MARKETING MATERIAL

[This subsection contains a number of papers on the practice of marketing]

7237 Target Measurement – Marketing Practices

MARKETING PRACTICES IN THE 1990s

David Mercer

Open University Business School, Walton Hall, Milton Keynes MK7 6AA

Telephone: 01908 656878 Fax: 01908 655898 E-mail: d.s.mercer@open.ac.uk

ABSTRACT

On the basis of responses from 566 managers/professionals, this research explored the marketing practices implemented by a range of organizations. At the basic level, half (53%) of the organizations were committed to producing marketing plans, and almost half of these (45%) went on to review them quarterly. In terms of practices, the more significant results were that half (51%) of the respondents reported that their organizations followed high price strategies, with only 30% following policies of market penetration. Marketing research was largely undertaken on the basis of secondary data.

MARKETING PRACTICES IN THE 1990s

INTRODUCTION

This research maps the current position of individual managers, and of their organizations, in terms of their acceptance of the various techniques/practices they deploy in their actual day to day marketing. It wasintended to provide a contemporary context for the debate as to what marketing practice is, and should be.

RESEARCH METHODOLOGY

In order to ensure that the respondents would be able to give meaningful answers to the wide range of detailed questions involved in the survey, they were drawn from a population made up of those Open University Business School (OUBS) students who had already completed at least one marketing course with the School. As can be seen from Table 1 below, the sample was weighted towards more senior managers and larger companies - reflecting the make-up of the OUBS student population.
 

To collect the range of data needed 7 questions were used to provide classification data on the respondent and a further 11 classification data on the organization. Then,  50 questions reported on marketing practice. These questions were developed from comments recorded during four separate group discussions with a total of 35 students, and the questionnaire was piloted with 50 students randomly selected from the population.

The final questionnaire was mailed to 1,000 OUBS students, chosen at random from the population. Completed questionnaires were received from 566 students (57% response). The size of the sample was such that the results had an accuracy (for this population) of better than ±4% (at the 95% confidence level). It also allowed for some statistically significant results for the larger sub-groups.

RESULTS

The finding, shown in Table 2, which was perhaps the most interesting was not just the widespread existence of departments which relate to marketing activities (83% having at least one such department), but also the plethora of different marketing related departments; which overlap to a large extent in the organizations represented in the survey. Thus, where marketing texts might suggest that marketing and sales departments could often be mutually exclusive, they seem to be almost complementary, and in practice 77% of the organizations having a marketing department also had a sales department (and, conversely, 71% of those with a sales department also had a marketing department).
 

The most direct correlation in detail was with size. The larger organizations were more likely to have such specialized departments. For instance, only 26% of organizations with a turnover of less than £2 million per annum ( 81 cases) had a marketing department, where 91% of those with a turnover in excess of £2 billion per annum (97 cases) had one. Those in the consumer goods and service industries were more likely to have such departments (with, for instance, 72% having a marketing department - out of 39 cases), and those in the government sector (72 cases) were less likely to (with 29% only having marketing departments, and 44% having none of these departments).

Much the same picture is seen in terms of the marketing suppliers they employ. Indeed, half the respondents reported that their organizations employed advertising agencies (43%) and a third used market research agencies (33% - comparable with their use of management consultants in general); though Public Relations Agencies - which were used equally by organizations of all sizes - were used by only 19% overall (which was unexpectedly low in comparison).

MARKETING PLANNING

The most obvious commitment should, in text-book theory at least, be the regular production of a marketing plan; and, as shown in Table 3,  half (53%) of all organizations do produce such a plan.

Of these organizations, half review their plan annually (as text-books suggest) but nearly half (45%) review it at least once a quarter. This is a  surprising result when it is reported by three quarters (76%) of the informants that their organizations experience changes in their environment annually or less often.

PRACTICAL USE OF FUNCTIONAL TECHNIQUES

One of the most prevalent concepts of recent years has been the splitting of marketing activities into the 4Ps (Product, Price, Promotion, Place). The research looked at each of these separately, to see what practical impact the theoretical commitment by organizations might have had.

Products

This was mainly investigated in terms of new products. At the most basic level, Table 4, only a quarter or the organizations reported that more than 20% of their current turnover was held by 'new' (two years old or less) products. This would indicate that markets are more stable than some new product theory might suggest; though this is in line with other reports (Mercer 1993).

On the other hand, the launch date of the organization’s 'leading product might seem to show slightly more volatility; as shown by Table 5.

Changes to products happen much more frequently, with nearly three quarters (71%) of leading products having been changed within the past year.

Pricing

Despite what neo-classical economic theory might suggest, half the organizations (51%) were - Table 6 - reported to follow high pricing strategies. Detailed examination showed, however, that 36% of managers' views still disagreed with those of their senior management.

On the other hand, the pricing processes reported, Table 7, seem to have little to do with what text-book pricing theory might recommend. Only a sixth of respondents (15%) report that their organizations relate prices to the value their customers put on their products or services. Again, a third (34%) of managers disagree with their senior management's view.

In terms of pricing new products, as shown in Table 8, only a third (30%) of organizations follow the current (Japanese led) approach of 'penetration'; with rather more (40%) still following the traditional approach of 'skimming' profit in the early days after launch (and 30% following neither of these approaches).

The gap between text-book theory and practice is even more obvious in the case of the declining products which are so important to Product Life Cycle theory and the Boston Matrix. Only an eighth (13%) of organizations 'milk' such products (by high prices) in the way that these now traditional marketing theories might suggest. Indeed, half the organizations, Table 9, seem to make no concession at all to the declining status of these products.

Promotion

In terms of the most basic promotional requirement, two thirds of the organizations (Table 10) had sales-forces with five or more members, and half of them had 20 or more members (and a fifth of them had in excess of 200 members).

The marketing weakness, against text-book expectations (Table 11), of the organizations is, however, most clearly seen in terms of their promotional budgets, with only a third (29%) spending more than £100,000 per annum in any area; despite the fact that OUBS students tend to come from larger organisations. There is also some evidence to support the view that sales promotion records the highest spend in most organizations.

Place

Contrary to what the 'Place' aspect of the 4Ps might imply, it was reported that most organizations in the survey distributed direct and the traditional distribution chains were largely irrelevant to them; Table 12.
 

MARKETING RESEARCH

As a final footnote to relations with customers, the organizations' main sources of information about their markets were reported to be those providing secondary data; which were typically used by twice as many organizations, Table 13, as those offering to research primary data.

The extensive use of focus groups may reflect the cost as well as the nature of the markets (where only a quarter of the organizations fall into the traditional consumer areas) rather than sophistication (especially where doorstep surveys are only used by 5%). The use of mail/telephone surveys may similarly reflect cost considerations - but this indicates that perhaps market research theory should give more attention to these.

CONCLUSIONS

The research indicates that the outstanding problems facing marketers lie in the use of specific functions. Most senior managements have committed to the philosophy, even though their junior managers may be cynical about the degree of that commitment. Unfortunately, there is little evidence to show that this new-found belief has led to positive action. Indeed, if we look at the marketing activities they do subscribe to, using the 4Ps framework say, there is little evidence that marketing practice (as opposed to the theory) has been widely embraced. In particular, pricing is largely on a cost-plus or competitive basis, promotional budgets are small (and spent more on sales promotion than advertising or PR), 'place'  is - in any case - not relevant, and marketing research is almost all second-hand.

REFERENCE

Mercer, DS (1993), A Two Decade Test of Product Life Cycle Theory, British Journal of Management Vol. 4, 269-274

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