It is very important that an organisation considers its environment
before beginning the marketing process. In fact, environmental
analysis should be continuous and feed all aspects of planning.
The organisation's marketing environment is made up from:
1. The internal environment e.g. staff (or internal customers),
office technology, wages and finance, etc.
2. The microenvironment e.g. our external customers, agents
and distributors, suppliers, our competitors, etc.
3. The macro-environment e.g. Political (and legal) forces,
Economic forces, Sociocultural forces, and Technological forces.
These are known as PEST factors.
The PEST factors combined with external microenvironmental
factors can be classified as opportunities and threats in
a SWOT analysis.
The five forces model was devised by Michael Porter, who provided
a framework that models an industry as being influenced by
five forces. The strategic business manager seeking to develop
an edge over rival firms can use this model to better understand
the industry context in which the firm operates.[4]
Five forces looks at five key areas namely the threat of entry,
the power of buyers, the power of suppliers, the threat of
substitutes, and competitive rivalry.[5]
Whilst it has been criticised for oversimplifying
what can be sometimes be complex commercial problems, the
two-dimensional Perceptual Map has become a particularlyuseful
vehicle for management to draw attention to an emerging market
opportunity, a new strategic direction, or a changing market
condition.[6] On
a perceptual map, a grid containing a x and y-axis, a company
can see how it is perceived in the eyes of the customer. When
a company knows how they are seen by the public they know
what there current position is and can then change that if
they want to be seen as something different.
From these the company can determine their goals for the coming
period, this will include figures and targets that have been
derived from market research and by the employees that have
been able to predict the field because they have been in this
field for a long time.
Once the market environment is known, the company can implement
pricing strategies and marketing campaigns. These will be
based on the 4P’s, the 4C’s and the 7P’s.
| Product |
Customer Benefit |
Product |
| Price |
Cost to customer |
Price |
| Promotion |
Convenient |
Promotion |
| Place |
Communications |
Place |
| |
|
People |
| |
|
Process |
| |
|
Physical environments |
By using a SWOT, PEST, perceptual map, five forces model,
the 4P’s, 4C’s, 7P’s and company aims and
values it will be possible for a company to see where they
are, where they want to be, how they are going to get there
and how to measure their success.
The purposes of objectives include:
to enable a company to control its marketing plan.
to help to motivate individuals and teams to reach a common
goal.
to provide an agreed, consistent focus for all functions of
an organization.
All objectives should be SMART i.e. Specific, Measurable,
Achievable, Realistic, and Timed [
7]
BUPA would have been able to see that there was space in the
market for other companies such as Norwich Union, PPP and
Legal & General to b able to enter the market and take
market share from them. They would also have been able to
see that consumer demand was starting to flag and they could
have offered promotions and increased marketing to win back
customers.
The research that has been carried out by BUPA suggests that
consumers are not interested in private health care but a
one-off health check. BUPA can now tailor the price, promotion
and product accordingly for their target market. Research
should also be able to tell BUPA how many people they can
expect to take up the service and how much money they can
make.
Question 2
Why must BUPA’s health insurance product have separate
marketing mix executions for its consumer and business target
markets? How might these marketing mixes differ?
Answer 2
The marketing mix is based on the 4P’s, conceived in
1960 by James McCarthy, the 4C's and some people may argue
that the 7P’s should be included. Albert Frey suggested
that these could be broken down into 2 groups the offering
and the methods and the tools.[
8]
The marketing mix focuses on the 4P’s, which have been
listed earlier.
The offering is concerned with the product, packaging, service,
brand and price, the methods and tools will be how the product
is brought to the attention of the consumer and business market.
The business market is also very different to the consumer
market and these nuances have to be dealt with in the marketing
mix. It is these differences that require the marketing mix
to be different based on the customer. Each customer group
has different demographics, so business customers can be perceived
to have more disposable income and should be targeted in a
different way than single consumers
The product, depending on what stage in the product life cycle
the company can decide what price to charge, if these changes
are not monitored then the customers will lose interest.[
9]
There cannot be many differences in the product offering,
although business customers can be expected to be early adopters
and will pay more for the service, although expect a superior
quality of service. It can be expected that after BUPA bring
out their service that their competitors are likely to copy
them.
Place refers to the method of distribution, it is possible
to tailor the method of distribution for the different types
of market that they are aiming for. It is about deciding what
is the cheapest way to get the product to the customer. For
business this may mean going into the office to give demonstrations
while it will be cheaper for the consumer market to come to
BUPA. The business market is supposedly more lucrative and
could provide 250 members of staff in one workplace.
Price can be seen as a determinant of the quality of a service,
normally the higher the price the higher the quality. Small
businesses will be able to and more willing to pay more money
to be seen to appease the staff, they also have more money
than single consumers. The price will need to be set at a
suitable level, which BUPA staff will be able to set having
worked in the industry for a long time.
Promotion would allow BUPA to offer discounts to bulk buying,
so when a small business comes to BUPA with 200 staff wanting
to have subscribe to ‘The Health Checker’ service
they can offer then a discount instead of charging them fullprice.
Promotion is also about how the product will be advertised,
this will vary on the demographics of the target community.
Small businesses and business people will read and visit different
Internet sites from single consumers, the questions that need
to be asked are ‘Where do my customers hang out?’
and ‘What would attract them to this product?’
Question 3
Assume BUPA have decided to launch ‘The Health Checker’
service:
a) Discuss the pricing strategy that should be adopted for
the consumer market only
b) Suggest where/how this service might be made available
for both the consumer and corporate markets
Answer 3
Companies habitually charge less than they could for new products,
especially with revolutionary offers. Underestimating a product's
value can be a costly mistake, since the introductory price
often fixes its worth in the buyer's mind.[
10]
How much should you charge for a new product? Charge too much
and it won't sell -a problem that can be fixed relatively
easily by reducing the price. Charging too little is far more
dangerous: a company not only forgoes significant revenues
and profits but also fixes the product's market value position
at a low level. And as companies have found time and again,
once prices hit the market it is difficult, even impossible,
to raise them. [
11]
A pricing strategy is dependent on the company’s research
and previous experience gained in the field, the price should
be pitched at a level according to a number of factors. These
factors include; where the product is in the product life
cycle, consumer demographics, quality of the service, buyer
behaviour and if there is any promotion running.
There are different pricing strategies and they are shown
in the following figure.
Figure 1 - Pricing strategies [
12]
Premium pricing is using a high price where there is a uniqueness
about the product or service. This approach is used where
a substantial competitive advantage exists. Penetration pricing
is when the price charged for products and services is set
artificially low in order to gain market share. Once this
is achieved, the price is increased. Economy pricing is a
no frills, low price. The cost of marketing and manufacture
are kept at a minimum. Price skimming occurs when the company
charges a high price because they have a substantial competitive
advantage. However, the advantage is not sustainable. The
high price tends to attract new competitors into the market,
and the price inevitably falls due to increased supply. Manufacturers
of digital watches used a skimming approach in the 1970s.
Once other manufacturers were tempted into the market and
the watches were produced at a lower unit cost, other marketing
strategies and pricing approaches are implemented [
13]
a) As BUPA are first to move in this market they hold all
the aces, whatever they decide to do will attract customers
and create a market. This is called a revolutionary product.
Because of the research carried out by BUPA they should know
the potential size of the market and at what level they should
set their launch price. It must be remembered that the price
for the consumer market is likely to be less than the business
market.
BUPA will be looking to employ a premium or penetration pricing
strategy, this will forever link the product as a high quality
product, the best pricing strategy is most probably somewhere
in-between. The early adopters will be the first to take up
the product, at an early stage and they will be willing to
pay more, although after the honeymoon period when there are
no competitors there will need to be a reduction in price.
In the early stages of the product life cycle there will be
no competition, a near monopoly in the market, when others
start to enter the market it will be time to lower the prices
and compete on price, the product may be entering the growth
stage of the product life cycle at this stage.
b) Where and how this product is made available will affect
the sales and revenue, if the product is not seen by the right
people in the right places then no matter how much BUPA spend
on advertising and marketing the product will fail. BUPA has
to carry out further research into where their target communities
will be most susceptible to their service. It is likely that
people who go to health clubs, sport clubs and gyms will want
to improve their fitness and using the ‘Health Checker’
service may help in their quest. BUPA may also want to advertise
at sports events that may appear on television and entice
amateur sports people to use the service. The service also
offers to look at lifestyle, so BUPA can target people who
are too busy, in the work or private lives to handle this
personally, including managers of small businesses and city
workers. The best place to advertise to this market would
include conferences and networking events. BUPA could set
up a stall to demonstrate to potential customers the benefit
of the ‘Health Checker’.
Question 4
Recommend a six-month promotional plan to launch the ‘Health
Checker’ service to both segments of the market.
Answer 4
Promotion can take place in many forms and at any time, using
many different methods and media. These include, television,
the Internet, mailings, billposters, radio, magazines, newspapers,
specialist publications such as trade journals and demonstrations.
The promotion strategy can start with a broad scale promotion
and generally get more direct as the launch date approaches.
More money can be spent on the business market, as they are
perceived as bringing in the most revenue by BUPA. Another
alternative to this promotion is to advertise on television
and poster campaigns although these media re more expensive.
| |
Consumer |
Business |
| Month 1 |
If BUPA promotes the health checker
on the radio, they will be able to reach a large audience.
Radio stations that the desired demographics listen
to. |
The Health Checker promoted on the
radio, BUPA should be aiming for stations that business
people are likely to listen to. |
| Month 2 |
BUPA Health Checker poster campaign
in gyms, sports clubs and health clubs. |
BUPA Health Checker poster campaign
in gyms and health clubs. |
| Month 3 |
Advertising in tabloid newspapers,
such as The Daily Mail. |
Advertising in business papers, such
as the Financial Times etc |
| Month 4 |
Advertising in Health and lifestyle
magazines. |
Health Checker advertisements in business
journals |
| Month 5 |
Promotion of BUPA website and Internet
advertising. |
BUPA staff are present at events such
as conferences and business networking events to demonstrate
their service. Promotion of BUPA website |
| Month 6 |
Demonstration of service in shopping
centres and gyms and health clubs, |
BUPA staff should go into offices,
gyms and health clubs and give demonstrations of the
new service they are offering |
