Course Notes - Business education



BUSINESS IN ACTION OUTCOME 2

HOW BUSINESSES SATISFY CUSTOMER NEEDS

The Sales and Marketing Department has direct contact with customers and overall responsibility for ensuring that customer needs are met.

MARKET RESEARCH

In order to sell goods a business must make sure that it provides what customers want – in other words “that it satisfies customer needs”.

The responsibility of finding out what customers want falls with the Sales and Marketing Department (sometimes these will be split into 2 separate departments).

Market research will give a business a clearer idea of what customers want and what price they would be prepared to pay.

There are 2 types of Market Research:

|FIELD RESEARCH |DESK RESEARCH |

|This involves gathering new information. This new information is called|This involves using information that has already been gathered for one |

|“primary information”. |purpose and is now used for another. It already exists. This second |

|ADVANTAGES |hand information is called “secondary information”. |

|The information gathered will match your needs |ADVANTAGES |

|It is up-to-date (because you have just collected it) |Easy and usually inexpensive to obtain (as it already exists) |

|You know how reliable it is (because you have been responsible for |Quick to obtain (as it already exists) |

|collecting it) |DISADVANTAGES |

|DISADVANTAGES: |You may have to filter out the relevant information you require |

|Time consuming to collect |The research may contain bias |

|Expensive to collect (because you have to pay someone to collect it) | |

METHODS OF FIELD RESEARCH

|Method |Advantages |Disadvantages |

|Face to Face Interview |Interviewer can ask in depth questions and |Interviews can be time consuming |

|Information is gathered by directly asking |provide explanations |Training of interviewers can be costly |

|questions and recording the answers |Follow up questions can be asked | |

|Telephone Survey |Can cover a wide geographical area |Phone calls can be seen as irritating and |

|Direct Questions are asked over the phone and | |intrusive by householders |

|the answers recorded | | |

|Postal Survey |Can cover a wide geographical area |Low response rate |

|Questions are posted out to individuals and the| |Questions have to be kept very simple (as they |

|answers recorded when the question sheets are | |cannot be explained) |

|returned | | |

|Focus Group |Can be used to obtain more in-depth views of |Findings are based on the opinions of a small |

|A small group of individuals are brought |the product/service |number of people |

|together and asked to discuss a product/service| | |

|On-line Survey |Inexpensive to produce and can be analysed |Low response rates |

|Individuals are asked to complete an on-line |automatically by computer |Questions have to be kept very simple |

|internet survey. Answers are automatically | | |

|recorded | | |

|Hall Test |Information is gained about the actual product |Testers may feel obliged to say positive things|

|Individuals are asked to try the |(not about an idea for a product) |about the product/service |

|product/service and give their opinion | | |

SOURCES OF DESK RESEARCH

|Newspapers |Magazine Articles |TV programmes |Trade Journals |

|Government Reports |Internal business reports/statistics |

The MARKETING MIX (the 4 P’s)

The Marketing Mix is the name given to the 4P’s of marketing. These 4 different elements form the basis of the “what, where, how and why” a product sells! They are:

• Product

• Price

• Promotion

• Place

The way that the 4P’s are mixed together determines the success or failure of the product or service.

PRODUCT

This is the actual item or service that the business is selling. The usefulness and the quality are central to why customers will purchase the item.

A business should make the following decisions about its products:

• What product or range of products will be sold

• What the product will be called

• How the product should be packaged

Because all products have a limited period of life it is normal for a business to improve their existing product range or to develop completely new products. This is known as product development and may include the design and development of a number of prototype designs before the actual product is launched.

PRICE

The Price is the amount the good or service will be offered at to the customer – it is important to get the price right. In general high prices usually result in fewer sales. However, very often customers associate a high price with a quality product - and demand may be high for such goods.

|LONG TERM PRICING STRATEGIES |SHORT TERM PRICING STRATEGIES |

|Low |High |Destroyer |Skimming |

|Price |Price | | |

| | |Penetration |Cost Plus |

PROMOTION

This is the way in which a business encourages customers to buy its products.

Advertising:

It includes all forms of advertising eg:

|TV |Radio |Internet |Billboards |Newspapers |Magazines |Cinema |

Other Methods of Promotion:

Money-off Coupons – these can be cut out of newspapers or magazines and enable customers to purchase products at a reduced price.

BOGOF (Buy one, get one free) – buy one product (usually at full price) and you get another one completely free - this can encourage the sale of more products.

Competitions – customers can enter competitions related to the product – this may require a number of purchases

Free Gifts – to encourage sales an additional “free gift” is offered with the product

PLACE

This relates to how the customer gains access to the product. The traditional way is through a shop (a retailer) but there are a number of other ways such as mail order and the internet (e-commerce).

The channel of distribution for a product is the way it reaches the customer – the main channels are shown in the diagram:

|Manufacturer | |Manufacturer | |Manufacturer | |Manufacturer |

|( | |Wholesaler | |( | |Wholesaler |

|( | |Retailer | |Retailer | |( |

|( | |( | |( | |( |

|Customer | |Customer | |

The method chosen will depend on the product eg bulk goods tend to be transported by rail or sea, perishable goods will have to be transported quickly, therefore road or air are usually the best methods.

QUALITY

The Operations Department has overall responsibility for QUALITY in the production process. They must ensure that products are up to suitable standards.

The Sales Department will be responsible for ensuring that the customer receives high quality service when they are purchasing the product.

QUALITY OF PRODUCTION

Businesses must make sure that the METHODS OF PRODUCTION used will produce a suitable quality standard for the finished product.

The Operations Department will employ a range of Quality Measures to ensure that no sub-standard or faulty products reach customers.

|Quality Measures |Description |

|QUALITY CONTROL |Quality control is all about CHECKING EACH PRODUCT AT THE END OF PRODUCTION to check it has been completed properly|

| |and if not that problems are corrected –this can result in a lot of wasted products. |

|QUALITY ASSURANCE |Each stage of the production process is checked to ensure that the product is of a satisfactory standard before |

| |moving onto the next stage. |

|BENCH MARKING |Benchmarking involves setting quality standards to match or beat the products/services offered by the best |

| |competitors the business has. |

|QUALITY CIRCLES |A small group of staff get together and discuss/suggest ways in which quality can be improved. QUALITY CIRCLES |

| |involve managers LISTENING TO THE STAFF who are the experts involved in the production process. Quality Circles |

| |can maintain and improve quality because they allow managers to use the advice from the workers who have the best |

| |understanding of production (due to their day to day role within the production process). |

|CUSTOMER FEEDBACK |Customers are asked what they think of the goods/service - this can be done through customer questionnaires and |

| |suggestion boxes |

QUALITY FOR CUSTOMERS

To customers, a quality finished product or service will be one that SATISFIES THEIR NEEDS and provides VALUE FOR MONEY. This means that it is RELIABLE (will work) relative to its’ COST Eg a BIC biro is a quality product because as a disposable pen as it does what consumers want (ie it writes) and it works quite well relative to its low cost.

In addition to the quality of the product itself, customers will also be interested in the quality of CUSTOMER SERVICE from a business.

Customer service/care is a crucial element of business success - every contact a business has with customers is an opportunity to improve its reputation and increase the likelihood of further sales. Good service is always doing the right thing in the right way - sales and profitability depends on keeping customers happy.

After-sales service must be included as if anything goes wrong or customers need help then they want their queries answered/goods fixed/ or replacement goods (if appropriate).

Thus customer service/care is important because it:

➢ builds loyalty

➢ builds brand image

➢ improves reputation

➢ improves profits

➢ leads to customer satisfaction.

Customer Service is all about the following.

✓ STAFF POLITENESS

✓ STAFF HELPFULNESS

✓ TIME TAKEN TO BE SERVED

✓ SOLUTIONS TO PROBLEMS OR COMPLAINTS

Customers are interested in Customer Service because they usually want to feel that their custom is important and that if anything goes wrong they will get a satisfactory solution.

All of the above points mean that quality is an important issue for businesses. This is because if finished products or customer service do not meet buyers’ standards then they will stop buying from a business and will take their custom elsewhere.

A business can use the following activities to improve the quality of the products or service offered to customers:

• Employ Mystery Shoppers

• Have a Free Phone Help Line or E-mail Help Desk

• Have a FAQ’s (Frequently Asked Questions) Section on their website

• Reward Loyal Customers (Discounts or Loyalty Cards)

• Listen To Customer Views – suggestion boxes, comment cards

• Deal With Customer Complaints Efficiently

• Reassure Customers by Providing a Guarantee or Warranty

|BENEFITS OF |COSTS OF |

|GOOD CUSTOMER CARE |POOR CUSTOMER CARE |

|Satisfied and loyal customers who will return and make further |Damage to businesses reputation and image |

|purchases | |

|Good reputation for the business |Falling sales resulting in reduced profit |

|Makes the business more attractive than competitors |Unhappy customers who will take their business elsewhere |

|Increased market share |De-motivated staff |

|Staff may be more motivated |Reduced market share |

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The 4 P’s

Daz Liqui-tabs

Daz Tablets

Daz Powder

Low Price Powder

Low Price Powder

High Price Powder

High Price Powder

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