area in which they had a creative idea was regarding a product that can be defined as a good and their idea was to create toys for children, particularly toys that contained some education value for the children that played with them. “Their strategy was to develop unique toys that required little up-front expenditures. Most toys would have some game or competitive aspect, be it educational, and involve paper, colour, numbers and the like” (Crawford & Di Benedetto 2006: pp.190). The second area in which the group of friends had a business idea was in the field of writing and this product is best defined as a service. “These services primarily involved designing and writing instruction sheets for area firms (training manuals, copy for package inserts, instruction signs – anywhere words were used to instruct people in doing things)” (Crawford & Di Benedetto 2006: pp.190). It is clear, therefore, from examining the two types of products developed by the Concept Development Corporation that one product is best defined as a good and the other as a service and that a number of important differences exist between the two products.

In the final section it is important to consider the consequences of the differences between the two products of the Concept Development Corporation on concept evaluation techniques and/or methods. It is clear, that, due to the fact that goods and services are different in nature, different techniques must be employed in order to evaluate the two concepts. For example, in order for a customer to evaluate the extent to which a good is soundly constructed, they may want to stress-test the product to ensure that it can withstand external pressure inflicted upon it. This type of test would not be applicable to a service. Therefore, due to the fact that goods a re tangible in nature and services tend be intangible, it is far easier to test the toys that the Development Corporation will produce than to test the writing service of the Corporation. As Berry states, “most services contain few search properties and are high in experience and credence properties, making their quality more difficult to evaluate than quality of goods”

(Berry 1985: pp.40). On the other hand, another study has found that customers use different criteria in order to judge the quality of goods and services. Whereas customers are more likely to trust their own judgment or those of sales people when it comes to products, one study found that “buyers relied heavily agreed or strongly agreed with the statement that there is upon personal sources of information in evaluating services, a difference in the purchasing of goods and services” (Jackson 1995: pp.103). It seems, therefore, that the evidence suggests strongly that goods are more readily evaluated than services and Hartman argues that this is the only effective criteria that can used to distinguish in the evaluation of goods and services. He states that “goods were distinguished from services only on the ease of evaluation dimension” (Hartman 1993: pp.10).

In conclusion, it has become evident during this study that a number of fundamental differences exist between goods and services. Goods are tangible in nature and can be consumed once or multiple times by the customer whereas services tend be intangible in nature. This fundamental difference between the two products has been clearly reflected in the experiences of the Concept Development Corporation, which created toys for children as well as a writing enterprise. The toys for children were a clear example of a good whereas the writing enterprise was a clear example of a service. It is likely that the Concept Development Corporation would have far more success in evaluating the toys as a product, because the studies cited in this investigation suggest that evaluating goods is a simpler task than evaluating services. The Concept Development Corporation will have to bear the differences between goods and services in mind when developing their products further.

Bibliography
Adil, J., 2006. Goods and services. Minnesota: Capstone Press
Berry, L., 1985. Problems and Strategies in Services Marketing. The Journal of Marketing, 49 (2), pp.33-46
Crawford, M., Di Benedetto, 2006. New Products Management. London: McGraw-Hill Publishing
Hartman, D., 1993. Consumer Evaluations of goods and services: implications for services marketing. Journal of Services Marketing, 7 (2), pp.4-15
Jackson, R., 1995. An Empirical investigation of the differences in goods and services as perceived by organisational buyers. Industrial Marketing Management, 24 (2), pp.99-108
Kerr, W., 2008. Handbook on International Trade Policy. Cheltenham: Edward Elgar Publishing

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This essay will briefly describe the development of services thinking within the Operations Management paradigm. The discussion will subsequently identify differences between manufacturing and service organisations. The first part of the discussion will draw to a close with a brief mention of hybrid manufacturing/service organisations.

The second part of the essay will outline the unique challenges involved in marketing and managing services, borrowing from the academic literature belonging to the field of service marketing. The key characteristics that derive the unique challenges in marketing and managing services will be described and suggestions that ameliorate these challenges will be brought into the discussion. The conversation will be brought to a close with a short review of the field of service marketing, reflecting upon the role of the key service characteristics.

Johnston (2005) describes the evolution of services thinking through three stages encompassing a period including the 1980s and 1990s. Conventional wisdom began to embrace a distinct role for services within an Operations management paradigm in the 1980s (Johnston, 2005: 1278). Early academic efforts were restricted to the description of services juxtaposed with manufacturing in an attempt to confirm the importance of services and promote theory building (Johnston, 2005: 1280-1281). Having established the role of services within the field of Operations Management, academics focused upon theory development and empirical testing (Johnston, 2005: 1281-1285).

Debate surrounding the emerging role of services within the field of Operations management will have inevitably produced contradictions. Perceptions of the differences between manufacturing and service organisations varied from no discernible differences (Lawrence, 1989) to rigid dichotomies based upon types of organisational behaviour and characteristic outputs (McDonald, 1994: 6; Troy and Schein, 1995).

McDonald (1994) describes the theoretical differences between manufacturing and service organisations from internal organisational and output perspectives.

The distinction between the two types of organisation based upon differences in internal organisational arrangements focuses upon the transformation process, employee skills/knowledge and the status of results (see Table (1) below).

Table (1): Internal Contrasts between Manufacturing and Service

ManufacturingServiceProduction is capital- or equipment-oriented
Technical skills dominate
Training will dominate
Production results are variable
Production is people-oriented
Interpersonal skills dominate
Education will dominate
Service results are subject to more variation

(McDonald, 1994: 6)

McDonald’s (1994: 6) theoretical comparison of the output of the two types of organisation further develops the notion of two separate operational systems (see Table (2) below).

Table (2): Differences between products and services

ProductService
The customer receives a tangible product in the form of goods which can be seen and touchedThe customer receives an intangible service, which may or may not satisfy
The goods remain with the customerServices are consumed at the moment of delivery
The production and delivery of goods are usually separatedProduction, delivery and consumption of services are often at the same time
Few producers deal with customersMost producers deal with customers
The customer is rarely involved with productionThe customer is often closely involved with production
Goods can be servicedServices have already been consumed and cannot be serviced
Goods are subject to liability, but the producer has more opportunity to ameliorate the effect on the customer and this the financial penaltyServices which do not meet the requirements are difficult to replace – the financial impact is usually total
Goods can be purchased to store in inventory to satisfy the customer’s needsServices cannot be stored, but must be available on customer demand
Goods can be transported to the point of saleSome services are transportable (e.g. information through communication lines) but most require the transportation of the service provider
The quality of goods is relatively easy for customer’s to evaluateThe quality of services is more dependent on subjective perception and expectation
Goods are often technically complex – the customer therefore feels more reliant on the producer The quality of services is more dependent on subjective perception and expectationServices appear less complex – the consumer therefore feels qualified to hassle the producer

(McDonald, 1994: 6)

The use of classification to differentiate between manufacturing and service organisations is an important academic activity, which provides a basis for theory development and empirical testing. Despite the utility of typologies, they can easily be misinterpreted by practitioners and more importantly, misrepresented by academics. A typology is not intended to represent an empirical reality, but rather an ideal reality that serves as a basis for the investigation and description of empirical reality. The danger occurs in any field of study when a theoretical ideal is misrepresented as a generalised empirical fact, which is essentially the problem of reification.

Contemporary studies of manufacturing and service organisations broach the discussion of organisations that combine product and service offerings (Gebauer et al, 2008 and Martinez et al., 2010).

Gebauer et al. (2008: 219-220) provide insight into how manufacturers experiencing difficult competitive conditions could exploit services to sell more products, achieve differentiation of their product portfolio and increase the likelihood of higher and more stable financial returns.

Martinez et al. (2010: 450) claim that there is an increasing tendency for manufacturing companies to integrate product and service offerings rather than focus exclusively on products. Their argument is based upon the assertion that manufacturing systems are relatively easy for competitors to imitate and that there is increasing evidence that manufacturers are integrating their products with services to achieve sustainable competitive advantage.

Although the emergence of service thinking within the Operations management paradigm was based upon a dichotomous view of manufacturing and service organisations, a trichotomy that includes mixed manufacturing/service organisations more accurately reflects the spectrum of modern organisational configurations.

The preceding paragraphs discussed the theoretical emergence of the service organisation. Management Discourse is dominated by theoretical polarities, which focus upon perceived differences between manufacturing and service organisations. These differences stem from the characteristics of their respective outputs. The unique challenges faced by service organisations in the marketing and management of their offering has been discussed by numerous academic studies. The extant theoretical hegemony in the academic literature propounds the view that the challenges posed by service offerings originate in their four principal characteristics (Ojanen et al, 2009; Tuzovic, 2009; Moeller, 2010; Jaaskelainen et al, 2012):

Intangibility – services do not exist in material form and deny the customer any physical interaction. This is a challenge for marketing, because without an object that can appeal to our senses, “…customer risk perceptions are increased and quality is more difficult to assess than for manufactured goods (Winsted and Patterson, 1998: 295).” According to Awara and Anyadighibe (2014: 35), “Intangibility, is the critical goods-services distinction from which all other differences emerge”;

Heterogeneity – a large number of service offerings have a high degree of human input, which creates managerial challenges in the achievement of a uniform, repeatable customer experience (Awara and Anyadighibe, 2014: 35 and Winsted and Patterson, 1998: 295);

Inseparability – the nature of service transactions often demands the presence and interaction of the customer. Following Awara and Anyadighibe (2014: 35), it is “…simultaneous production and consumption which characterises most services.” The proximity of the customer makes the production of services highly interactive, demanding high levels of service customisation and tailored marketing (Winsted and Patterson, 1998: 295);

Perishability – services cannot be stored, which can lead to difficulties in balancing supply with demand (Awara and Anyadighibe, 2014: 35).

The four basic service characteristics outlined above are commonly referred to as IHIP characteristics in the service marketing literature and the roots of their existence go back as far as the 1970s (Parasuraman et al, 1985; Groonroos and Ravald, 2011).

In response to the unique challenges represented by the IHIP characteristics, Booms and Bitner (1981) in Awara and Anyadighibe (2014: 36) recommended that the 4Ps marketing mix (Product, Place, Pricing and Promotion) be extended to include:

People – “…all people directly or indirectly involved in the consumption of a service…”(Awara and Anyadighibe, 2014: 36);

Physical evidence – “…the environment in which the service is assembled and in which the seller and customer interact, combined with tangible commodities that facilitate performance or communication of the service.”(Awara and Anyadighibe, 2014: 36); and

Process – “…procedures, mechanisms and flow of activities by which the service is delivered…”(Awara and Anyadighibe, 2014: 36).

In addition to the service marketing mix, Awara and Anyadighibe (2014: 37) describe criteria that could be used as bases for a differentiated service offering: Offer; Delivery; Image; Service Quality.

IHIP characteristics are generally treated axiomatically within the management discourse and a lack of critical reflection upon their contribution to knowledge is probably indicative of the hegemony of epistemological dogma (Hultman and Ek, 2011). Nevertheless, there are signs of interest in critically re-evaluating service marketing and management as a field of study.

Moeller (2010) identifies the lack of critical treatment applied to the IHIP characteristics. However, instead of dispensing with IHIP and investigating the possibility of new characteristics, the study focuses upon the re-evaluation of IHIP through the lens of the FTU (Facilities/Transformation/Usage) framework (Moeller, 2010: 360-361). The FTU framework is employed to dismantle IHIP and apply it to different aspects of a service offering (Moeller, 2010: 365). The study claims to reveal the applicability of components of IHIP in their service context rather than the use of IHIP as representative of service marketing per se (Moeller, 2010: 365). However, the ability of Moeller (2010) to take a reification (IHIP), break it down into components and claim that it is more relevant in its component parts or groups of those component parts is inconsistent. The characteristics coupled with theoretical aspects of service do not escape the problem of IHIP applied as a single entity.

Hultman and Ek (2011) critically evaluate the philosophical underpinnings of the field of service marketing. An important part of their discussion is the inclusion of social philosophy in an evolving discourse to describe service marketing as an essentially social process. The IHIP characteristics are subjected to criticism and reduced to an irrelevance (Hultman and Elk, 2011: 173). The authors agree with the critics of IHIP, asserting that they “…find these descriptors impossible to use for defining services and explaining the difference between services and goods.”(Hultman and Elk, 2011: 173). They also resist the current tendency in the field of service marketing to replace one paradigmatic cage with another, their project being occupied with the broadening of the study of service marketing rather than its continued limitation.

The ability of Hultman and Elk (2011) to realise the ambition of opening up the field of service marketing would depend upon the willingness and ability of incumbent researchers to embrace the project. An increase in interest shown in the field by critical management theorists would also have the affect sought by the authors.

The two studies used to demonstrate critical contributions to the field of service marketing originate from different epistemological beliefs, but they both achieve similar results. Although Moeller (2010) did not intend to undermine IHIP characteristics, it achieved this end almost as successfully as Hultman and Elk’s (2011) dismantling of IHIP characteristics. As the traditional view contained in the field of service marketing would suggest that the unique challenges in marketing and managing services derive from IHIP characteristics, has the invalidation of IHIP characteristics left the essay question unanswered? Conventional wisdom from service marketing would probably respond no, the question has been answered from the stock of knowledge. Whereas opponents of the conventional wisdom would probably argue that the field has never possessed the ability to effectively answer the question.

This essay has outlined the differences between manufacturing and service organisations against the backdrop of service theory development in the field of Operations management. A representation of manufacturing and service organisations as polar opposites, typical of the conventional wisdom in Operations Management, was provided. The portrayal of manufacturing and service organisations was extended through the discussion of mixed manufacturing/service organisations, encouraging the creation of a trichotomy to more effectively depict theoretical types.

The unique challenges in marketing and managing services were discussed with the support of evidence from the field of service marketing. The IHIP characteristics of services were introduced and suggestions for handling marketing and managing challenges derived from the IHIP characteristics were included. Critical contributions to the field of service marketing were summarised for the purpose of developing the discussion of IHIP characteristics and their relevance.

References

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Groonroos, C. and Ravald, A. (2011). Service as business logic: implications for value creation and marketing. Journal of Service Management. Vol. 22 (1): 5-22. [online] Accessed at: https://www.deepdyve.com/lp/emerald-publishing/service-as-business-logic-implications-for-value-creation-and-G07NwBivq

Hultman, J. and Ek, R. (2011). Can there be only one? Towards a post-paradigmatic service marketing approach. International Journal of Quality and Service Sciences. Vol.3 (2): pp. 166-180. [online] Accessed at: https://www.deepdyve.com/lp/emerald-publishing/can-there-only-be-one-towards-a-post-paradigmatic-service-marketing-Y7dJ6L8Ttz?articleList=%2Fsearch%3Fquery%3DIHIP%2Bcharacteristics

Jaaskelainen, Laihonen, H., Lonnqvist, A, Palvalin, M. and Sillanpaa, V., Pekkola, S. and Ukko, J. (2012). A contingency approach to performance measurement in service operations. Measuring Business Excellence. Vol. 16 (1): pp.43-52. [online] Accessed at: https://www.deepdyve.com/lp/emerald-publishing/a-contingency-approach-to-performance-measurement-in-service-jw2hN5WFOn?articleList=%2Fsearch%3Fquery%3DIHIP%2Bcharacteristics

Johnston, R. (2005). Service operations management: return to roots. International Journal of Operations & Production Management. Vol. 25 (12): pp. 1278-1297. [online] Accessed at: https://www.deepdyve.com/lp/emerald-publishing/service-operations-management-return-to-roots-vsgfLtpMjt/1

Lawrence, P. (1989). Manufacturing or Services After 1992? Economic Affairs. Vol. 9 (4): pp. 14-17. [online] Accessed at: https://www.deepdyve.com/lp/wiley/manufacturing-or-services-after-1992-T53SsLh5ql

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McDonald, J. (1994). Service is Different. The TQM Magazine, Vol. 6 (1): pp. 5-7. [online] Accessed at: https://www.deepdyve.com/lp/emerald-publishing/service-is-different-HcpInUSN2w

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Ojanen, V.; Xin, Y. and Chai, K-H. (2009). Innovation management in technology-related knowledge-intensive business services. International Journal of entrepreneurship and innovation management. Vol. 10 (2): pp. 162-177. [online] Accessed at: https://www.deepdyve.com/lp/inderscience-publishers/innovation-management-in-technology-related-knowledge-intensive-yjEI8G1Oi0/1

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Introduction

The emergence and growth of small to medium enterprises (SMEs) globally has generated increasing interest into research on how the strategy and tactics of these companies differ from or overlap with general marketing theories, as well as theories designed for multinational corporations (MNCs) (Bridge, O’Neill, & Cromie, 2003, p. 123). Through definition, SMEs benefit from less financial and human resources than their large corporate competitors, yet some of these companies managed to gain a competitive position in their respective industries (Chaston & Mangles, 2002, p. 67). With less financial resources dedicated to marketing and significantly smaller marketing teams, SMEs revolutionised areas of marketing through the need to find more creative ways to gain a good position in the market (Burns, 2007, p. 259).

Whilst marketing in the traditional sense through extensive paid for advertising campaigns and price competitiveness requires extensive funds, SMEs have a need for more cost effective campaigns with tangible results, as their ability to invest in marketing initiatives is significantly lower (Storey & Greene, 2010, p. 33). In order to respond to this practical need, an increasing number of scholarly research projects are focusing on tracing the successful strategy of SMEs that thrive in conquering a significant market share (Knight, 2000, p. 13). The impact of the perceived success of small companies has generated a paradigm shift in the entrepreneurial world, hinting at the fact that a well executed vision counts more than a company’s cash flow. At the same time, the influence of the internet and globalisation has made its impact felt on the ability of SMEs to advance beyond their capability to serve local customers (Dholakia & Kshetri, 2004, p. 311).

Often opting for the most effective means of marketing, SMEs have indeed become the role models of other companies in their attempt to communicate with and gain the loyalty of customers (Lu & Beamish, 2001, p. 567). As such, this essay is analysing the relevance of standard marketing practice to SMEs and also the innovative solutions employed by small or medium businesses and their impact on the academic knowledge regarding marketing. Drawing a parallel between available scholarly knowledge and practice exemplified through the successful marketing initiatives of SMEs, this essay attempts to draw a clear conclusion in regards to the emerging paradigm shift in marketing.

Entrepreneurship and organisational structure in SMEs

Entrepreneurs usually become owner-managers of SMEs through launching their business idea and gaining the necessary funding for it from grants, loans or self-funded initiatives (Stokes & Wilson, 2010, p. 35). Due to the fact that the entrepreneur is in charge of all the decision making of a firm, SMEs are often faced with operational and strategic challenges that their large corporate counterparts do not experience (Stokes, Wilson, & Mador, 2010, p. 194). On the other hand, SMEs have the advantage of an organisational structure that presents closer working relationships within the company, which can aid the business to become an industry leader (Chaston, 2000, p. 166). To start with, setting the vision of a company and attempting to inspire all members of a business to share the views of the senior management is a challenging task (Southon & West, 2002, p. 94). More often than not, large corporations struggle with the resonance of their vision throughout the entire corporation more than small businesses, for obvious reasons. The hierarchical management structures often met in MNCs are inexistent in small corporations, where the success of the team is seen as a result of equal effort from all those involved in the business (Adler, 2001, p. 220). As such, the contact between the leaders of the business and the end employees is more common in SMEs (Bolton & Thompson, 2000, p. 82).

The leaders and employees of a business are the first and sometimes most important brand ambassadors of a company (Morhart, Herzog, & Tomczak, 2009, p. 122). The relationships within a company are usually reflected in the behaviour of employees with external stakeholders and a strong corporate reputation usually stems from the cohesion inside a company (Kuhn, 2008, p. 1227). Close contact with all other members involved in the operations of a firm and constant communication leads to a strong vision and innovative ideas, due to constant exchange of information, often in face to face settings (Crotts & Turner, 1999, p. 116). On the other hand, the complex and formalised communication matrix that can be identified in large companies may inhibit the exchange of views and ideas and may lead to the loss of meaning of the values and vision of a firm, also inhibiting innovation (Dougherty, 1992, p. 180).

Market research capabilities

Uncovering the demands and opportunities of the market can be a complex issue, hence why large corporations delegate this task to teams within the research and development (R&D) function of the company (Von Zedtwitz & Gassmann, 2002, p. 573). The subtleties involved in the market research, including tactics of audience profiling and anticipation of demands require specific skillets (Schindehutte, Morris, & Pitt, 2009, p. 93). As already mentioned, SMEs have significantly lower human resources that they can rely on for the purpose of market research and development. As such, they either rely on commonly available market research released by market research companies, due to its accessibility. However, this does not allow SMEs to gather the knowledge necessary to respond to relevant market demand in a quick manner. In addition to this, publicly available information can also be accessed by similar competitors, therefore not offering any of the companies using it the competitiveness of innovation (Wong, 2005, p. 270). Traditional market research conducted through expensive face to face, phone or post methods are more accessible to large corporations that can invest the capital in these initiatives. The internet, particularly social media platforms have opened up new methods, which are much cheaper and arguably more effective for conducting market research (Deakins & Freel, 2009, p. 143).

Granted, large corporations can still use an effective mix of the old and new methods, which would offer them a competitive edge over SMEs, but the depth of the research is only relevant when it can be effectively put into practice (Greenhalgh, Robert, Macfarlane, Bate, & Kyriakidou, 2004, p. 603). The ability to analyse data obtained via any market research method and turn this into relevant information for marketing purposes is still closely linked with the talent available within a company, and once again the MNCs have an edge over SMEs. Nonetheless, the flexibility of operations of SMEs is the core advantage of these companies over MNCs, as they can easily modify products and services to suit the needs of their consumer (O’Regan, Ghobadian, & Gallear, 2006, p. 35). In the toy industry for instance, the product offerings of smaller businesses translates into significantly lower costs incurred by changes, than in the case of large corporations who have are dealing with higher volume of products.

Opportunity marketing

In terms of market research and responsiveness, one of the advantages of SMEs is the close ties they can develop with local communities, making them stronger as competitors to large corporations in specific regions (Perrini, Russo, & Tencati, 2007, p. 290). The debate regarding localisation of international businesses in specific regions is a result of the perceived influential power of SMEs, as the flexibility of smaller businesses to take advantage of the opportunities presented by each specific market is significantly higher. Whilst global businesses rely on the recognition of brand name and reputation, SMEs rely on the convenience they can offer in the market due to proximity of shops or familiarity with the demands of the local customer base (Stokes, 2002, p. 85).

In regards to opportunity marketing, SMEs can build a competitive edge for themselves through responding to immediate needs of local consumers due to the flexibility in operations that they benefit from (Rae, 2007, p. 72). As such, distributors of toys in the UK, for instance, can take advantage of important events in the local community better than MNCs, as they will be aware of local community events for children faster than the global brands present in the area. The low capital requirement for market entry in the toy manufacturing industry is an advantage for the entrepreneurial initiatives in the industry (Ecorys Research and Consulting et al., 2013, p. 36). The multitude of options for supply chain management in the UK, through local manufacturing facilities or import of products from overseas is luring for entrepreneurs that can identify a market need in a particular area of the industry or a specific region (Kirby, 2003, p. 269). Although the price competitiveness of large toy chains such as Toys R Us is quite a high threat to the entry of SMEs in this industry, local businesses can take advantage of their knowledge regarding the more subtle needs of the consumers in their attempt to win over the market share (Michman & Mazze, 2001, p. 201).

Positioning is paramount for the success of smaller businesses over their multinational competitors, and the ability to take advantage of proximity of schools is an important factor in the success of SMEs (Patten, 2001, p. 14). Whilst MNCs have an intrinsic need to find or build large stores to accommodate their extensive product range, SMEs can take advantage of strategically placed boutique stores in the vicinity of areas where the footfall of customers can make a significant difference to their financial returns. The product offerings of SMEs can be tailored to suit the needs of their local customer base and individuals with significant entrepreneurial talent will identify the gap in the market which is not fulfilled by MNCs (Davenport, 2005, p. 683).

Innovation and word of mouth marketing

The perceived risks associated with innovation may represent a higher threat for SMEs, due to their investment power, but the focus on niche product offerings could significantly reduce this risk. Therefore, innovation in the context of small business ventures needs to be seen as the ability to respond to the needs of a niche consumer base, usually referring to a local consumer base and their immediate need (Freel, 2000, p. 27). Whilst MNCs in the toy industry have to balance out the needs of a large consumer base with their ability to market new products, due to the need to respond to the desires of all of their customers, niche small businesses can venture into offering tailored products without endangering their strategy and operations (Carson, Cromie, McGowan, & Hill, 1995, p. 54).

In addition to this, the marketing of large corporations is usually concerned with the ability of their messages to appeal to a large consumer base, whilst smaller businesses can easily tailor their marketing tactics to appeal to a specific consumer group (Dalgic & Leeuw, 1994, p. 39). Through the ability to take advantage of specific needs and wants of local consumers, SMEs have higher chances of being featured in local press or radio, therefore being able to develop more lucrative public relations initiatives. For example, entrepreneurs in the toy industry can identify important school events that they can sponsor, therefore gaining important exposure for their brand and becoming known to the relevant consumer base. Research of these opportunities is not easily accessible to MNCs, therefore leaving a gap in the market for SMEs to gain popularity over the well established chain stores. These initiatives increase the opportunity for SMEs to take advantage of both opportunity marketing and word of mouth marketing.

Children and their parents are the target consumer groups of the companies in the toy manufacturing industry and whilst these groups are sensitive to advertising, there is still significant reliance on impulse buying for these products (Seiter, 1992, p. 240). As a result of this, even though SMEs are less likely to have the funds necessary for investment in standard marketing tactics such as extensive ad campaigns on TV channels, this is not necessarily seen as a barrier in the toy industry. The ability to reach the customer in person and persuade them to make a purchase is still important in the toy industry and SMEs have the added advantage of proximity to the customer and the chance to reach out into the community at key moments, when the need for their products increases (Brown, 1990, p. 180).

The importance of CSR

Entrepreneurs in the toy industry must realise the primary importance of safety and quality of the products sold (TIE, 2013, p. 2). Increasing concerns of outsourcing of manufacturing and testing to production facilities in developing countries have impacted on the reputation of MNCs. Therefore, the ability to demonstrate a commitment to local or national manufacturing can significantly impact on the perception of customers in regards to the quality of products and the overall image of the small companies (Spence & Schmidpeter, 2003, p. 93). This can diminish the impact of pricing tactics used by MNCs, as customers are willing to pay premium prices for products that they perceive as safe and durable for their children (Trudel & Cotte, 2009, p. 62).

Therefore, instead of seeking to compete with their large corporate opponents from a price perspective, SMEs in the toy industry should focus on quality of products instead and demonstrate that their corporate social responsibility (CSR) abilities are significantly higher than those of mass manufacturers of toys (Perrini, 2006, p. 307). The profitability of SMEs can therefore be increased by persuading customers to pay premium prices that reflect the added value of locally sourced products and services. In the context of SMEs, effective marketing of products demonstrates that the purchase of a product is part of a cycle that enables the entire economy of a region to prosper (Du, Bhattacharya, & Sen, 2010, p. 10). Managing to demonstrate how a customer’s investment impacts on the employability of the region is paramount in the success of SMEs over MNCs, through effective communication with the consumers that outlines how the profits of a company are invested back into the larger economy of a region.

Conclusion

Whilst this paper does not ignore the issues faced by SMEs due to the significantly lower financial and human resources available to them, it outlines the strategies and tactics to overcome any of these issues. Through effective marketing tactics that take into account the needs of local customers, as well as the ability to demonstrate how quality and safety is reflected in the premium pricing of toys sold by SMEs in the UK, the smaller entrepreneurial initiatives of individuals can have a significant competitive edge over the MNCs present in the region. Developing lucrative partnerships with local schools and media outlets can impact on the success of SMEs through the ability to create a stronger reputation of the company and meaningful relationships with the targeted consumers.

To conclude, whilst there are significant distinctions between SMEs and MNCs, there is not an innate need to reinvent the wheel in terms of marketing, only to tailor the tactics to the abilities and needs of a company. Whilst innovation, opportunity, word of mouth and CSR are equally as important to both types of companies, the manner in which the leaders of the companies can take advantage of these marketing drivers is significantly different. The success of SMEs is possible through focusing on smaller scale research of needs and wants of consumers and the ability to develop innovative solutions to respond to these without being hindered by the price competitiveness of MNCs.

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Why consumer behaviour and an understanding of such processes is useful from the perspective of the marketer

Introduction

Marketers in today’s business environment are presented with the particular challenge of circumventing conflicted messaging, over-saturation of marketing initiatives, and consumer hesitation and guarded behaviour in order to achieve their objectives of enhancing long term brand loyalty and encouraging product purchases. While there are various environmental stimuli which may influence consumer behaviour, the most significant affectation comes from psychological influences associated with marketing communication and personal interpretation of brand and product value. By expanding this value beyond base level interpretation, marketers are able to influence consumer behaviour and redirect purchases over extended periods of time. In order to achieve such standards, however, it is essential that marketers understand what behaviour may be influenced and in what ways this influence may be affected. Undeniably, the product itself has particular importance in this process; however, the result of a product-based marketing campaign may not demonstrate the value desired by a diverse consumer population. Therefore, the achievement of key consumer development and loyalty objectives is based on investigation and analysis of past, present, and future consumer behaviour.

This investigation seeks to expand upon the relationship between consumer behaviour and marketing, highlighting those mechanisms that can contribute to more effective marketing practices. A variety of academic theories and empirical studies have been compiled and analysed over the following section and models of consumer behaviour analysis and marketing programme development will be highlighted. Ultimately, conclusions will be drawn in which effective marketing is directly affected by consumer behaviour, and more effective means of communication and consumer encouragement are the direct result of cognitive stimuli. From both scientific and market perspectives, the ability to influence consumer behaviour is directly reliant upon an understanding of the intrinsic and extrinsic motivation which the majority of consumers within a given market or business sector exhibit. By modelling such motivations and establishing value associated with a particular brand or product, marketers will be able to sustain consumer loyalty over the lifecycle of a product and compete more effectively within marketplaces that are highly saturated.

Consumer Behaviour

A milestone definition of marketing by Peter Drucker (1999) would firmly establish the relative value and importance of consumer behaviour in effective marketing, arguing that marketing is ‘the whole business seen from the point of view of its final product, that is, from the customer’s point of view’ (58). Marketing, therefore, becomes a composite of both pre-purchase consumer behaviour interpretation and forecasting and post-purchase behavioural analysis. In this way, a rapid increase in consumption over a short period of time may be viewed as an opportunity to develop a broader, loyal consumer base and marketing tactics must change to accommodate such an opportunity. While early marketing efforts were based on communicating new and diverse products with a growing class of discerning consumers, Raaij et al. (2001:60) argue that marketing communication has since been repurposed in order to establish brand loyalty and reinforce consumer perceptions of value. In effect, marketers attempt to influence consumer behaviour through their presentation of a strategic, targeted marketing message, establishing the unique value of a given product or brand that will ensure future purchasing loyalty.

In his empirical analysis of consumer behaviour and its affectation by marketing initiatives, Foxall (1992:397-98) argues that marketing interventions provide reinforcement of the anticipated result or features of a given product while simultaneously modifying the scope of consumer settings (i.e. purchase intent, brand loyalty, etc.). Such reinforcement is affected through a variety of channels including product features, strategic delays in provision, and modulation of information exchange and messaging (Foxall, 1992:398). Ultimately, the marketer assumes responsibility for a psychological connection between a particular brand or product and the consumer, strategically directing communications in order to improve a cognitive connection that can potentially influence consumer behaviour. Foxall (1992:398) addresses key concerns surrounding the effectiveness of such communication, but indicates that consumer behaviour has a direct impact on marketing strategies, the result of a measurable need for reinforcement and connection.

As the internet age continues to challenge marketers to consider more diverse relationship formats in the online environment, behavioural analysis has quickly become an effective means of programme development and modulation. From trust to satisfaction to site navigability, Taylor and Strutton (2010:954) have compiled widespread academic evidence that investigates various behavioural features that are frequently evaluated by marketers seeking to enhance their online presence and consumer loyalty. Consumer satisfaction, for example, was found to have a direct impact on trust and brand loyalty in addition to the perceived value of a given product, potentially influencing future purchasing decisions or commitments (Taylor and Strutton, 2010:954). While such concerns are more traditional in nature, their applicability within an online purchasing environment is undeniable, and without marketer intervention and a strategic reinforcement of value, there is a potential that future purchases will be impacted. Yet such interventions require a concise and accurate understanding of consumer behaviour in order to effectively provide value-oriented reinforcement and messaging that is directly related to consumer value systems.

Aside from the electronic nature of online consumption, the diversification of communication channels and its impact on consumer behaviour in the past decade has had direct and remarkable influences purchasing decisions, brand loyalty, and consumer commitment. Anton et al. (2007:515) argue that as consumer access to information, feedback, and peer reviews has increased, consumers have increasingly become intolerant to inconsistency and mediocrity, the result of exposure to choice. Essentially the consumer right to choose continues to impact behaviour and future purchasing considerations, as substitute products and competitive messaging have a direct impact on interpretation and loyalty. By communicating added value and fostering a stable and sustainable relationship, Anton et al. (2007:516) suggest that marketers are able to influence consumer switching behaviour and restrict the influence of competitive initiatives. The affectation provided by strategic marketing communication is essentially a direct link to consumer preferences and purchasing models, as psychological affectation becomes a means of sustaining a particular, idealised behaviour.

The role between consumer behaviour and marketing is based on adaptation, a concept that is oftentimes difficult to implement within a diverse, competitive environment as firms attempt to strategically manage resources and reduce corporate excess. Thrassou and Vrontis (2009:499) argue that the consumer behaviour is the most valuable information conduit for marketers as they attempt to navigate market changes, competitive influences, and the consumer buying cycle. From channel preferences (i.e. television, magazine, etc.) to message content, the consumer response to various initiatives should be predictable, a function of extensive market research and behavioural analysis (2009:510). Marketing communications, as a strategic, value-added enterprise for modern organisations has shifted in its purpose, embracing the demonstration and modelling of product value within the context of consumer preferences, as opposed to past models of feature presentation, differentiation, etc (2009:516). Essentially, the role of the consumer has become one of exchange and communication, providing marketers with information necessary to evolve their messaging, models, and marketing channels.

While there is inherent value in strategic messaging, the targeted nature of such communication must be linked to key stimuli which inspire consumer behaviour. Chiu et al. (2005:1682) evaluate such phenomena from a more scientific perspective, suggest that the stimulus-organism-response (SOR) paradigm provides evidence the underlying psychological response that can be expected from consumers. Essentially, the relational bonding activities by a firm (stimulus) can have a measurable impact on consumers’ value perceptions (organism), whereby their purchase behaviours may be influenced (response) (Chiu et al., 2005:1682). Within such a model, it is evident that the consumer perception of value has a direct influence on their subjective response to stimuli from marketers, but in order to ensure that such responses are consistent with what the marketing initiative had intended, marketers must understand consumer perceptions and their impact on behaviour. Chiu et al. (2005:1687) used empirical data to model the influence which value perceptions can have on switching behaviour amongst consumers, suggesting that dissatisfaction in general cannot be overcome through messaging or branding alone. Instead, there is a measurable link between the depth of the relationship between a given brand and its consumers which can allow marketers to overcome dissatisfaction and achieve a renewed state of trust. Such relational bonding focuses on the inherent value of a given product to the consumer in relation to their wants and needs, establishing a connection between fulfilment and the particular product in which there is an inherent purchasing response when considering that particular need.

When considering the decision making process of consumers, there tangible rewards which must be considered for picking a particular brand or product. De Wulf and Okerken-Schroder (2003:97), for example, have suggested that at the first level of relationship marketing, basic, tangible rewards are identified including cost savings and pricing incentives which provide consumers with a more general value based on financial concerns. More dynamic rewards also focus on intrinsic value in which rewards systems connect consumers and products according to an extended, implied position of loyalty. From rewards coupons to frequent flyer programmes to loyalty bonuses, the long term achievement of reward for consumers can lead them to remain loyal to a particular brand, as switching behaviour would ultimately have a measurable consequence for their rewards earnings (De Wulf and Okerken-Schroder, 2003:97). Such second tier rewards systems establish a long term relationship between the consumer and the brand, ultimately defining consumer participation within the programme in spite of other value challenges or product inconsistencies.

Oftentimes the value of understanding consumer behaviour can provide marketers with the information necessary to repurpose their products, meeting consumer needs without directly impacting the product or brand itself. Fine (2010) presents evidence of the information value associated with purchase behaviour, as consumers self-actualise particular objectives and needs through consumptive actions. From luxury items to particular brands, the decision to purchase a particular product is frequently based on deeper psychological influences, oftentimes influencing brand loyalty according to psycho-social interpretation of product value (Fine, 2010:244). While such peer-based acknowledgement of value can be identified through survey and research, information surrounding consumer behaviour and brand preferences is much more valuable when considering rebranding efforts and consumer communication. Ultimately, Fine (2010:245) argues that it is the achievement of status through the purchase of a luxury or personally valuable brand that can provide consumers with a level of satisfaction that is linked to their future purchase intentions. As previously discussed, dissatisfaction or product failure can ultimately lead to reduced value within this relationship and dissolve the psychological connection.

Consumer behaviour is both time sensitive and immediate, experiencing influences according to various stimuli over time. Kowatsch and Maas (2010:702) have modelled the impact which direct communication can have on consumer behaviour during their purchasing process, using an in-store, mobile recommendation agent (MRA) to provide information and feedback for consumers as they shop. The inherent value of such decision assistance systems was demonstrated from a practical perspective, allowing consumers to access additional product data that might have otherwise remained unavailable. The authors also determined that the effectiveness of the system (MRA) had a measurable impact on consumer purchasing behaviour, suggesting that the personal value of the information and the means in which it was communicated could determine whether or not the consumer would engage in the purchase (Kowatsch and Maass, 2010:702). These findings also have implications for more practical marketing applications, as information exchange during the consumption process can have different influences on consumer behaviour than information exchanged over a more extended period of time.

Whether communicated at the point of purchase or over other channels, the marketing message can have a direct impact on consumer behaviour. Research on exploratory buying behaviour has been conducted by Baumgartner and Steenkamp (1996:132), demonstrating how psychological affectation can ultimately lead to consumers decision to purchase, even without original experience with a particular product. The authors argue that there are a host of unique, individual-specific traits which can lead to differences in product purchasing behaviour, the result of interpretation of stimuli and risk taking proclivity (Baumgartner and Steenkamp (1996:131). In order to chase consumers motivated by curiosity or by particular incentives, the authors suggest that marketers must explore the psychological implications of their particular messaging, potentially resulting in a greater sales opportunity. Taking advantage of promotional campaigns and marketing to specific niche consumers are some methods in which consumer behaviour can be influenced by particular psychological undercurrents within a singular marketing mix. The authors also suggested that there may not be a large difference in consumption behaviour amongst individuals with similar cultural ties, as the influence of marketing campaigns may resonate universally amongst these individuals (Baumgartner and Steenkamp, 1996:134). Regardless of affectation, such findings do have important implications when considering the inherent value of marketing campaigns in affecting consumer purchasing behaviour.

While marketing initiatives are frequently associated with consumer purchasing behaviour, there are underlying variables related to such consumption that must also be addressed in order to encapsulate the value of a particular product or brand for consumers. Demirdijian and Senguder (2004), for example, have investigated products from a psychological perspective, highlighting key genetic characteristics that influence behaviour and programme future purchasing behaviour. Whether linked to an individual’s personal preferences or actually a function of internal chemical stimuli, the researchers suggest that there are more scientific reasons for consumer behaviour that can ultimately be determined, modelled, and used in product marketing (Demirdijian and Senguder , 2004:351). From the interpretation of a particular taste to the analysis of various sensations associated with fabric, analysts are able to determine and synthesise a future intent to purchase. While such product development can be used for consumer influence, it can also be used to generate data relevant to the development of those products and services that have greater value to consumers over the long term. While value-added positioning can be achieved through market research, scientific analysis of consumer behaviour will also produce a means of defining those more subversive value components that might otherwise not be identified, from product packaging to secondary uses to the inherent status perceptions held by consumers during use.

Conclusions

This analysis began with a simple question of why consumer behaviour and an understanding of such processes is useful from the perspective of the marketer. There were a variety of findings uncovered over the course of this research, the majority of which establish some form of affectation according to psychological influences and messaging stimuli. Inherently linked to brand loyalty and the consumer commitment to the product or brand over time, the means of reducing switching behaviours within extremely saturated marketplaces are directly afforded by marketing communication. The effectiveness of such communication, however, can have the desired (or opposite) result on sustaining consumer loyalty over an extended period of time. While more traditional marketing models focused on product features and competitive positioning of particular brands or products, modern marketing emphasises the relationship between consumer behaviour and value. By enhancing a product’s value, consumers are encouraged to engage in the buying process and are more likely to maintain personal investment in a product over an extended period of time.

There are several implications associated with this research and this analysis of various academic perspectives within this field. First, there is a psychological link between purchase and loyalty. Where cognitive interpretation of marketing messages may have influence on purchasing behaviour over the long term, exploratory consumption may result from proper stimulation and more dynamic brand messaging early in the buying cycle. It is this internalisation of intent which ultimately allows marketers to attract a larger base of consumers, even in a marketplace where there are various substitute products. In order to identify the best fit communication strategy, marketers are oftentimes forced to rely on trial and error or unsupported market research. By modelling particular behaviour patterns, however, associated with exploratory buying, these firms and individuals may be able to predict consumer responses to more dynamic marketing campaigns. From rewards programmes to creative branding to niche marketing, the ability to communicate with consumers according to their personal preferences and their understanding of intrinsic an extrinsic product value is invaluable and can sustain a product’s market expansion over the long term. This research has demonstrated that consumer behaviour and marketing are undeniably linked, and through the understanding of the former, the latter may be more appropriately defined.

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1. Introduction

Multinational corporations operating in complex and diverse political, economic, social and cultural environments have to improve, adjust and develop their marketing strategies on a regular basis (Bamberg, 2009:46). Changing environmental factors create new conditions for their operating, which often require considerable and serious changes in strategic decision-making and positioning of companies. Inflexible and rigid firms will cease to be competitive in the market every time changes occur (Fight, 2006:85). The aim of the present report is to identify the past and present changes in marketing strategy of British Petroleum, which have occurred under the pressure of environmental factors. It is evaluated whether these changes were necessary, and future strategic options for British Petroleum are recommended.

2. Background

British Petroleum (BP) is a multi-national gas and oil company located in the United Kingdom. Taking into consideration the size of revenues, BP proves to be the third largest energy company in the world. It is reported that its revenue was equal to as much as $308 billion in 2010 (BP, 2010:18). Working in the field of the gas and oil industry, the corporation carries out a wide range of operations, namely exploration, refining, production, trading, power generation, renewable energy production, etc. BP is presented in more than 80 countries all over the world and employs more than 80,000 workers. The company was founded in 1909 as the Anglo-Persian Oil Company, but only in 1954, it was known as the British Petroleum Company. 1998 was marked by the merger with Amoco (BP, 2011:1). Operating in turbulent and dynamic industrial sector, BP has always had to adequately react to the environmental changes and adjust their marketing strategy (Bamberg, 2009:49).

3. BP in Dynamic and Changing Environment

Taking into account that this report analyses strategic positioning of BP as a response to environmental changes and influences, the external environment of the company should be carefully scanned. It is important to note that not only contemporary external influences ought to be investigated, but also the environmental factors that used to influence BP some time ago. This will allow for observing changes from a historical perspective. In this sense, the PESTEL framework appears to be a very useful tool. It is argued that “the PESTEL framework helps to identify the relative importance of political, economic, social, technological, environmental and legal influences, and can be used to identify the key long-term drivers of change” (Fight, 2006:44).

It may be critically stated that “recent market events have provided a sharp reminder of the central role of energy for our near-term security; insecurity arises from a range of issues, including geopolitical instability, natural disasters, terrorism and even poor regulatory design” (ORCD, 2003:421). Indeed, geopolitical instability proves to be a powerful political factor, which can influence volatility in the energy markets. It is reported that the world is heavily dependent on Middle East since this region has more than 60% of the world’s oil reserves (Thomas White Global Investing, 2010:1). The key oil producing countries are Saudi Arabia, Iran, Iraq, Kuwait, UAE, Venezuela, Russia and Libya. Oil reserves of these countries are demonstrated in the graph below. It is valid to argue that a number of instability ‘symptoms’ have been observed in these countries recently, including military conflicts, authoritarian political regimes, corruption, etc. For instance, Venezuela tends to use its oil revenues to finance governmental programmes and ideology (Thomas White Global Investing, 2010:1).

As it may be observed from the histogram, Saudi Arabia has the largest oil reserves in the world, namely 262.2 billion barrels. Canada, Iran and Iraq have 179.2 billion, 136.3 billion and 115 billion barrels respectively (Thomas White Global Investing, 2010:1).

In response to the mentioned political influences, BP’s strategy has been changed the following way. Generally, it is possible to observe two main tendencies. First, British Petroleum attempts to hedge political risks in the oil producing countries by means of partnership and deals with the governments. For instance, BP signed a contract with the Russian state-run oil company Rosneft in 2009 (Hernandez, 2011:1). Second, the company evacuated its personnel from northern Africa because of growing political instability in Tunisia, Egypt and Libya. Simultaneously, BP develops its cooperation with emerging economies in Asia, which are more politically stable, namely India (Hernandez, 2011:1). These changes were necessary in order to avoid political risks in the countries, which prove to be the leading producers of oil.

Geopolitical instability in the world and political tensions in these countries can be viewed as important factors that have led to the fluctuations in oil prices, which may be illustrated by the following graph.

As it may be grasped from the graph, crude oil price reached its maximum in 2008 and constituted as much as $91.48 per barrel (IBP Oil, 2011:1). The period from 2002 to 2008 was marked by the gradual rise in crude oil prices. In 2009, the indicator was equal to $53.56, and oil prices started growing again (IBP Oil, 2011:1). It may be argued that fluctuations in crude oil prices are also the result of economic influences. It is obvious from the graph that crude oil prices skyrocketed simultaneously with the coming of the global financial crisis. Another increase in oil prices occurred during the prolonged recession, in the long-term of the financial crisis (Bamberg, 2009:184; IBP Oil, 2011:1).

In accordance with Brigham and Ehrhardt (2010:901), the main causes of fluctuations in crude oil prices are demand and supply forces, investment demand and monetary inflation. The US Dollar inflation can be graphically presented the following way.

As it is observed, inflation reached its maximum in 2008 when the indicator was equal to 3.85% (Inflation Data, 2011:1). It has already been stated that the rapid growth of crude oil priced took place the same year. As argued by Brigham and Ehrhardt (2010:901), it is possible to establish cause-effect relations between high inflation and the growth of oil prices. Indeed, these environmental factors had economic influence on British Petroleum. The excessive dependence on non-renewable energy carriers and fluctuations in crude oil prices have contributed to the popularity of renewable energy, namely wind, solar and geothermal (Fight, 2006:93). The point is that the reserves of renewable energy are not limited.

In response to these economic influences, BP reconsidered its business strategy the following way. It is reported that the company started producing solar panels after the acquisitions of Lucas Energy Systems (1980) and Amoco (1998). At the present moment, the company proves to be the largest manufacturer of solar panels in the world. BP has launched two main types of solar energy products, namely products for individual consumers and products for organisations. For instance, the firm is planning to run a new solar energy project aimed at energy supply for Wal-Mart stores (BP, 2011:1). Furthermore, it is reported that BP invested more than $6 billion in wind and biofuel energy projects during the period from 2005 to 2010 (BP, 2010:61). These changes were necessary because the PB attempted to attract customers by cheaper and ‘green’ energy. The volumes of ‘green’ energy production by BP can be presented by the following graph.

It is illustrated by the histogram that BP produced as much as 774 megawatts in 2010. The total volume of wind energy produced by the company is more than the volume of solar energy (BP, 2010:63). However, the company tends to produce more solar energy every following year. If 162 megawatts were produced in 2008, the indicator increased to the level of 325 megawatts in 2010 (BP, 2010:63).

Global energy consumption patterns may be viewed as an important social influence on BP. The following histogram illustrates the changes in energy consumption during the last two decades. It can be observed that the world’s population consumed as much as 8,131 million tons in oil equivalent in 1990. However, the indicator constituted 11,808 million tons in 2010 (BP, 2011:1).

However, it should be taken into consideration that energy is not consumed equally by different regions of the world (BP, 2011:1). The following graph illustrates energy consumption patterns by economic zones, unions and countries. As it may be understood, this social influence could lead to changes in marketing strategy of BP.

It is reported that nearly 20% of the world energy is consumed in the US market. To be more specific, the indicator was equal to 89,021 kWh/hab in 1990 and decreased to the level of 87,216 kWh/hab in 2008 (BP, 2011:1). It can be observed that the EU countries consume half the amount of energy used in the US; it constitutes 40,812 kWh/hab. It is interesting to note that the EU consumption patterns had grown by 2008. Furthermore, it should be emphasised that such regions as Middle East and China have experienced enormous growth of energy consumption recently (BP, 2011:1).

In response to these socials changes, BP has reconsidered and changed its strategy the following way. The company used to operate in the US market very actively and have large manufacturing facilities in this country during the 1990s. It is understandable that the region consuming nearly 20% of the world energy will be of strategic interest for British Petroleum (Bamberg, 2009:142). Nevertheless, the company attempted to move considerable part of its manufacturing facilities from the US to China during the 2000s. For instance, BP’s factories in Frederick, Maryland were closed in 2000 (Wenying, 2004:100). Moving production facilities to China continued regardless of the fact that the Chinese government issued a number of protectionist laws, which require than no less than 85% of input materials must be manufactured in China (Bamberg, 2009:83). These changes were necessary because energy consumption patterns in the US market had reduced by 2008.

It may be argued that technological progress is associated with the growth of energy consumption patterns by such sectors as industry and transport. The following graph can be presented to illustrate this relationship.

All the four sectors have experienced growth in energy consumption recently. It is reported that in 2008, industry and transport used 27,273 TWh and 26,742 TWh respectively (BP, 2011). It may be explained by the fact that new technologies are more energy consuming. Furthermore, rapid growth of the world’s population means that more and more oil should be spent on manufacturing of industrial goods and transportation (Bamberg, 2009:42). For example, there were about 400 million motor cars in 2000; however, the total amount of vehicles constitutes more than 750 million today (Heitmann, 2009:167).

These technological changes have led to the following reconsiderations and amendments in BP’s strategy. First, the company started popularising efficient use of energy and invested in energy efficiency of industrial enterprises and engines for motor vehicles (BP, 2010:53). Second, BP introduces new technologies in their own production process. It was officially stated by the Group Chief Executive that “the answer to the problems caused by some technology is more and better technology – to reduce the environmental impact of exploration, to reduce the carbon content of the fuels we use, to give people everywhere better choices” (BP, 2001:1). To be more specific, BP has rationalised transportation of oil and its products and has reduced the content of carbon in its fuel (Bamberg, 2009:142).

Being an energy company, BP is subjected to manifold environmental influences. It is possible to differentiate between environmental factors that refer to the global ecological changes and environmental influences provoked by the company itself. The latter are numerous chemical leaks, oil spills and dumping of hazardous substances. For instance, BP was blamed for dumping of chemical wasted in Alaska during the period from 1993 to 1995 (Roach, 2006:1). Prudhoe Bay oil spill, which occurred in August 2006, was the result of pipeline corrosion. More than 5,000 barrels of crude oil leaked and caused environmental damage to the sea life. Another problem was registered in Texas City in 2010 when there was a chemical leak of hazardous elements into the atmosphere (Aulds, 2010:1).

Regardless of the fact that BP runs a great number of ‘green’ practices and corporate social responsibilities (investment in renewable energy projects, restoration of the environment after oil accidents, funding of ecological projects and initiatives, etc.), the company was given the Greenwash Award in 2009 (Green Peace, 2010:24). The firm tends to manipulate the public paying considerable attention to its CSR activities. It is argued that BP spends on ‘green’ practices less than it is proclaimed in official statements of the company (Green Peace, 2010:26). It can be summarised that BP attempted to build positive public image by its ‘green’ practices in response to the mentioned environmental influences. However, these attempts cannot be classified as successful. These changes in strategy cannot be classified as a necessity. The company could have been more open and honest with the public, which could have created more positive public image.

Finally, it may be stated that BP has already had a series of legal arguments with the governments and non-governmental organisations. It is reported that “yet already BP’s actions are facing unprecedented scrutiny, thanks to a years-long history of legal and ethical violations that critics, judges and members of Congress say shows that the London-based company has a penchant for putting profits ahead of just about everything else” (Mauer and Tinsley, 2010:1). In response to these legal influences, the company has become more careful and prudent (Aulds, 2010:1).

4. Strategic Position of BP

Prior to the identification of the generic strategy of BP, it is necessary to conduct a stakeholder analysis and detect the recent changes in BP’s attitude towards different interest groups. The main stakeholders of the company are the government, the press, suppliers, ecological organisations, customers, alliance partners, shareholders, the public and employees (BP, 2010:34). The positioning of these interest groups in the stakeholder matrix can be presented the following way.

It may be observed that role of the governments has changed under the influence of political influences and geopolitical instability. The governments of oil producing countries and suppliers appear to be very powerful (BP, 2010:74). At the present moment, BP has to build strong long-term relationships with governments in order to avoid political risks, limitations and possible restrictions (Thomas White Global Investing, 2010:1). It is argued that ecological organisations and customers are less powerful, but they tend to demonstrate greater interest to the company. Ecological organisations and the public are worried about harmful effects of the company’s operations. Customers are interested in BP because the energy consumption patterns are growing and there is always demand for oil (Bamberg, 2009:34). The company has several groups of customers, namely car owners using service stations (Aral, ARCO, BP Connect, BP Express and BP2go), users of convenience stores, users of solar panels, users of motor oils and derived products, the transport industry and the aerospace industry (BP, 2010:74).

Another important change that has happened recently is that employees’ power has increased. This change can be explained by several accidents, disasters and safety problems, which have occurred at British Petroleum. For instance, it is stated by the US Department of Labour (2011:1) that the explosion in the isomerisation unit of the BP refinery in Texas City led to the death of 15 workers and injury of 170 employees. Similar scandals attract the public attention and interest and stimulate better maintenance of safety standards and norms. It should be noted that the power of the press and the public has increased too (Green Peace, 2010:21).

Discussing generic strategies of the company, it is also possible to identify changes. At the early stages of its development, BP was following the cost leadership strategy (Bamberg, 2009:132). Indeed, the company made considerable efforts to remain the leader in developing costs. Nevertheless, it is argued by Business & Leadership (2011:1) that the firm’s cost reduction practices were the main reason for oil spills and leaks. Cost cutting measures prevented the company from timely and regular repairs and maintenance of the infrastructure (Business & Leadership, 2011:1). BP has transformed the cost leadership strategy into the differentiation strategy by the present moment. It is argued that “the company has endeavoured to redefine its market space by laying claim to activities beyond oil and gas such as alternative energy and a lower carbon future” (Bright, 2011:4).

As it may be seen, the turbulent and changing external environment has forced BP to undertake a series of new decisions, which were different from those undertaken in the past. These changes in the corporate marketing strategy can be evaluated as a normal reaction to external political, economic, social and technological influences. As a result, it is possible to observe the change in stakeholders’ power and interest towards the company. Furthermore, BP’s generic strategy has evolved from cost leadership into differentiation (Business & Leadership, 2011:1; Bright, 2011:4).

5. Future Strategic Options

The discussion of future challenges for BP will reveal that future energy consumption patterns will continue growing. The forecast of future changes may be presented the following way.

The total volume of energy consumed by the world will have constituted as much as 16,432 million tons in oil equivalent by 2030 (BP, 2011:1). Another important challenge that should be taken into account is possible growth and fluctuations of oil prices. The company should avoid accidents, disasters and safety problems, which prove to be serious challenges to British Petroleum. Finally growing popularity and demand for renewable energy are both opportunity and challenge for the firm (Aulds, 2010:4).

Relying on the previously identified environmental influences and pressures, it can be suggested that British Petroleum should follow the diversification strategy as a future option. In accordance with Ansoff matrix, diversification is the strategy, which implies entering new markets with new products (Meldrum and McDonald, 2007:142).

This choice of the future strategic option can be explained by a number of reasons. First, growing geopolitical instability and political risks and oil producing countries have forced BP to entering new markets, which are characterised by considerable potential. Second, the company can continue running and developing renewable energy projects, which have become very popular (Hernandez, 2011:1). In the conditions of growing demand for energy, growing consumption patterns and increasing crude oil prices, the company should be more active in the field of alternative energy.

A modified version of strategic options was offered by Turner (2005:340).

As it can be grasped from the improved framework, BP should follow the offensive strategy in future. It is implied that new services should be delivered to more politically stable and balanced markets (Turner, 2005:340). It is expected that this choice of the future strategy will be consistent with contemporary changes and tendencies in the industry, namely growing demand for renewable energy, unstable crude oil prices, ecological awareness and energy efficiency (Bamberg, 2009:153).

6. Conclusion and Recommendations

It may be concluded that the main strategic changes undertaken by British Petroleum in response to the turbulent and dynamic environment are contracts with the governments to avoid political risks, moving to more stable countries such as India from the northern Africa, acquisition of the solar panel manufacturers, investment in wind and solar projects, moving manufacturing facilities to China, investment in energy efficiency, reduction of carbon content in fuels, participation in ‘green’ activities an ‘greenwashing’. The company had to transform its generic strategy from cost leadership to differentiation since cost reducing practices had led to oil spills and leaks. It may be summarised that the identified changes were necessary. Nevertheless, the company could have been more honest and open in its CSR projects.

It is recommended that BP should use the diversification strategy as a future strategic option in order to continue responding to the environmental challenges. The company should diversify its product range associated with the production of solar and wind energy for individual and corporate customers. It is expected that these products will be popular in the emerging markets such as India and China where incomes are not high, but energy consumption patterns are growing very fast. Furthermore, it is recommended that the company should increase expenditures on infrastructure maintenance and employee safety. Together with alternative energy production, this will positively influence corporate reputation after the recent safety scandals and ‘greenwashing’. Finally, it is recommended that BP should continue popularising efficient use of energy by individual consumers and industrial enterprises.

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