Marketing Management “Marketing ideas have made singularly little penetration into the centres of influence of the construction industry. To some extent this follows from the character of the industry as an agglomeration of service organisations, not without structural relationship to one another, but serving a clientele from which individuals seek service very infrequently.” (Jepson & Nicholson, 1972: p.1) Although times have and are changing the above statement despite being written over twenty five years ago is still to some extent very true. The subject of this assignment is a construction firm that has recently designed and implemented a marketing management strategy. The objective of this assignment is fourfold, firstly the companys approach to marketing management will be documented this will then be related to marketing management theory Then by analysing data collected through research the effectiveness of the strategy will be discussed. Finally using marketing management theory as a foundation recommendations will be made to identify where the initial strategy could be improved in order to promote future business development and success, in line with the strategic mission of the company.
The organisation in question has strong foundations, since its incorporation in the mid fifties turnover has grown in line with inflation. In 1984 the Company was purchased by the son of the original managing director, he took up the role of new managing director. By the beginning of the 1990s it became apparent that the company had reached a stage where it was no longer a small “hands-on” enterprise. The level of turnover and number of employees had increased at such a rate that the organisation now employed a sizeable management team. All with an experienced technical background in the fields of surveying, estimating or site management and who had either progressed through the ranks of this firm or other organisations of a similar size and nature.
The company was at the time of the initial implementation of this initiative inexperienced in marketing management and strategy. However, the senior personnel realised the company had reached a stage where future business growth wasnt just going to come from hard work, doing the job well and relying on a good reputation. The view was taken that it was necessary to pursue new ventures to bring about growth and development. The Company has a large contracting portfolio with contracts completed for public and private clients in the commercial and industrial sectors. Appendix A shows the diversification with the selection of recently completed projects and list the clients for whom work has been carried out.
The reason for a firm of this size carrying out such a wide range of activities is largely based on the belief that in such a competitive industry as construction it has been necessary to take on whatever type of work was available in order to maintain a consistent order book. In developing the companys marketing management strategy numerous workshops were held, attending these were the company directors and two senior managers. Information on the company was gained from interviews with the persons attending these workshops. There are many reasons for running a business, this company wanted to be clear on why it wanted to improve or introduce the marketing effort so that appropriate goals can be set. The aim of wanting to grow the business by increasing sales while at the same time sustaining the level of profit margin is the underlying factor in this case.
Turnover could be increased very easily as most of the work is procured on an invitation to tender basis where the deciding factor is almost always price, however, “buying in” work will not necessary have a long term positive effect. The secondary objective was to secure profitable business relationships. These objectives are reflected in the mission statement in the appendix B. The development of the mission statement was the start of the companys marketing management initiative. The companys overall objective in the eyes of the leaders was defined. It was thought the development of a mission statement would provide the foundation needed.
Perhaps the implementation of a mission statement doesnt have a direct link to the theory of marketing management however its place in the overall field of strategy is illustrated below. “A firms mission is top managements view of what the organisation seeks to do and become over the long term. Expressed in the form of a mission statement it provides a publicly available summary of the long term goals of a firms top managers.” (Barney, 1997: p.10) After the preliminary stage it was decided that careful and critical examination of the company would be needed. The questions of what do we do well and what do we do badly ? were asked, however, analysis of “what we do?” was first necessary. Previously there had been no formal categorisation so the next step was to analyse the business in relation to its markets. It became apparent that this was impossible without analysing the different business activities and categorising the market areas.
The categories for such a division were decided upon as being type of client, sector of work, type of work, type of contract and location of work. These divisions produced provided the workshop team initially with the sufficient tools for analysing the business. The areas highlighted under these headings are shown in appendix C. This way of thinking doesnt have a direct link to marketing management theory but can be proved to be a form of market segmentation. For the construction industry the application of marketing theory in order to segment the market is not directly appropriate, but it can be applied in the way stated to produce effective results as the common goal is the “identification of target markets”.
Even though demographic, ethnic, religious and national classification are not appropriate as regards construction, industry own classifications appear to make data collection and analysis possible. “Market segmentation is the analysis of the total demand in a market into its constituent parts, so that different sets of consumers, with distinctive needs and behavioural patterns, can be identified,” (Page, 1995:p.40) It would become apparent later that the market segmentation would be extremely useful when analysing markets. At this moment the initial divisions would help the effort of gathering information from various sources enabling critical analysis of the company. “From the customers point of view, the information process is the least visible of all the marketing functions. It is, nevertheless, the basis of all marketing activity. If the product / service is said to be the cornerstone of marketing, then it must be remembered that good products / services accurately reflect the needs and wants of customers, which can only be ascertained by gathering information.
Information provides the means for a company to fulfil the marketing concept,” (Lancaster & Reynolds, 1995: p.57) Examination of the company began by using the personal experience of the persons attending the workshop. In this forum, lists were made of things that were likely to happen in the business environment which could have beneficial or negative effects on the companys fortunes. Subjects that were concentrated on were, new technology such as Information Technology and the latest building methods, the development of communication methods and any known developments within local and general government. This type of analysis of the macro environment could be perceived as a form of STEP or PEST analysis. From it the company compiled a list, developed from the personal experience of the workshop members, of all the external factors affecting the organisation. Further factors relating to the proximate macro environment about markets and competitors were also noted.
These environmental factors are in a broader context and are ones that the organisation has little or no control, however, they could highlight the marketing opportunities and threats of the future. “Successful companies recognise that the environment is constantly spinning new opportunities and threats and understand the importance of continuously monitoring and adapting to the changing environment.” (Kotler, 1997 :p.147) The next stage was the development of the organisations strengths weaknesses opportunities and threats through a SWOT analysis. First came the opportunities and threats using the results of the analysis of the external environmental factors. Using a pragmatic approach all things on the horizon which could have a negative effect on the business. Including not knowing key competitors well enough, changes in government spending. It was found the most of the threats were also opportunities and vice versa, depending on how a firm made predictions and reacted to changes.
From the list produced the top three items that: had an extremely high probability of happening and a potentially high impact on the business were identified. Following this the internal factors were considered, highlighting the sectors that the panel believed they were good at (internal strengths) and areas were they were lacking in some way and where there was potential for dangerous situations (internal weaknesses). This type of SWOT analysis gave the firm “the means by which to identify its own strengths and weaknesses as they relate to external opportunities and threats.” (McDonald, 1995: p.28) Following SWOT analysis further investigation into the business was required as the SWOT had only dealt with the personal views and experience of senior personnel. The various business classifications brought about following segmentation were analysed for the preceding five years. Factors analysed were profit, turnover, levels of enquiries and level of competition. As most of the work in the building industry is gained through tendering and selective tendering the competition factor would be the average number of companies tendering for a particular project. All agreed profit margin analysis was particularly important as profit margin was fundamental to both survival and future growth.
Insufficient margins are unlikely to give the business the freedom to choose the best strategic option because of the impact on break even levels. From the data analysis the following conclusions were drawn, the majority of the companys turnover came from work on schools and colleges and the industrial sector from the construction of warehouses and other similar buildings. Over recent years there had been a swing, however, towards work in the leisure industry. Industrial and commercial work had risen while public work had remained constant as the overall turnover increased. As far as profitability was concerned it was difficult to see any particular definite trend as to the more and less profitable sector of work.
As regards the other areas of analysis, design and build work had increased steadily over the last couple of years and had proved profitable but was also considered an area where the company lacked experience. Repair and maintenance work accounted for a small percentage of turnover but was highly profitable. Location analysis didnt prove any particular use apart from the fact that contracts carried out outside the north west region were generally for existing clients. At this stage the company didnt have the set-up and was reluctant to venture further a field unless it was to carry out work for valued clients. Following the analysis and information gathering stage, the workshop team were in a situation where numerous internal and external factors affecting the companys ability to achieve profit and sales had been identified. They were asking the question How do we reach our goal using the results of the analysis undertaken? In order to make marketing management decisions some kind of formal marketing planning would now be required. “There can be little doubt that marketing planning is essential when we consider the increasingly hostile and complex environment in which companies operate” (McDonald, 1995: p.21) The team focused their attention on the options for development.
Stay offering our regular clients the same services which would only be possible with the large clients that carryout regular building work and profitability would need to be maximised by reducing costs through increased efficiency. Provide a new type of service to existing clients possibilities included offering regular repair and maintenance service or offering the “complete service” from the initial design stage to the finished product. The advantage would be that the company would be dealing with clients where good stable relationship existed but the disadvantage was the companys unfamiliarity. Another option was to offer the “usual” service to a wider range of clients, not necessarily meaning a different type of client but to increase the marketing effort as regards selling the company or perhaps by widening the geographic region. This type of strategy undertaken by the company fits well with the theory of product / market expansion. Meaning the route chosen to achieve company goals through the range of services it offers to its chosen market segments.
The simplification of the firms competitive situation into only the two dimensions of products and markets. Despite not actually using a framework such as Ansoffs expansion matrix the group managed to simplify their task to produce a logical path towards their objectives. “Marketing objectives are about each of the four main categories of the Ansoff matrix, market extension, product development, market penetration and diversification.” (Baker, 1993: p.85) During the planning stage it became clear that two strategies were equally attractive. However, it would be necessary to focus on one particular one very clearly for a given time because resources are likely to be too limited to spread thinly. The plan of action was to stay the same for six months to consolidate customers, to ensure profitability and develop the action plan investigating the marketing methods needed in the months to come. Following this the idea was to push forward and target new customers enlarging the client base and awareness of the company within the current sectors that the company was already involved. “There may be any number of strategic options, which give us the chance to be creative in thinking about a variety of routes that might be chosen to achieve company and marketing objectives” (Lancaster and Massingham, 1993: p.354) Finally the product development strategic option was employed, where the plan was to widen and develop its range of services for existing clients.
The sectors of work with traditionally a higher share of turnover or where the company had experienced growth in recent years were areas targeted. Together with the sectors where the trend was towards increased number of new enquiries and the areas of least or diminishing competition. Although design and build work looked an attractive option on the face of it, potentially highly profitable and an area of low exploitation by the competition. It requires specialist resources some of which the company did not possess, however, there was the option of outsourcing certain constituents of work. The company was also inexperienced in this area showing that it is a risky proposition.
However, continued exploration of this area was agreed at the firms current pace. Having determined the range of segments in which they will participate, and nature of services to be offered, the next decision in formulating the marketing strategy is to determine the utilisation of individual elements of the marketing mix and the relative degree of reliance to be placed on each. In accomplishing the market development strategy of promoting the companys range of services to a wider audience the work group fitted to the theory of the marketing mix. Hence the allocation of the 4 Ps, product, price, place and promotion. “The marketing mix is a set of market tools that the firm uses to pursue its marketing objectives in the target market” (Kotler, 1997: p.
92) Having determined the desired markets that the company would compete in the next step was organising a promotional strategy in these area. Following the apportionment of a marketing budget discussions were held in order to dec …