Effect of Culture in the Formulation of Marketing Strategies

Effect of Culture in the Formulation of Marketing Strategies Introduction As a student of business administration and having experienced the multicultural cosmopolitan life in London, U.K., marketing strategies of various multinational companies have always intrigued me. These marketing strategies are more challenging for small and medium sized enterprises. Hence I am motivated to research on various marketing strategies focussing on Culture to determine how well an organization working under stressful economical conditions can formulate successful marketing strategies. After careful research and study small and medium sized enterprises can focus their marketing by understanding how culture influences consumer psychology. Consumers are influences by various external factors like demographics, age, geographical location and culture is an outside influence on the consumer. According to Professor Lars Perner of Marshall School of Business the study of psychology of how the consumer is influenced by his or her environment is important for companies to improve their marketing strategies. (Perner) By understand culture, we can develop and better streamline marketing strategies/campaings to reach the customers more efficiently and aggresively. Aims The aim of the research effort is to better understand consumer behaviour which includes research of the buyers decision making process. It will include understanding the psychology, socio-economic background (from consumers in India) and other factors. There are two distinct influences acting on the consumer during the decision making process namely internal and external influences Internal Influences: These types of influences are caused by the consumer demographics, personal lifestyles, educational qualifications, financial conditions etc. External Influences: The outside factors that act on the consumer are referred as external influences. These are caused by culture and sub-culture, geographical location, gender, ethnicity and social class. As mentioned earlier Culture plays an important role in the consumer decision making process and the aim of this research is to better understand and possibly provide some suggestions so that small and medium sized companies can better formulate their marketing strategies. Objectives I hope to present a clear and definite picture on how various enterprises can attain better financial results by focussing and developing marketing strategies which are inclusive of all cultures, sub cultures and consumer social classes. By explaining consumer behaviour more clearly and making it adaptive to our fast changing economical and financial situation I hope to provide solutions for marketing successfully including possible consumer research methods. I would like to use the survey mentioned in the methodology section to understand consumer behaviour. Due to my inability to reach out to consumer/survey volunteers in U.K. and/or USA I might restrict my findings to India but I would hopefully be able to support my solutions using use cases of already successful marketing strategies. Literature Review Following globalization regional small and medium sized companies in India, USA and the UK are under increased pressure to formulate better marketing strategies. In India dimensions of marketing are fast changing. As literacy rate is increasing there is increased consumer awareness. Therefore industries face new challenges. Retail markets are now flooded with retail chains posing serious threat to traditional businesses. Consumers are now experiencing elevated service level as service sector is adopting market-focussed approach. These fast changing scenario is creating lot of changes are expected to take at a fast pace. In this context, it is important for small and medium sized enterprises for adopt and change rapidly. Changes come at a price and are not easily acceptable. It is my effort to provide struggling firms to follow simple steps to design efficient marketing strategies. Marketing is the key for successful businesses. My knowledge about different marketing strategies and related topics is based on my review of available research papers and books written by economists and philosophers. My research concludes with books and websites on consumer behaviour. I have also researched and understood the role of culture and subculture based on my finding and hope to bring a new perspective in formulating marketing strategies for small and medium sized enterprises. Lars E. Perner and is Professor of Clinical Marketing with University of South Carolina, USA. He motivates me with his research available on the web at http://www.consumerpsychologist.com/. In the introduction to Psychology of Marketing he presents some ideas which I have tried to explain further using additional references based on my research which are duly referenced in bibliography section. His work helped me build the foundation of this thesis. Consumer should be the centre and possibly the only point of focus of any marketing campaign. Perner briefly describes the role of culture and subculture. Though it should be understood from a different perspective for Indian enterprises, some of the thoughts can be applied generally. The idea that subcultures in India have distinct identity and can be identified uniquely from their heterogeneous group forms a major challenge for marketers. In the section Formulating Marketing Strategies, I have described in detail how one can ensure to include different major and minor motives that at acting on the consumer during the decision making process to design good and appealing marketing campaigns. I hope that this succinct attempt will motivate and encourage readers to focus their marketing campaigns using suggested methodologies to include various segments as mentioned in the Consumer Culture and Subculture section. Another primary source of my research and motivation is a book written by Matin Khan. It was published in 2006 and presents a perfect picture about Indian consumers and their influences. After reading this book, I have realized that it is very challenging to completely understand Indian consumers at any point. Yet, the complexity is resolved when they are segmented based on factors like geographical location and dialect. There are more factors which are useful in market segmentation and I have listed them under the section Application of Consumer Behaviour Information of my thesis. In his book Consumer Behaviour and Advertising Management, Khan discusses about consumer behaviour and its importance for companies. He writes in detail about its application and market analysis. In the chapter 2 Psychographic or Lifestyle Segmentation Khan writes in detail about Indias family structure and how marketers can use the familys socio-cultural behaviour in their favour in defining winning marke ting strategies. I am an Indian and Matin Khan helps me explore my heritage and culture by carefully exploring the hidden motives that influence my decision making process when I try to purchase any asset for my family. In his chapter Concept of Culture and Subculture, Khan made an attempt to draw a parallel and to find common characteristics amongst different Indian cultures and subcultures. My research however has helped me conclude that culture and subculture are in changing continuously and their likeliness and differences will vary from time to time. Hence, marketing strategies based on common characteristics in subcultures may not be relevant throughout the tenure of the product. In such scenarios, the strategies have to be evaluated time to time and changed accordingly. In order to further understand consumer behaviour I have further researched Ray Wrights book called Consumer Behaviour. Wright writes in detail about buyer behaviour. Examining the study of consumer behaviour is important to demonstrate the roles of customer and the market economy in designing successful marketing campaigns. Firms should compare, evaluate and analyze to relate consumer behaviour and natural and social sciences. It is necessary to individually research all the factors that influence the consumers decision making process. India is now a part of the World Trade Organization (WTO) and with Capitalism dominating all the leading economies of the world; it is becoming challenging for Indian firms to adjust to the pricing provided by the Chinese counterparts. However, the idea of swades [1] is becoming more and more relevant to Indias educated classes. Hence, there is an opportunity to design marketing strategies which exploit this consumer behaviour to increase market shar e and product line-up. The societal benefits includes adaptation and reengineering of various industrial equipment imported by India for its growing economy as the rules relating to intellectual property are not yet clearly defined and implemented by Indian legislation. Though this might change (I do not condone), it is worth mentioning how Indian companies have adapted and to sudden changes in customer behaviour following liberalisation of Indian economy. Wright also explains about the consumers central position within the free market system. India is not yet a product driven market[2] and therefore marketing campaigns designed for various countries may not be equally appealing to Indian consumers. After carefully designed marketing strategies are rolled out, it is important to maintain and sustain those efforts. Hence, marketing management small companies will have to look into as well. Robert D. Hisrich is a Garvin Professor of Global Entrepreneurship and writes about the challenges in managing marketing in his book Marketing. He writes in detail about various methods in marketing research, packaging, pricing scenarios, best practices in advertising and distribution. This secondary source is very essential to enhance my understanding of stages of marketing after strategies are rolled out. In various aptly laid out chapters, Hisrich discusses the small and medium sized industries and external marketing environment affecting them. Effective planning is super important. This book provides supporting information for my thoughts in market segmentation. Unfortunately, this book is published in the USA and does not consider Indian market scenario. Therefore, I have used this book a s a secondary reference. My emphasis for market segmentation can is extension of the information provided in Analyzing Markets and Target Marketing. This book has enhanced my understanding of consumer behaviour from business intelligence perspective. It has expanded the role of marketing by focussing only on the behaviour of the consumer. As a reader I am presented with insightful information that makes me wonder if I should keep track of every consumer motive to design better marketing solutions. Hisrich explains in detail about theoretical models in understanding consumer behaviour. This includes Stimulus-Response Model Learning Model. It is based on the sequential placement of the research steps like drive, motivation, stimuli, cu[3]e and response to fulfil consumer needs. In the psychoanalytic model we make an attempt to understand the complex consumer motives. Within one segmented market and for each product there exist different groups who buy the product for satisfying diffe rent needs. Some buy it for functional requirements and some for symbolic concerns. Maslows hierarchy of needs theory also explains how the needs of human beings can be categorized into physical, sociological and the self-actualization. Indian consumers are now starting to think more rationally on the lines of western consumers. They make decisions based on rationally perceived self-interests. They have range of products from Indian and foreign manufacturers and given the limited amount of money for attaining satisfaction by attempting to satisfy only limited number of wants from many needs. Indian firms, therefore, should make efforts to maximize these demands as mentioned in the book as utility maximization. Having understood the influences on the consumer, it is important to understand the Indian market and how it is different from the economies of the west. The biggest contrast is that companies outside India create a demand rather than responding to it. Unlike the west, Indian manufacturers are very quick to get into the market and exit as rapidly as shown by traders and their traditional trading mentality. Foreign companies should have a strong basis for understanding Indian domestic market. It will ensure they are able to best penetrate it. Indians are more welcoming to new ideas and approaches. The consumers are reasonably receptive and reasonably enthusiastic. More comparisons about western and Indian consumers are explained in detail using case studies in Paul Daviess New Business in India. In a guide to marketing in India, Davies has insights of an economist and the discourse of a writer. He writes about the Indian feeling about competition from China which is accounting for st range consumer behaviour. Such behaviour is making domestic Indian firms start thinking about hurdles while entering the Indian market. They are too high and very risky. Yet there is a opportunity to explore. Davies poses questions about Indian market to prospective firms in India, questions to ask yourself (while entering Indian market) are the one of whether you can either complement Indian businesses or offer a competitive position that will enable you to establish your business. Putting this in context of my example of Maruti Suzuki, though Maruti hold the key position since 1984, Hyundai Motors India Limited (HMIL) was successfully able to offer consumers with its Santro model, and has gain prominent market share. As of 2009, HMIL became the second largest automobile manufacturer and largest exporter of automobiles in India[4]. Similarly, scores of life insurance companies are setting up franchises to cater the needs of demanding Indian consumers. Indian manufacturers need to have some competitive edge over their competitors to capture and expand their market share. It is my effort to provide some guidelines and suggestions so that they can adapt accordingly. For traditional Indian businesses it is important to understand their areas of competitive advantages. India has vast amount of natural resources. According to P.N. Mari Bhatt in Indian Demographic Scenario 2025, Institute of Economic Growth, New Delhi, there will be more than 882 million people in the age group of 15-64 years. The age of retirement in India is 64 years. So the workforce will near one billion Indians. Therefore I conclude that Indians to have superior skills, specialized knowledge, customer orientation, trade relationships and technical expertise. Indias abundant resources are made of extensive coverage, economies of large scales, availability of global financing schemes, and ease of foreign direct investments (FDI). This together with current cost and in tellectual property niche gives Indian manufacturers head start and leading ground. In the fifth edition of Marketing Book, the author Michael Baker makes these subtle rules for start-ups very evident. He includes notes and commentary on increasing focus on channel management, CRM, direct marketing, E-Marketing and communication integration. Indian manufacturers should also understand and develop methods to differentiate their products by providing superior product quality, more functionalities, impeccable after sales service, and wider range as discussed in the section Indian Consumer Characteristics of this thesis. Even for Indian manufacturers understanding the environment is the key to success. Constantly changing political scenario takes constant adjustments within the company to accommodate and comply with changing rules. Formal marketing audits should be carried out for market size and potential, customer behaviour, segmentation and supply channels. They should understand com petitors and should not assume their behaviour. There could be direct competitors, potential competitors, and their strengths and weaknesses. Side by product comparison helps in new design ideas. They should re-evaluate their own products and market position which will enable to compete aggressively. One of the biggest mistakes done by firms is their strategies and priorities are constantly changing and setting clear strategic priorities is necessary for continuous growth. Finally with products comes customer orientation. Baker writes (Companies should) develop customer orientation in all function. Ensure that every function understands that they are there to serve the customer, not their own functional interests. This applies best to all small and medium sized enterprises. They should focus on key indicators for performance and audit those often. Also in the same context it is implied that study of market needs market research. As a supporting document to my knowledge I have reviewed Introducing Market Research written by Paul Baines and Bal Chansarkar of Middlesex University Business School. After reading introduction I am now able to better articulate the marketing research and am able to appreciate the role that marketing research plays. In the chapters ahead, Baines and Chansarkar help me decide what and who should conduct marketing research for small and medium sized enterprises in the Indian market conditions. One common mistake firms in India repeatedly do is not being able to distinguish clearly between marketing research and market research. Market research is the research of the markets. Marketing research deals with analysis of marketing process. After market and marketing research it is time for strategic planning, which uses all the information collected during research. Strategic planning has five important elements; Product Strategy, Offer Strategy, Media Strategy, Distribution Strategy and Creative Strategies. India has Growing number of internet shoppers who necessitate small businesses to adapt these strategies in their favour. Edward L. Nashs Direct Marketing: Strategy, Planning, Execution is a great reference to understand each of these strategies. In its fourth edition, Nash explains how businesses can use internet and global marketing strategies to capture ground in this competitive marketplace. Internet is the newest form of direct marketing. Relying solely on the media can be catastrophic. Following the principles of strategic direct marketing we can create successful campaigns for any product and in any segment of market in India or any other country of the work. But it is very important to have a strategy clea rly defined. Earlier in India there was no co-ordination between product development team and the marketing team. The product development team rarely took information about the end user and the marketing team was responsible for selling it. Today, it is just the reverse. Product development teams are instructed to find products that can be marketed easily. The author takes example of Dell and Apple who allow users to configure the computers they would like to buy. The consumers tell the manufacturers what they want and it is made for them rather than buying preconfigured computers available in the market. This gives them the competitive advantage and greater market share. Something similar needs to happen in India. The author presents small businesses with retailing opportunity using the internet. There are many advantages associated with letting consumers buy products online. The physical store can be smaller but the online store can be vast with products that can be delivered just in time. Unlike traditional businesses where the consumers/end users are restricted, online shopping portals do not have geographical restriction. The online store is open almost all the time. Unlike physical stores, online portals can get a makeover almost instantly appealing to masses. It is very easy to gather consumer information as it is not a hassle when the shopping is being done online. Growing number of companies in India are switching to this model because of high cost of running physical stores. After speaking to business owners in Hyderabad and Kamareddy cities of Andhra Pradesh, India I have realized that businesses are looking for to a clearly and planned guide to marketing plan which is customized for them. Robert E Stevens, PhD is a Professor of Management and Marketing at University of Louisiana at Monroe. Along with his colleague David Loudan, PhD and Bruce Wrenn have collaborated to compose a Marketing Planning Guide. The book lays out step by step, wizard like actions for marketing planning. It introduces plannings importance in any organization and the formal marketing planning process. It has organizational considerations while marketing planning (organizational purpose, objectives and strategies, a look and current organizations structure, and market responsiveness). It introduces Indian businesses to database marketing planning using Hyundai Motor Company as an example. Types of data that we should keep information on and decision making process are well illustr ated. It also has steps one should have in any marketing research project. From the market analysis perspective we have to ensure thorough situational analysis, which has strategic implications of product and market analysis including sales and costs analysis of the product versus its competitor. As mentioned in my analysis, Professor Stevens lays strong emphasis on consumer analysis using market segmentation, lifestyle segmentation and introduces Market Grid Analysis to the small and medium enterprises. He also writes in detail about competitive analysis for establishing competitive advantage which is also discussed by Michael Baker. With increasing power to spend, Indias market is constantly increasing which gives every company an opportunity to succeed. An opportunity analysis should be carefully conducted identifying potential problems and opportunities. There exist internal and other risk factors that need to be considered. Companies should used data from situation analysis to set clear objectives for marketing. Companies should develop a strategy and also evaluate alternate marketing strategies. They should also evaluate other factors influencing the selected strategy. For manufacturers who offer variety of products, different product related decisions should also be made during marketing mix. Different product positioning strategies and quality based marketing should be initiated. Service strategy should be implemented and evaluated often. Improving customer service is the key to changing customers perception about the company. If the existing products need a makeover or change, relevant product line decisions should be taken. Distribution channels should be carefully selected and promotion decisions should be made only on the basis of target audience. Media and promotional media decisions should not be made without proper cause. For companies competing with Chinese manufacturers pricing also plays an important role in changing customers perspective about the company. Professor Stevens writes about penetration pricing and skimming pricing for making pricing decisions for new products. In designing successful marketing systems, companies should focus on the following four subsystems (departments) within the organization Organizational System: The super system which binds all other systems together and coordinates the interaction of all other systems. Marketing Planning System: This department identifies opportunities for marketing and should create consumer oriented plans. Marketing Control System: This system will monitor and audit performance of marketing plans to ensure marketing objectives are being met. Marketing Information System: This provides decision making information and data to all other departments of the company. Richard L. Sandhusen explains the importance of these systems in his book Marketing and explains why organization system harmonizes marketing efforts. It is because the organization system has infrastructure in which marketing analysis, marketing planning, implementation and controls can be efficiently coordinated. These can be customized for small and medium sized industries we have can more one or group of persons performing multiple tasks. These tasks should be divided once the company starts to grow. This books also talks about product design. The main consideration in product design is consumer preference. Companies should design what consumers want. Indian consumers are now expecting world class safety features in the cars they buy. Almost every car manufacturer now offers cars with air bags, and side impact bar. All those who were reluctant to offer have dealt serious loses. The main criterion for product competitiveness and profitability is pricing. Cost of labour and materia ls should be carefully used in the price of the product. Products should also be designed for compatibility as well. India is a large country with varied geographical and environmental constraints. There are different climates, and different measurements systems which should be considered during product design. The study of Indian marketing environment can never be adequate due to constantly changing dimensions. There are the forces that marketing managers should use to create and plan organization objectives. For Indian companies, microenvironment [Sandhusen, 2000][6] is the force that affects the ability of the company to serve its customers better than its competitors. The macroenvironment [Sandhusen, 2000][6] influence the microenvironment due to politics, economy, and changing culture and subculture. Finally, the game changing role is played by considering distribution systems. Unlike USA and UK, roadway and railway infrastructure is not very well maintained. Companies should make use of channel systems. In India, logistics are becoming the biggest deterrent to appealing marketing campaigns. Logistics requires material management and product distribution (packaging, transportation, storage, and inventory management) for bring products to the end users. These functions are interrelated. Indian companies should adopt structuring logistics into material management and product distribution for efficient logistics. If possible separate department should be created with greater communication between them. Sandhusen writes about the importance of logistics in marketing planning, and mentions marketing planning can be measured by a number of costly concerns: transportation, storage costs, number of (intermediate) channels in logistics, costs, etc. Methodology The primary aim of this research is to emphasize the impact of culture on marketing strategies for small and medium sized enterprises. Unlike large sized companies, small and medium enterprises face increased competition due to inadequate resources including capital, human resources and strategic assets. To better communicate with their target customer group the small and medium sized enterprises use various techniques in exploring existing or newer markets. I would like to limit my focus to the efforts in understanding the cultural impact on those marketing strategies and, to provide better solutions I would like to refer to the following ways of collecting information. The primary source of my research is books, magazines, historical articles and, other information available in hard copy. All references will be duly mentioned in the bibliography section. Information available on internet and white papers. While most of the information and statistics available on the web cannot be collaborated with strong facts, it secondary source of information which will act as supporting data for the information I would collect by preliminary research using books, journals and government provided economic data. Also, I would like to survey the existing marketing campaigns to find similarities and differences between different small sized enterprises. As the emphasis is on culture, I cannot limit my research to UK alone and would like to extend my survey to other countries including USA and India. The research poll will include a short questionnaire which can be an online survey and or a hand written copy. I would like to provide a parallel between the current trends in marketing strategies and the general opinion from the research poll. Though it is possible that there might be a difference in them, it is still valid as this effort is to better understand and streamline marketing. A sample questionnaire is enclosed for reference. Sample questions from research survey: 1. What is your age group? Answer choices: a. Between 18-24 b. Between 25-34 c. Between 34-44 d. Between 45-54 e. Between 55-54 f. Over 65 2. What is your gender? Answer choices: 3. Answer choices: a. UK b. U.S.A c. India 4a. For respondents in U.K. Do you feel London is an example of cross cultural metropolitan? Answer choices: a. Yes b. No 4b. If the answer is â€Å"yes† to question number 4a. Have you ever felt any commercial is particularly offensive to your culture/background? Answer choices: a. Yes b. No 5. If the answer is â€Å"no† to question number 4b. Will you be interested in purchasing a product of Company A if its marketing commercials portrays your culture/background in a positive way? Answer choices: a. Yes b. No 6. Have you recently been motivated to buy any product because its advertisement if inclusive and portrays your culture positively? Answer choices: a. Yes b. No 6b. If the answer is â€Å"yes† to the question number 6. Please mention the company name, product name and category if applicable. Answer choices: a. b. c. 1 What is your age group? a. Between 18-24 b. Between 25-34> c. Between 34-44 d. Between 45-54 e. Between 55-54 f. Over 65 2. What is your gender? a. Male b. Female 3. What is your primary country of residence? a. UK b. U.S.A c. India 4.a. For respondents in U.K.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Do you feel London is an example of cross cultural metropolitan? a. Yes b. No 4.b. If the answer is â€Å"yes† to question number 4a.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Have you ever felt any commercial is particularly offensive to your culture/background? a. Yes b. No 5. If the answer is â€Å"no† to ques