Tag Archives: Research

Vitamin Enhanced Water Could Make a Bigger Splash

28 Tuesday Jun 2011

Posted by in Marketing Strategy

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There is a global opportunity for companies producing vitamin enhanced water, but do the marketing executives see it? China is the second largest market for energy drinks in the world. According to research by Zenith International (2009), the United States and Canada combined to consume 37% of the overall volume of energy drinks in 2008 (Just-Drinks.com). The Asia Pacific region boasts 30% of the global volume.

With a strong distribution channel, competitive pricing, smart positioning, and aggressive advertising Glaceau VITAMINWATER® enhanced water can become the number one energy drink in China.

Overall sales of energy drinks worldwide have doubled in the last five years (Roethenbaugh, 2009). Clever marketing and product positioning has blurred the line between energy drinks and the six categories of water that struggles to compete in the same market. Flavored waters muddy the market with nothing more that bottled water with a twist. Clustered water, the latest version of ultra purified H2O, has yet to take hold. Fitness and oxygenated waters appeal to athletes and casual gym patrons. Premium waters are typically enjoyed at fine restaurants as an alternative to tap water. Vitamin enhanced waters are targeted to health conscious individuals.

The market leader in energy drinks manufactures and distributes a product containing high levels of caffeine. The public perception is that caffeine is the most effective stimulant for energizing your mind and body. However, other energy drink companies have made attempts to make a splash in the market by using energy boosting ingredients such as green tea and ginkgo biloba (AllBusiness.com, 2005). These particular products find themselves competing with soft drinks, smoothies, and iced teas for market share—and as a result, barely providing competition for the caffeine based products.

The most compelling statistic that would encourage Glaceau to re-position their VITAMINWATER® enhanced water in the energy drink market is the 12% annual growth prediction taking sales to over $9 billion dollars in the U.S. (ReportBuyer.com, 2007). Based on this prediction, and the knowledge that the Asia Pacific market enjoys similar sales forecasts, the timing is perfect for Glaceau VITAMINWATER® enhanced water to enter this new market. The industry for bottle waters, fitness drinks, and enriched waters is flourishing. PepsiCo cites the declining popularity on carbonated soft drinks is partly responsible for the increase in sales of their sports drink, Gatorade (Farrell & Rappeport, 2010).

The largest segment for the VITAMINWATER® enhanced water product in the Asia Pacific market is in China. The most recent census data shows the average total consumption expenditure for a Chinese family is 7142 Yuan, or approximately $1,053 U.S. dollars (Coutsoukis, 2004). Nearly 38% of the total expenditure is on food. Based on this information alone, Glaceau should be skeptical when deciding whether or not the market can sustain the energy drink business. One existing company has a proven track record in the Asia Pacific market.

Red Bull, the world’s leading manufacturer of energy drinks, has enjoyed several years of success in China. However, their flagship product is targeted specifically to males between the ages of 18 and 24 (Yates, 2008). Glaceau VITAMINWATER® enhanced water, with a slight product repositioning, can cast a wider net and attract a strong target audience comprised of males and females between the ages of 18 and 49. China has approximately 700 million people that fall within this demographic model. Many, of course, do not have the income to justify purchases outside of the bare essentials. However, companies currently with market saturation have isolated the target audience.

Constant adjustments to the U.S. – China trade agreements need to be considered when planning a manufacturing and distribution strategy. There have been several talks within the last few months regarding trade barriers (Lawder, 2010). Depending on the outcome of the trade agreements between the United States and China, Glaceau may need to establish production and distribution within China as opposed to exporting the VITAMINWATER® enhanced water product from the United States.

A few trade sectors in China are suffering from overcapacity (Gunn, 2010). The overcapacity is mostly within the industrial and commercial sectors. Environmental issues and increasing social tension are a few current weaknesses that should be monitored, but not distract from the plan to introduce VITAMINWATER® enhanced water to the Asia Pacific market. China’s overall economic position is strong—boasting a $53 billion dollar surplus in the first quarter of 2010.

The China Food & Drink Report (2010) exposes one of China’s weaknesses as their under-developed agriculture and distribution system (Business Monitor International). Moreover, the health scares with products produced in their own country has opened a door for imports. The timing could not be better for Glaceau VITAMINWATER® enhanced water to spring into the spotlight, and begin an aggressive campaign to dominate the energy drink market.

The Chinese government is overwhelmed with issues regarding the environment. While the 8% average growth has enhanced the standard of living for the population, it has also contributed to their environmental challenges. Any company, regardless of origin, with the intent to develop a manufacturing facility in China will find most of the opposition coming from special interest groups. Glaceau must continue to monitor and assess political risks. Coca-Cola Company has been conducting business in the Asia Pacific market for many years. Their experience in this area will help foster the necessary relations with key government officials and organization for success.

Glaceau is a privately owned subsidiary of Coca-Cola Company. The company began manufacturing enhanced waters in 1998. The Smartwater product, an electrolyte enhanced water, is the foundation for the VITAMINWATER® enhanced water product. Glaceau VITAMINWATER® enhanced water is produced in eleven flavors and enriched with energy enhancing natural ingredients and vitamins. VITAMINWATER® enhanced water is positioned to compete with traditional bottled water, sports drinks, and flavored waters. The brand is recognized world wide as simply another variation of enhanced bottled water.

Glaceau has positioned its VITAMINWATER® enhanced water product as a healthy alternative to soda. However, the Asia Pacific market currently perceives VITAMINWATER® enhanced water as a product for the affluent. VITAMINWATER® enhanced water in the Asia Pacific market is available in upscale restaurants and high-end retail outlets. This is in complete contrast to the public perception of the same product in North America. The company acknowledges the need to tap into a market with the potential to dwarf sales in other global markets.

What if, and at the same time, VITAMINWATER® enhanced water is re-positioned as an energy drink?

The competition for energy drinks in China is far less crowded than with specialty waters. This is unexpected considering that caffeine-based energy drinks originated in Japan and Thailand (AllBusiness.com). The Austrian-distributed drink, Red Bull, has dominated this category for several years. Glaceau can make a strong impact and at the same time broaden the definition of energy drink to include healthy alternatives. Health conscious consumers, regardless of location, would cross over to create a new market.

All mind and body stimulating energy drinks that would compete with VITAMINWATER® enhanced water in the Asia Pacific market contain caffeine. Glaceau boasts no artificial flavors, colors, are any chemical stimulants as contained in the products of the competitors. Glaceau can leverage their all-natural approach as the differentiator that will eliminate the caffeine-based products from the competition. The current VITAMINWATER® enhanced water product line will not be adjusted or altered for the Asia Pacific market, but rather re-positioned as a healthy alternative energy drink.

There are over 500 energy drink products worldwide. Five producers dominate the market share.  Red Bull is the leader with 42.7% overall sales. Hanson Natural, the manufacturer of Monster brands has 16% of the market. PepsiCo has pushed their SoBe and Amp products to an impressive 13.2%. Rockstar International enjoys 12% and Full Throttle by Coca-Cola has 10% of the market (Simon & Mosher, 2007).

Each of these producers of energy drinks leverage caffeine as their main ingredient. Glaceau VITAMINWATER® enhanced water, repositioned to compete in the energy drink market, would enjoy immediate success by attracting health conscious energy drink consumers. The assumption is that many consumers remain leery of the chemical-based energy drink, and because there are no alternatives choose to consume the caffeine riddled energy drinks. There is little competition in the energy drink market for products that bring a healthy natural alternative to the mix.

Glaceau VITAMINWATER® enhanced water has a strong global presence, with the exception of the Asia Pacific market. This is due mostly to the fact that the product was perceived by the Asian population as an upscale water only available to the affluent. In all fairness to the consumers, without a marketing plan to properly position the product—there would be no reason to think otherwise. The strategy is to create a drink category that attracts consumers from both the energy drink category and the fitness water category.

Better positioned as an energy drink, Glaceau VITAMINWATER® enhanced water can make an immediate impact to the Asia Pacific market by advertising the differentiator. VITAMINWATER® enhanced water is an all-natural alternative to the chemical laden products in a can. Unlike other energy drinks, VITAMINWATER® enhanced water is safer for a broader age group. Energy should be replaced naturally. With Glaceau VITAMINWATER® enhanced water, you can reenergize and “harness your energy—naturally.”

References

AllBusiness.com (2005). In the energy drinks market by 2009 the United States is expected to have the largest market. Business Wire. [Electronic version] Retrieved July 21, 2010, from http://www.allbusiness.com/consumer-products/food-beverage-products-nonalcoholics/5178192-1.html

China Food & Drink Report – Q3 2010. (2010). Business Monitor International. [Electronic version]  Retrieved July 26, 2010, from ProQuest: http://proquest.umi.com/pqdweb?index=7&did=2062171471&SrchMode=1&sid=4&Fmt=2&VInst=PROD&Type=PQD&RQT=309&VName=PQD&TS=1280177041&clientId=74379.

Cateora, P. & Graham, J. (2007). International marketing. New York: McGraw-Hill Irwin.

Coutsoukis, P. (2004). Per capita annual living expenditure of urban households (2004) – China statistics census. Retrieved July 24, 2010, from http://www.allcountries.org/china_statistics/10_7_per_capita_annual_living_expenditure.html

Farrell, G. & Rappeport, A. (2010). PepsiCo net income falls 3%. Financial Times. [Electronic version]  Retrieved July 26, 2010, from ProQuest: http://proquest.umi.com/pqdweb?did=2087426421&sid=1&Fmt=3&clientId=74379&RQT=309&VName=PQD

Gunn, N. (2010). Coface’s China country rating and business climate rating. Retrieved July 21, 2010, from http://import-export.suite101.com/article.cfm/cofaces-china-country-rating-and-business-climate-rating

Just-Drinks.com (2009). Energy drink sales hindered by Thai decline – research. Retrieved July 20, 2010, from http://www.justdrinks.com/analysis/energy-drink-sales-  hindered-by-thai-decline-research_id98736.aspx

Lawder, D. (2010). US-China talks to focus on trade barriers—Geithner. Retrieved July 26, 2010, from http://www.reuters.com/article/idUSNLLIGE64020100518

ReportBuyer.com (2007). New report predicts energy drink sales in the U.S. to exceed $9 billion by 2011. Retrieved July 20, 2010, from             http://www.reportbuyer.com/press/new-report-predicts-energy-drink-sales-in-the-us-to-exceed-9-billion-by-2011/

Roethenbaugh, G. (2009). Global energy drinks market 2003-2008. Retrieved July 25, 2010, from http://www.researchandmarkets.com/reports/c29596

Simon, M. & Mosher, J. (2007). Alcohol, energy drinks, and youth: A dangerous mix. Retrieved July 20, 2010, from http://www.marininstitute.org/alcopops/energy_drink_report.htm

Yates, D. (2008). Is coffee an old man’s beverage? Retrieved July 21, 2010, from http://www.energydrinkreviewer.com/

Public Relations: The New Marketing Ethos

04 Friday Feb 2011

Posted by in Marketing Strategy

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Many paradigm cases of public relations, advertising, and marketing activities exist to provide a basis for believing there are few differences between them. Advertising and public relations are individual instruments of marketing. Both have strengths and weaknesses, and each has a specific purpose. However, the gap between advertising and public relations is closing. Eventually, there will be more similarities than differences—and as a result, public relations tactics will take the place of traditional advertising methods.

Social Media is a Marketing Conduit

The popularity of social media is largely responsible for the convergence of public relations and advertising. Social media communication channels are accelerating the inevitable overlap in definition between public relations and advertising. Public relations activities are a form of marketing. Public relations communicates information about a company and its products and services—but from a neutral, broad, human-interest perspective. Whereas, advertising is more focused on a persuasive, non-personal marketing communication (Arens, et. al., 2009, p. 4). Both methods of marketing, however, require viable and effective communication channels.

Social media is quickly becoming the desired conduit for social marketing. Companies selling ideas, attitudes, and behaviors as opposed to products and services first realized social marketing in the 1970s. Social marketing and public relations are both designed to influence a target audience or general society. Social media—not available in the 1970s—has given public relations professionals a conduit to their publics. Social networking has extended the principles of marketing and redefined the marketing mix.

The four ‘P’s of marketing—product, price, place, and promotion—are joined by four additional ‘P’s. Marketing communications across social media channels require and understanding of the expanded marketing mix. The social marketing ‘P’s include publics, partnership, policy, and purse strings (Weinreich, 2010). A social marketing or public relations ‘public’ is the target market, special audience, or segment of the general public identified by an organization. Market research is often used to isolate and group individuals for the purpose of targeted marketing communications.

Social media channels, as with most Internet-based communication conduits, are easy to penetrate but difficult to control. While it is simple for public relations professionals to participate in social media activities—such as forums, blogs, and moblogs—it is impossible to control access to the content. Moreover, the Internet encourages content sharing and site linking making it difficult to know exactly who is ultimately at the receiving end of a social media communication.

Public relations strategies include providing honest, objective information to various publics through effective communication channels (Shauib, 2011). Social media has evolved from a communication channel to a marketing conduit. Press releases, one of the most effective tools for a public relations agent, provides one-way communication to a company’s publics. Social media, however, includes mechanisms that will allow the publics to communicate back to the company. Similarly, brands are using social networking to create goodwill with its consumers and prospects by encouraging an open dialog between the company and the consumer.

Social media bolsters partnerships between businesses with complementing products or services. Partnerships and strategic alliances can amplify brands, enforce messages, and influence public opinion.  Kellogg Company, for example, partnered with the National Cancer Institute to raise awareness by showing the relationship between eating habits and the likelihood of contracting cancer (Caywood, 1997, p. 439). Social media is an excellent communication channel for cause-related marketing.

Policy, one of the social media specific ‘P’s in the marketing mix, takes place when a public relations message motivates individual behavior or influences change. The use of public relations in education and Government organizations is primarily for public persuasion. A public relations professional can leverage social media channels to communicate information about the current policies of government agencies (Cameron, et. al., 2008, p. 408). If successful, promoting policies through social media communication channels will encourage support from the people.

When social media is used to raise awareness for non-profit and cause-related organizations, there is usually a strong message that pulls on the heartstrings. At the same time, a compelling call-to-action pulls on the purse strings. Social service organizations rely on public relations marketing to not only develop public awareness and recruit new members, but also raise and replenish operating funds. Fund-raising events are critical to the longevity of a non-profit organization.

Not all press releases are the same

While social media channels deliver public relations marketing messages to target audiences in real-time, the approach and composition of a message for social media is different than traditional press releases (Dubois, 2010). Public relations is quickly becoming the marketing approach of choice for businesses of all sizes. A public relations professional relies heavily on the traditional press release to compliment other public relations activities.

The use of social media to deliver press releases moves public relations ahead of traditional advertising as an effective marketing communication option. Any communication—press release or otherwise—requires a different strategy when delivered using an online method. Every online communication should be designed for two-way communication. Dean Guadagni (2009) identifies the three common non-interactive as: broadcasting, announcements, and crowdsourcing. However, crowdsourcing offers a feedback loop between consumers and businesses.

A press release or other marketing communication deployed across Internet channels should always be positioned as an interactive communication. Not only should the message engage the audience, but also all interaction should be acknowledged and an open dialog created. A company can glean information about their publics by offering surveys and polls as part of the message strategy. Additionally, feedback from the target audience presents a company with insight into the psyche of their customers. Social media—when used for marketing communication—should not be exempt from targeted communication strategies.

Target audiences, market segments, and defined publics are unique groups that can impact the company’s goals. The process of identifying a target audience for public relations and advertising is similar. A public relations professional defines his or her ‘publics’ by using traditional methods of gathering data through primary research. This approach can be expensive, but the results are specific to the business needs. In other words, primary research approaches—such as focus groups, surveys, interviews, and observation—allow companies to identify and learn more about their target market.

Secondary research is less costly and easier to obtain. The results, however, may not be as accurate as information gleaned from primary research. Secondary research is typically a great way to quickly identify a target audience. Basic demographic, psychographic, and geographic information is important for understanding the ‘anatomy’ of the members in a target audience. This information alone is enough to develop communication strategies across social media channels, but a physical address, email address, or phone number is necessary for a direct marketing communication.

Both advertising and public relations use a mass marketing or broadcast approach to deliver messages to their respective target audience. A public relations professional will cast a wider net than an advertising professional when identifying their publics. A segmented public encompasses the target audience, but also includes secondary audiences, policymakers, and gatekeepers (Weinreich, 2010). A public relations campaign is intended to create goodwill for a product, company, or cause. One common goal of both advertising and public relations is to communicate with the target audience or segmented public in a language best understood.

Advertising is Becoming Less Effective

Every successful message strategy begins with an effective use of language. Whether the marketing campaign uses advertising methods or public relations tactics, the message must be written specifically for the intended audience. The clarity and simplicity of a message has a direct impact on the success of the communication. Jargon and clichés should always be avoided. A public relations message can lose credibility if euphemisms or discriminatory language is used (Cameron, et. al., 2008, p. 150).

Advertising messages do not carry the same credibility as pubic relations messages. Consumers know that advertisements are designed to sell a product or service. Most consumers have become callused against catchy slogans and gimmicks, leaving the door wide open for public relations style communications to replace traditional advertising. The writing styles between an advertising copywriter and a public relations writer is vastly different. Advertisements typically concentrate on a single benefit of a product or service. Public relations materials are written in a journalistic style, while offering more in-depth information about a company, product, or services (Mathlesen, 2010).

While advertising continues to have its place in the marketing toolbox, public relations is proving to be a more versatile solution. Toyota Motor Corporation experienced first hand the issues surrounding the use of advertising in a situation better suited for public relations. In March 2010—in the wake of public concern over safety issues—Toyota spawned an advertising campaign designed to promote brand loyalty and build retention. The problem, however, was that Toyota failed to address specific concerns surrounding congressional inquiries and safety investigations. Moreover, Toyota did not seem humbled by the problems and made no effort to apologize to their customers (Fredrix, 2010).

Toyota’s advertising arrogance had a negative impact on their loyal following. A public relations campaign would have provided the goodwill needed at a time when the public was unsure about the company. Additionally, public relations becomes the credibility conduit between the consumer and the company. The public trusts anything written in a press release or other public relations communication. Ford Motor Company was faced with similar challenges in 2000 when many Bridgestone tire clad Ford Explorers were responsible for over 250 traffic deaths. Ford chose to reduce their advertising efforts until the public trust was regained.

The general public is skeptical of advertising. Advertising is considered self-serving and ineffective. Branding is an important part of marketing. Public relations tactics continue to be more effective than advertising for building brands. The top five brands according to The Economist magazine are Google, Apple, Coca-Cola, Starbucks, and Ikea. In contrast, the top five advertisers are, General Motors, Proctor & Gamble, Ford, PepsiCo, and Pfizer (Elliott, 2010).

Public relations offers credibility, clarity, and cost advantages over advertising. The public has weathered advertising promises for many years. No matter how cleverly disguised, an advertisement is still designed to sell. The journalistic approach of public relations messages creates a newsworthy credibility that will never exist in advertising. Claims and comparisons sometimes cloud the underlying intention of an advertisement. A public relations message is always clear, concise, and directly to the point.

One of the greatest advantages of public relations over advertising is the cost. Marketing publicity is a form of public relations that involves getting stories published about a company’s products and services. Each product inherits the credibility of the publication. Consumer Reports, for example, is known for unbiased reviews and comparisons of thousands of consumer products. Several magazines and websites specialize in restaurant and travel reviews. All of this publicity is impartial and free.

Public relations is viral. A public relations campaign can be spread across many communication channels simultaneously. Social media offers additional advantages to public relations over advertising. Word of mouth communication is commonplace on the Internet. With a single click of the mouse, a consumer can easily share information and opinion about a product or service to thousands of individuals.

For years, the words advertising and marketing were synonymous. The recent economic challenges have forced consumers to make cutbacks on products and services. Advertisers are creating more aggressive campaigns in hopes of creating a spending frenzy. In the aftermath of government bailouts and mass media coverage of mismanaged corporations, the public is desensitized to advertising. Companies need to bring themselves into the public spotlight and win the trust of their target audience. Public relations produce goodwill in the company’s various publics (Turney, 2001).

Public relations activities blaze the trail so that advertising is more effective. Moreover, advertising is more effective if following a public relations campaign. While advertising cannot perform the same function as public relations, marketing campaigns using public relations tactics can accomplish the goals of traditional advertising—increase sales and raise company or product awareness. Advertising will always be an important instrument of marketing. Public relations is proving to be a viable alternative to traditional advertising, and the lines between the two are fading. Public relations has supplanted advertising and quickly become the new marketing ethos.

References

Arens, W., Schaefer, D., & Weigold, M. (2009). Essentials of contemporary advertising. McGraw-Hill Irwin: Boston.

Cameron, G., Wilcox, D., Reber, B. & Shin J. (2008). Public relations today: Managing competition and conflict. New York: Pearson.

Caywood, C. (1997). The handbook of strategic public relations and integrated   communications. McGraw-Hill: Boston

Dubois, L. (2010). How to write a social media press release. Retrieved January 30, 2011, from http://www.inc.com/guides/2010/11/how-to-write-a-social-media-press-release.html

Elliott, J. (2010). Advertising vs. PR. Retrieved January 28, 2011, from http://www.tvaproductions.com/article/advertising-vs-pr—17.php

Fredrix, E. (2010). Toyota: No apologies for safety problems in latest ad campaign. Retrieved January 31, 2011, from http://www.huffingtonpost.com/2010/03/07/toyota-no-apologies-for-s_n_489229.html

Guadagni, D. (2009). Social media: 5 strategies for interactive communications. Retrieved January 28, 2011, from http://innerarchitect.com/2009/06/22/social-media-5-strategies-for-interactive-communications/

Mathlesen, S. (2010). Advertising vs. public relations. Retrieved January 30, 2011, from http://www.suite101.com/content/advertising-vs-public-relations-a187370

Shauib, Y. (2011). Publics and target audiences. Retrieved January 28, 2011, from http://yashuaib.tripod.com/id12.html

Turney, M. (2001). Public relations and marketing were initially distinct. Retrieved, January 25, 2011, from http://www.nku.edu/~turney/prclass/readings/mkting.html

Weinreich, N. (2011). What is social marketing? Retrieved January 28, 2011, from http://www.social-marketing.com/Whatis.html

Ethical imperatives of a marketing company

03 Sunday Oct 2010

Posted by in Marketing Psychology

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A marketing company is faced with a plethora of moral challenges. Considering that it is the responsibility of a marketing company to provide services on behalf of other companies, it stands to reason that any unethical decision or approach reflects on the company being represented by the marketing firm. Moreover, antitrust concerns are always prevalent due to the fact that the marketing company has access to internal knowledge of many companies—some of which are competitors in the same market.

Unlike other types of businesses, a marketing company must be trusted with a client’s most valuable asset—their customer data. In many cases, customer records for several companies are comingled and hosted on a common platform. The marketing company is responsible for protecting the integrity of the information, but at the same time ensure that the proprietary information is not shared with competitors.  All the while, the marketing company is expected to create revenue-producing campaigns.

A marketing company’s success is based entirely on the performance and effectiveness of their strategies and campaigns. If a marketing company represents several clients in the same industry, there is an inescapable moral dilemma. The marketing strategy for one company could benefit from knowing the marketing strategy and corporate direction of another. The marketing industry is crowded and fierce. Pressure to retain a customer could lead to unethical decisions by campaign managers and salespersons within a marketing company.

The temptation for a salesperson to leverage information from one account for the purpose of producing revenue-generating campaigns for another is not uncommon. Pressure from upper management, coupled with personal financial responsibilities, can influence the salesperson to make immoral decisions. If caught, the individuals responsible can face serious legal problems.  Velasquez (2006) defines one of the five characteristics of moral standards as one “not established by law or legislature” (p. 9). Marketing ethics are based on—among other things—advertising truthfulness and honesty, and privacy in database marketing.

Antitrust laws were designed to allow businesses to compete fairly. Having access to a competitor’s playbook—in this case, their marketing strategy—exposes an unfair advantage. The Federal Trade Commission created the Bureau of Competition to promote competition and protect consumers (Feinstein, 2010). The Compliance Division of the Bureau of Competition would be responsible for investigating complaints and enforcing the laws. Any legislation, passed or pending, should be in the foreground of all decisions made by an agency in the marketing industry.

A proven record of capabilities and performance is imperative, but not at the risk of a bad reputation. A marketing company that cannot be trusted to represent the best interest of their client’s will not sustain business. Moreover, the same effort and expertise should be used on every marketing campaign—regardless of the client. Ethical guidelines are critical to establishing a trustworthy reputation in the marketing industry. Enforcing the guidelines is critical for maintaining the reputation and business.

Before ethical guidelines can be established, research regarding ethics in the marketing industry must be conducted. Whether the research is empirical or conceptual, the results will be enough to formulate a series of ethical guidelines for the marketing industry. Research should continue until there is enough information regarding all current ethical dilemmas in order to establish an internal corporate ethical policy. The most prevalent ethical issues facing the marketing industry are product safety and reliability, advertising truthfulness and honesty, fairness in pricing, and forthrightness in selling (Murphy, 2002).

The American Marketing Association has established a code of ethics that provides a strong framework for which an internal, company-specific, code of ethics can be developed. The company’s ethical guidelines should include details regarding product development, promotion, distribution, pricing, and market research. Each area has its own unique ethical challenges. For example, ethic issues regarding promotion would encompass false and misleading advertising. Coercion is associated with the distribution or supply-chain process. The code of ethics needs to take into consideration every aspect of the business.

Marketing research has always been under the microscope of morally sensitive consumers. No one is comfortable giving personal information to a complete stranger. A corporate policy on ethics would offer support to the researchers in the field, and help alleviate any concerns by the survey audience. A published policy on the storage, usage, and privacy of information collected in the field will put at rest any concerns by the general audience. Additionally, an acceptable usage policy could serve as an addendum to the corporate code of ethics.

Corporate ethical guidelines concerning antitrust issues are becoming more important today than ever before. While the current code of ethics developed by The American Marketing Association concentrates on issues affecting consumers, there is little written regarding antitrust or business-to-business relationships. Legislation on the subject of antitrust has been in effect for over one hundred years.  The aim of antitrust legislation is to create a level playing field for competitors (Fontenot, 2010). At the same time, however, antitrust laws and corporate adopted ethic guidelines are designed to protect the organization.

A corporate guideline of ethics needs to go beyond the issues covered by legislation. The Sherman Antitrust Act of 1890, the Clayton Act of 1914, the Robinson-Patman Act of 1936, and the Federal Trade Commission Act of 1914 together ensure inter-firm competition without interfering with the spirit and creativity of the marketing industry. Standard Oil, Alcoa, American Tobacco, IBM, and Microsoft—to name a few—have faced charges for antitrust violations. These situations may have been avoided if an internal corporate code of ethics was developed and enforced.

The company’s code of ethics should be a culmination of two moral philosophies—moral idealism and utilitarianism. The moral idealism approach assumes many expectations drawn from industry standards to establish a universal acceptance approach (Sobel, 2010). The utilitarian approach will take into consideration social costs and benefits of the policies defined in the corporate code of ethics (Velasquez, 2006, p. 60).

The company’s code of ethics will ultimately define the ethical culture of the organization.

At one time or another, every company is faced with moral challenges. The need for scruples spans every department at every level. The need for written policies regarding the company’s position on certain ethical issues is crucial. A company-wide adopted code of ethics demonstrates the company’s moral responsibility. This is not only important to the employees, but many clients and prospects insist on such a policy. It is not unreasonable for a potential client to ask for documentation concerning service levels, continuity plans, and ethical standards.

Certain types of business conducted within a marketing company are bound by pre-existing regulations. For example, if a marketing company were to produce a campaign that leveraged information—such as personal health data—the HIPA regulations would need to be followed. Similarly, under certain conditions, the Sarbanes-Oxley Act of 2002 would be enforced to ensure the proper reporting of financial information resulting from campaigns.

A formal code of ethics should include sections covering the acceptable use of the company’s inter- or intra-net. A policy explaining the proper etiquette and protocol of communicating electronically is very important. A large percent of daily communication between employees and clients happens via email. The casualness of an email message sometimes lends itself to the inadvertent mention of sensitive company or client information.

Electronic communication has become the standard. This method of communication, however, exposes several vulnerabilities and concerns. Security of everyday, casual email messages is non-existent. The corporate code of ethics should address problems related to the flippant attitude sometimes portrayed in electronic communication. Casual comments can very easily be taken out of context and leveraged against a company for proving a lack of ethical standards.

Email etiquette and voice mail policies—at the corporate level—need to be well documented, distributed, and enforced as part of a corporate code of ethics. Email messages are no longer used only to send quick messages to the next cubicle (Woloch, 1999). Important corporate communications, such as policies and contract negotiations, are distributed across email channels. The simplistic nature of email communication lends itself to vulnerabilities as it is used more often to communicate sensitive information.

One of the most important considerations for adopting a code of ethics is current technology. New technologies are realized every day. Companies are beginning to leverage technologies that did not exist a decade ago. Social networking, instant messaging, and text messaging are becoming mainstream communication tools for businesses in every industry. The code of ethics adopted by any company should include current issues that are easy to understand and enforce. The code of ethics for a marketing company will need to expand beyond the typical policies for interoffice communication. Social media has become a viable communication channel for corporate marketing and advertising.

A company code of ethics should never be a company secret, but rather the roadmap for morality.

Every employee, at every level, within the corporate structure should be trained to understand, abide by, and enforce the company’s code of ethics. The employees are the face and voice of the company. Every action is subject to scrutiny. The company will succeed by standing strong, unified, and embracing the adopted code of ethics. However, when an employee recognizes a situation that is contrary to his or her own moral virtues, there needs to be a mechanism for grievance.

The company’s code of ethics must include the procedure for reporting unethical behavior. A formal grievance procedure will encourage employees to become actively engaged in enforcing the corporate code of ethics. Moreover, the company is making a global statement regarding the widespread acceptance of the code of ethics policies. The grievance procedure will need to include sections explaining the differences, and reporting steps, between an illegal action and an unethical action. An illegal action, for example, should be reported to authorities responsible for upholding the laws.

Once adopted, the code of ethics will be circulated throughout the organization. Every employee will be required to attend training sessions that will enforce the importance of a company code of ethics on ethics while explaining the details of each internal policy. Most large organizations have an extensive human resources department. The HR department is already well versed in the methods and techniques for training employees on company policies and procedures. The challenge, of course, is managing competing schedules and the demands of clients while isolating the necessary time to train every employee.

While it is true that companies conduct ethics training to comply with legal mandates, positive fallout includes increased employee morale and retention (Tyler, 2005). With a well-defined code of ethics and a company-wide adoption of the policies, ethical issues can be addressed before they become a concern. As policies within the code of ethics change to address the company’s social costs, new training will be necessary to implement and enforce these policies. The corporate code of ethics is always evolving.

A marketing company must not only adhere to their internal policies, but also inherit the policies of their clients. Every marketing company eventually becomes an extension of other businesses. Any wrongdoing by the marketing company is reflected upon its clients. In some cases, as with Nestle in the 1960s, the burden of responsibility is entirely with the company—not the marketing firm or outside vendors. After many years of unethical behavior resulting in public boycotts, Nestle pledged to adopt the WHO/UNICEF International Code of Marketing of Breast-milk Substitutes (Sikkink, 1986). The development of a formal code of ethics by Nestle Corporation might have thwarted the unethical actions by their marketing and advertising team.

Businesses of every size leverage marketing companies for promoting their products and services. Any marketing company, bound by its own code of ethics, will accept projects that will not jeopardize their moral standards. Ethical dilemmas occur when a marketing firm is forced to choose between their moral compass and their bottom line. The policies outlined in the corporate code of ethics are only a guideline for moral standards. The decisions faced by a marketing company may not be as black and white as a code of ethics. In these situations, the company must look beyond these policies.

Companies find themselves, many times, faced with an ethical dilemma. In many cases, the problem is not internal to the company, but the result of a decision made by a client. A marketing company can be asked to develop a marketing strategy for a controversial product. There will always be a desire to be profitable, but to what end? A formal statement of ethical principles will add the necessary structure for an organization to become strong moral stewards. At the same time, a code of ethics can cause personal conflict. A marketing company armed with a code of ethics becomes the moral compass for their clients and a beacon of societal principles for the consumer.

References

Feinstein, R. (2010). Bureau of competition: 2010 user’s guide. Retrieved August 28, 2010, from http://www.ftc.gov/bc/BCUsersGuide.pdf

Fontenot, R. (2010). Antitrust issues in marketing. Retrieved August 29, 2010, from http://hercules.gcsu.edu/~rfonteno/Strategic/Anti-trust%20Issues%20in%20Marketing.pdf

Murphy, P. (2002). Marketing ethics at the millennium: Review, reflections, and recommendations. Retrieved August 28, 2010, from http://www.ethicalbusiness.nd.edu/pdf/Marketing_Ethics_Millennium.pdf

Sikkink, K. (1986). Codes of conduct for transnational corporations: The case of the WHO/UNICEF code. [Electronic version] International Organization, 40(4), 815-840. Retrieved August 27, 2010, from JSTOR: http://www.jstor.org/stable/2706830

Sobel, J. (2010). Kant’s moral idealism. [Electronic version] Philosophical Studies, 52(2), 277-287. Retrieved August 27, 2010, from http://www.springerlink.com/content/h386362587434775/fulltext.pdf

Tyler, K. (2005). Do the right thing: ethics training programs help employees deal with ethical dilemmas Retrieved August 29, 2010, from http://findarticles.com/p/articles/mi_m3495/is_2_50/ai_n11841923/

Velasquez, M. (2006). Business ethics – concepts and cases. Pearson Prentice Hall. New Jersey

Woloch, L. (1999). Email etiquette. Retrieved August 27, 2010, from http://www.theproductivitypro.com/newsletters/Number%202%20March%201999.htm

IHOP: An American Icon–not exempt from marketing research

22 Saturday May 2010

Posted by in Marketing Strategy

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Successful and accurate marketing research evolves from a structured eleven-step process. Understanding and solving a marketing problem, as with any problem, can be over or under engineered. Over engineering simply means that unnecessary steps are used in the marketing research plan. Moreover, using too few steps would result in limited information and potentially less accurate results. The challenge is to leverage only the steps necessary to deliver an accurate analysis. In some cases, there will be marketing research projects that require all eleven steps.

The customer landscape is constantly changing

Well-established companies sometimes forget the importance of understanding the demographic anatomy of their current customers. Without information harvested from marketing research, a company runs the risk of losing business to competition. This is especially true if the competitor uses marketing research to inspire direction and drive marketing decisions. Marketing research is not a one-time process. Cultures and sub-cultures within our society are constantly changing—and as a result, consumers do not respond to the same marketing as in the past.

It is irresponsible for a company to not periodically survey their customers so as to better understand their wants, needs, and desires. The International House of Pancakes (IHOP) is far too familiar with the economic rollercoaster caused by stiff and faster moving competition. While the traditional tabletop survey cards are sufficient for improving the quality of service at the local level, a structured marketing research plan is required to provide the information necessary to remain competitive in the market.

The International House of Pancakes is a restaurant chain with over fourteen hundred locations. There are a few locations with overlapping markets, but each market is burdened with its own unique set of challenges. The International House of Pancakes must design a marketing research plan that is managed at the corporate level and deployed at the franchise level, but provides information relevant to all. A plan of this complexity will leverage all eleven steps in the marketing research process.

Burns & Bush (2008) identify the eleven steps of marketing research as: (1) establish the need for market research, (2) define the problem, (3) establish research objectives, (4) determine research design, (5) identify information types and sources, (6) determine methods of accessing data, (7) design data collection forms, (8) determine sample plan and size, (9) collect data, (10) analyze data, and (11) prepare and present the final research report (p. 63). In every marketing research campaign the first step remains the same—establish the need. Both, the corporation and the individual franchises need marketing research. Without information gleaned from the data collected and analyzed during marketing research campaigns, marketing managers at both the franchise and corporate levels cannot make educated decisions. The need for marketing research is constant, and based on the reality that the customer landscape is constantly changing.

Create a structured plan

One of the most difficult steps in the marketing research process is defining the problem. In some cases, many people within the organization have their own interpretation of the problems facing the company. Step two, defining the problem, is critical to the success of a marketing research plan. The International House of Pancakes has enjoyed moderate success in the shadow of an unpredictable economic time. Additionally, they have become complacent as it relates to catering to a changing market.

At the corporate level, the International House of Pancakes needs to define new market areas and better leverage existing opportunities. Franchises need to have a clear snapshot of how they are perceived in the eyes of their customers. Retention of existing customers is the springboard for new business. Creating a profile and understanding the wants, needs, and desires of IHOP’s existing customers will help define the model for marketing campaigns to attract new customers.

The International House of Pancakes is recovering from a loss of 3.1% in the fourth quarter of 2009 (Shauk, 2010). With the majority of consumers tightening their belts, it is imperative for the corporation to find the right marketing mix to survive, prosper, and grow. Marketing research can help determine areas with existing franchises and a lower market share. Information is key in making marketing decisions. The overall marketing research plan is designed around addressing and solving the problem.

Establishing research objectives, the third step in the process, presents a few challenges. Considering that the overall business is down, surveying existing customers will provide only a fraction of the information needed to complete the marketing research analysis. An in-store survey will suffice for capturing information regarding the merit of service, diversity of the menu, and quality of the food. Each franchise will offer an incentive-based survey to each of their patrons.

The franchise-level marketing research campaign will be coupled with a corporate-level survey that is designed to reveal any hesitation by prospective customers to frequent their local International House of Pancakes. The questionnaire will be presented through on-line channels as well as telephone surveys. The overall marketing research objective is to poll a minimum of two hundred individuals in each market area.

The fourth step, determining research design, is significant to the accuracy of information captured during the research campaign. A descriptive research design will be used describe the current customer or prospect. A cross-sectional methodology within the descriptive research approach is the best solution for establishing a benchmark of a particular point in time. The information from these surveys will be used to help recognize and forecast trends.

As part of the fifth step, researchers need to identify information types and sources. The International House of Pancakes has been in existence for over half a century. From the beginning, the company has expanded through franchising. The holding company, DineEquity, also owns the Applebee’s Neighborhood Grill and Bar restaurant franchise (Meece, 2007). Applebee’s and IHOP appeal to two different markets with some overlap. Both restaurant chains operate in the casual dining and family dining categories. Therefore, it would stand to reason that some information from previous marketing research campaigns could be shared.

Secondary data, such as the information captured over the past several years, can be used to backfill missing information from current campaigns. Information from a data provider is necessary for creating a list of contacts for the telephone survey. This secondary data will be broken down into segments based on geography, age, income, and number of individuals in the household. The primary data accumulated during the marketing research campaigns will be joined with the secondary information provided by one or more outside list providers.

The methods for accessing the data, the sixth step, will mostly revolve around unobtrusive techniques such as self-surveys over the Internet. Additionally, a telephone survey will allow a more personal approach. The telephone survey campaign will allow the marketing researchers to cover a wider area in less time than an in-home survey. A savvy researcher can monitor inflections and emotions in the voice of the persons being surveyed to measure the integrity of the responses (Tyebjee, 1997).

The seventh step in the marketing research process involves designing the actual forms used to collect data. One of the challenges is creating questions that will generate responses to satisfy the marketing objectives defined in step three of the marketing research process. The franchise-level in-store surveys, for example, will use a combination of dual-choice categorical scale questions coupled with several synthetic metric scale questions. Questions regarding gender, or any question requiring a simple “yes” or “no” response, will be developed using a dual-choice categorical scale. Questions concerning the quality of service, frequency of visits, or overall rating of a consumer’s IHOP experience will leverage either natural or synthetic metric scale questions. In all cases, the questions will be brief and clear—not leading, loaded, double-barreled, or overstated (Burns & Bush, 2008).

Determining the sample plan and size is a very important eighth step in the marketing research process for the International House of Pancakes. The in-store table card surveys should be used throughout the year to ensure the individual restaurants are listening to the voice of their patrons. A timeline needs to be determined to as the extent of the survey for the marketing research campaign. Information captured within the survey time window will be combined with data from other research initiatives in the same timeframe for final analysis.

Several factors are considered when deciding how many individuals is to be sampled. While accuracy and confidence of the data is a concern, sensitivity to the marketing research budget is a factor. A larger sample equates to more accurate results. Time and budget constraints, along with the logistics of surveying everyone in the target audience, makes it necessary to establish a sample size that will best represent the majority. A stratified sampling approach is recommended for selecting the list of individuals to participate in the telephone survey. The optimum number of individuals to contact, or sample size, is determined by using the confidence interval formula. Variability, confidence level, and accuracy are the three elements considered when leveraging this formula (Birchall, 2009).

Collecting data is the ninth step in the marketing research process. The method by which the data is collected is directly related to the accuracy of the information captured. For example, it is nearly impossible to know for sure who responded to a survey hosted on-line. In contrast, information captured during a telephone survey seems to have more credibility. An in-person method would provide the most credible results, but time and budget for this particular marketing research project limit data collection to telephone surveys, online surveys, and in-store self surveys.

Each data collection method poses certain risks of error. An on-line survey can result in data skewed by bogus responders and a misrepresentation of the population. Telephone surveys are met with challenges associated with the overuse of this conduit by traditional telemarketers. A substantial percentage of telephone survey attempts typically result in a non-response. An individual might refuse to take the survey or break-off during the interview.

Bringing it all together

The tenth step in the marketing research process is data analysis. Interpreting the information collected during the research campaign is accomplished by choosing an analysis type that will produce results to meet the research objective. The research objective is to describe the target audience. The International House of Pancakes’ survey results from current customers combined with the sample data captured from the on-line and telephone surveys can be summarized into percentages and averages.

The data collected across all research channels will be summarized. Categorical questions can be summarized using percent distribution. Depending on the categorical data, a frequency distribution might be used to summarize the findings (Burns & Bush, 2008).            Further analysis could include cross-tabulation to better understand the relationship between variables recognized during the marketing research campaign.

The final step in the marketing research process is the preparation and presentation of the findings. The marketing research report is a document that will be used by the key decision makers within the International House of Pancakes executive team. Decisions regarding business direction and overall marketing plans rely on the accuracy of the information contained in the final report. The marketing research report will include a full analysis of the information and recommendations as concluded by the marketing research team. The results will be compiled and presented in an informative manner that will best reflect the efforts of the marketing research team.

The International House of Pancakes is an American icon. But longevity does not equate to success. The company needs to change as society dictates and continue to serve the public at a level that will ensure repeat business and continued growth. Franchises need marketing research to provide information regarding lifestyle, interests, and spending habits of their respective target audiences. Corporate headquarters needs marketing research to help determine the viability of expanding into other geographic areas. The pulse of the community is measured through marketing research.

The eleven-step marketing research process is neither over nor under-engineering a plan necessary to deliver information to help marketing managers of the International House of Pancakes set direction and devise a marketing strategy. Every aspect of the corporation can benefit from a well-designed marketing research plan. The International House of Pancakes’ greatest assets are their customers. Understanding the psyche of these individuals is invaluable.

References

Birchall, J. (2009). Sampling and samples. Retrieved May 16, 2010, from             http://www.marketresearchworld.net/index.php?option=com_content&task=view&id=23&Itemid=1&limit=1&limitstart=2

Burns, A. & Bush, R. (2008) Basic Marketing Research. Pearson Prentice Hall. New Jersey.

Meece, M. (2007). Can the IHOP Corp. do for Applebee’s what it did for itself? The New York Times. [Electronic version]. Retrieved May 15, 2010, from http://query.nytimes.com/gst/fullpage.html?res=9400E3DD173BF932A2575BC0A9619C8B63

Shauk, Z. (2010). IHOP owner’s earnings hobbling back. Glendale News Press [Electronic version]. Retrieved May 16, 2010, from http://www.glendalenewspress.com/articles/2010/03/03/business/gnp-ihop030410.txt

Tyebjee, T. (1997). Telephone survey methods: The state of the art. [Electronic version]. The Journal of Marketing, 43(3), 68-78. Retrieved May 15, 2010, from JSTOR: http://www.jstor.org/stable/1250148