Marketing Principles

Introduction

McDonalds is the world largest fast food restaurants. It is established in 1995 in United States. It is operating its business in 119 countries with more 36000 outlets. In this assignment we focused on the marketing principles. Here at first we clarified various stages of marketing process that are followed by the McDonalds and then cost and benefits of market orientation to McDonalds. Macro and micro environments and various segmentation criterion are also briefly discussed here that have an impact on McDonald’s business decisions. Then various targeting strategy and various buying behavior in different buying situation also given later. After that we discussed about how McDonalds used four marketing mix elements to get competitive advantage and attract a large number of customer. Three additional elements of marketing mix are also discussed here. In the last task we discussed how McDonalds used marketing mix elements for different market segment and how and why they make difference in their product and service than the competitors. And finally we show the basic difference between domestic marketing and international marketing.

1 Task 1

1.1 explanation of elements of marketing process.

Marketing is a process of identifying customer needs, wants, demands and delivering superior customer value to that customers for maintain long term customer relationships that leads to enjoy competitive advantage. Like each and every company McDonalds also follow the marketing process that has five stage. These stages are given below;

Understand the market place and customer needs, wants and demands:

Firstly McDonalds tries to understand which place is most suitable to run their business and what is their customer present needs, wants and demands. According to their needs, wants and demand they try to serve their people and design their product offerings.

Design a customer driven marketing strategy:

After determining customer needs and wants McDonalds design marketing strategy that is consist of market segmentation, market targeting and market positioning.

Construct an integrated marketing program that delivers superior value

In this stage McDonalds take decision regarding marketing mix that means product, price place promotions. They need to take decision in what price they will deliver their product, in which place they will set up their store and how they will promote their brands toward the customers. Besides they have to make SWOT analysis to find out their strength, weakness, opportunities and threats. Based on this SWOT analysis they will try their best to satisfy their target customers.

Build profitable relationships and create customer delight

In this stage McDonalds try heart and soul to make a strong relationship with their target customers and build long term profitable relationships through providing customer value.

Capture value from customers to create profits and customer equity

Finally in this stage, by providing superior customer value McDonalds try to gain positive impression from the customer and through this way they want their customer more loyal to their organization that ultimately make the organization more profitable I the long run (Ammi, 2007).

1.2 Evaluation of the cost and benefits of marketing orientation for a selected organization.

Each and every business organization follows some an orientation approach for their product and service. It can be either production orientation, product orientation, market orientation. In product orientation organizations focus on product rather than customer need and demand. On the other hand in market orientation organizations focuses on customer needs, wants and demands rather than what they can easily produce in less cost (Blackwell, 2001). McDonalds follow a market orientation that has some benefits and cost to McDonalds that are shortly given below;

Advantages of market orientation

·         Customer centric: in this approach customer is hold in the center. McDonalds give emphasize on their customer needs and wants.

·         Addressing demand: McDonalds always try to fulfill their customer demand in cost effective way.

·         Making customer benefit: This orientation helps McDonalds to create superior value for customer that ultimately satisfy their customer and they become loyal customers to McDonalds.

·         Reasonably competitive advantage: McDonalds offer quality products at a reasonable price that’s why their customers are highly satisfied and day by day their numbers of customers are increasing that allow McDonalds to get competitive advantage over their competitors.

The disadvantages of market orientations are:

·         Costly research: to find out present needs and wants of customer McDonalds have to conduct research that is very much costlier.  

·         Increasing price: As they conduct research and add many values with their products so it increases product price.

·         Deficiency of predictability: Customer’s preferences are changing gradually that make product development very much tough (Clancy & Kriegafsd, 2010).

2 Task 2

2.1 Macro and micro environmental factors which influence marketing decisions

Every business organizations have to run their business I a business environment. These business environments have two major parts. These are micro environments and macro environments. Each of these two has some factors that have a great impact on organizational decision.

Macro environment:

Macro environment are the external factors that indirectly affect the organization decisions. It has some factors. How these factors affect McDonalds are briefly describe below:

·         Political: it includes various rules and regulation imposed by the foreign government and various government organization.

·         Technological: it refers to the related component of technology. By using technology customers of McDonalds can order from home and get their food within 30 minutes.

·         Social: social restriction, social customs’ impact on marketing decision of a firm. McDonalds have to take decision by considering social belies, values, rituals and norms.

·         Economic factors: it indicates the economic condition of both McDonalds and its customers. McDonalds set their product price based on their customer income level.

·         Environmental: here firms should produce their product by keeping environment free from the pollution. If they can then consumer have a positive impact on that firm.

·         Legal: in this case McDonalds have to consider the following factors at the time of taking marketing decisions. Health and safety, Consumer rights and laws, Equal opportunities, Product labelling and Product safety.

Micro environment:

Micro environmental factors are those factors that directly affect the business decisions (Espejo, 2010). How these factors impacted on organizations decision basically McDonalds are given below;

·         Customers: customers are the heart of an organization. To increase market share and make more profit McDonalds always try to satisfy customer needs and wants to make them loyal customer.

·         Employees: products quality and service are the main attracting components of McDonalds. To maintain high quality product and service McDonalds always trained up their employees.

·         Suppliers: suppliers have a great impact on organizations decision because high quality goods and product price is also depends on suppliers also.

·         Media: media is used to attract a large numbers of customers to get McDonalds offerings. Competitors: competitors also have a great impact on organizations decision. McDonalds always remain careful about their competitors.

2.2 Segmentation criteria to be used for McDonald's products in different markets.

Segment can be defined as a small part where all the group members have similar interest to a particular product or service and the process of making this small segment is called segmentation. Like other business organization McDonalds also segment their market. Basically they segment their total market in three major criterion (Kokemuller, 2012). These are demographic, psychographic and behavioral segmentation. These three segmentation are briefly described below

Demographic segmentation: in this segmentation McDonalds offer different offerings for the kids, teenagers and for the family. For example McDonalds offer happy meal for the kid that includes a free toy.

Psychographic segmentation:

This segmentation is done on the basis of lifestyle, thought process, feelings, interest, values, beliefs etc. as for example we can say that McDonalds offer Mc Veggie burger and Mc Aloo tikki Burger for the Indian consumer as they are the vegetarian in most number.

Behavioral segmentation: in this segmentation McDonalds consider consumer readiness to buy, their purchasing habit and occasions. For example college students can go McDonalds for celebrating any birthday party.

2.3 Targeting strategy for a selected product

Organizations produce a wide variety of good and services for the customer. But they follow different targeting strategy. This targeting strategy can be classified in major three parts. These are differentiated marketing, niche marketing and mass marketing

Under differentiated marketing, organizations divide the total market into small segment and design different marketing program for each segment. In this segmentation any organization can highly satisfy their customer because they design different program for particular product line. There is a disadvantage and that is in this segmentation system cost increases (Blanchard, 2007).

Under niche marketing organizations does not target total customer. They target only a small group of customer and try to attract those customer and sell the product to those target customers. Here they offer unique product feature and charges high prices because numbers of target customers are few.

Under mass marketing organizations do not offer their product to specific target group of people rather than they offer their product to all kinds of customers. In this segmentation product price is kept low because number of sales volume is high here. For example McDonalds follow mass marketing because they offer their product for kids, teenagers, students and for the family. Every kind of customers can consume product from the McDonalds (Kotler, 2013).

2.4 The effect of buying behavior on marketing activities in different buying Situations.

Consumer buying behavior refers to the mental and behavioral process of consumers at the time of purchasing any products and services. Consumer buying behavior can be four types. These are given below:

Complex buying behavior

Under this buying behavior consumer are highly involved in a purchasing situation and they find significant differences among the brands. Before purchasing products consumers search information from various sources like newspapers, internet, advertisements etc. this behavior occurs when consumer want to purchase any expensive products like cars.

Dissonance reducing buying behavior

Under this using behavior consumer are highly involved in a purchase but there are insignificant differences among the brands. These buying behaviors occur at the time of purchasing those products that are expensive but consumer purchase infrequently. As for example we can say about furniture where product difference are few.

Habitual buying behavior

Under this buying behavior consumers are consumer are low involve in a purchase and there are few differences among the brand. This buying behavior occurs at the time of purchasing a low price products. For instance we can say about salt (Joshi, 2005).

Variety seeking buying behavior

Under this buying behavior consumers are less involve in a purchase but they seek significant differences among the brands. As for example we can say about fast food consumer.

As McDonalds offer various fast food items to the consumer so marketing manager should consider variety seeking buying behavior of consumer because these consumers are always seeking tasty and quality foods at a reasonable price. So they should design their product offerings based on consumer changing preferences (Krishna, 2013).

2.5 Propose new positioning for a selected product or service.

Positioning is a process of taking a unique position in the mind of consumer by offering differentiate products, different feature and different services that the competitors. Positioning is a long term process. McDonalds make a strong position in the consumer mind. Now consumers believe that they can get quality food at a reasonable price from the McDonalds than any other brands. McDonald uses a slogan that is "i'm lovin' it". Their slogans are also very much effective for their positioning. To make a strong position in the consumer mind almost every organizations develop new message and deliver these message to the target audiences through various media like television, radio, newspaper etc. finally it can be said that to build a strong positioning in the consumer mind McDonalds need to emphasize on differentiation of their products quality, price and services (Laura, 2011).

3 Task 3

3.1 How products are developed to sustain competitive advantage.

Competitive advantage indicates those advantages that a company enjoys over the other competitors. As McDonalds is the market leader in their industry so they enjoy competitive advantage over their competitors and when any company enjoy competitive advantage from a long time then it can be said as sustained competitive advantages. To have sustainable competitive advantage McDonalds develop their products feature that have standard quality, clean environment inside the restaurants and wide variation in product offerings and features. They offer various fast food items like hot dogs, hamburgers, cheeseburgers, milkshakes, French fries etc. They develop their products based on their location that means by considering geographical factors. As for example for the Indians the offer various vegetables fast food items because a large number of Indian consumer are vegetarian. Through this way they become able to attract a large number of customer’s especially who are vegetarian. In this way they develop particular product offerings for particular segment that help them to get sustainable competitive advantage (Kotler & Keller, 2006).

3.2 Explain distribution strategies used by McDonald’s.

Every day McDonalds serve more than 58 million people around the world. They are market leader in their industry. They have more than 3000 outlets around the whole world from which they are serving a large portion of customer. All of this retail shops or outlets do not directed and controlled by McDonalds itself. Most of them are operated by franchisee. One of the distribution policy of McDonalds is they established their retail shop in those location where they can get their target number of customer and consumer income level is matched with McDonalds. 

From this figure we can say that some of the organization produced produce products in their manufacturing plant and directly sell to their customer, some other organization use retailers to sell their products but they do not use wholesaler. On the other hand many organization use both wholesaler and retailers to sell their product to the customer. Among these three McDonalds sell their product directly to their customer. For example if any customer wants to have a launch then he can go to McDonalds and order for some food. After ordering he will get his ordered food. Here one important issue is that McDonalds itself a retail shop as well as producer of McDonalds foods (Micheal R Soloman, 2010)

3.3 pricing strategies used by McDonald's.

Price is the amount of money that a customer or consumer want to pay for a particular goods or services. There are some internal and external factors that affect price of the product.

Internal factors:

·         Cost: production cost of a product have an significant impact on product price. If production cost and other fixed and variable cost is high then product cost will also be high.

·         Promotional activity: to attract target customer and send promotional message to that customer’s promotional activity is must. If promotional cost increases then product price will also increase.

External factors:

·         Competition: if there is a low competition in the market then product price will be high because there are less substitute product and brands for the customers that’s why they are bound to pay the higher prices.

·         Consumer: if consumers have more bargaining power and more substitute who deliver the same value to the target customers then a firm cannot charge higher prices so in this case product price will be low.

Generally two types of pricing strategy used by the organizations. One is skimming pricing and another is penetration pricing. In skimming pricing high price is charged from the customer because here unique product features are offered by the company. For example Apple charges high prices from the customer because they provide unique features that do not easily copied by other competitors. They use unique technology in their products. On the other hand in penetration pricing low price is charged from the customer because here product features do not vary so much among the brands. For example, Unilever follow penetration pricing for most of their products because usually they offered common products for the customers.  Among these two, McDonalds follow penetration pricing strategy for their product because it matches with their organizational objective. Some of their product prices are given below:

From the above chart we can say that McDonalds charges minimum prices from their customer because they want to sell their product to every level customers of all ages. For example they charges $ 1 for small soft drinks from the Australians. They charges low prices because they want to increase their sales volume that ultimately increase their profit at a large portion. That why they try to keep their product prices low. If they set higher prices for their product then it may be difficult for the school going student to purchase foods from the McDonalds (Muthumani, 2010).

3.4 How Promotional activity is integrated to achieve organizational objectives.

To gain customer attention to the company’s product almost every company has to use promotional activity. McDonalds is not different from them. There are various promotional tools used by companies. These can be advertisement, sales promotion, personal selling, publicity etc. among all these advertising in various broadcasting media and newspaper in print media is the most effective than the other tools. Promotional activity is adopted to communicate with the target audience. There are some techniques to make the communication effective. These techniques are followed by McDonalds that are given below

Figure: effective communication way

From the above figure it can be said that to reach the target audiences of the promotional message at first McDonalds prepare a right message and then choose the best media to deliver the message. For example, as McDonalds target customers are all age’s people so in most of the cases they use newspapers and magazine in print media and television in broadcasting media. They also sponsored various event like various football and cricket event to attract a large number of potential customer to their brand. As McDonald’s main objective is to hold the leading position by maximizing their number of customer they use mainly newspaper and television to send their promotional message to the maximum number of target audience (Mullin, 2010).

3.5 An analysis of the additional elements of the extended marketing mix for McDonald's.

Generally four elements of marketing mix are well known to all that are product, price, place and promotion. Besides there are three more additional elements of marketing mix. These three elements are people, process and physical evidence.

People: people are the most essential elements to run an organization. Lower level, mid-level and higher level employees are include in it. As McDonalds is well known for its foods and service so it is the main responsibility of HRM department of McDonalds to select and hire best employees and trained up those employees so that they can interact in the best way with the customers and easily handle any kind of objection.

Process: many types of process are conducted in marketing activities like marketing process and product development process etc. To success in the competitive marketplace all the companies need to be very effective and efficient in their marketing activities process. For example when any customer ordered for any foods from McDonalds for home delivery then they will get the ordered food within 30 minutes.

Physical evidence: infrastructure, service and facility are included in it. McDonalds hold the leading position not only by their food but also their service. They provide a neat and clean environment for their customer where customers feel a natural environment (Muthumani, 2010).

4 Task 4

4.1 Marketing mixes for two different segments in consumer markets with reference to McDonalds.

Marketing mix is the combination of 7ps. That’s are product, price, place, promotion, people, process and physical evidence. To be succeed in the competitive market place almost all of the organizations have to consider these 7ps very carefully. Because success of an organization mostly depends on developing a right product, establishing prices based on quality and demand of consumer, suitable location to operate business, using best media for promoting message and efficient, effective and skilled people for run business (Pakroo, 2008). McDonalds consider all these marketing mix elements based on their segmentation. Basically McDonalds segment their total market based on three criterion. These criterion are demographic, psychographic and behavioral. For example we can say that they set different prices for Australia and India because income levels of these two countries are not equal. They charges low prices from the Indian consumer comparatively than the Australian. On the other hand employee’s qualification, salary and educational level are also different in these two countries. Indian employees got comparatively lower salary than the Australians employees because they are less educated and less skillful than the develop country. From the above discussion we can say that McDonalds design and develop different marketing mix strategy for different segments (Parente, 2006).

4.2 Illustrate differences in marketing products and services to businesses rather than consumers

There are many organizations in an industry. All companies have the same customer. Although they produce same product but they need to differentiate their product feature according to the customer needs, wants and demands. For example McDonalds, KFC and Pizza hut have the same customer. But customers do not go to all brands. They will choose only those brands which best their demand most. Every company uses many promotional tools to attract maximum target customers. They set different product prices for their product (Porter, 2008). For example McDonalds set lower prices for their fast food items then the KFC so that in this case they enjoy some competitive advantage. As their product price match with their product quality so that consumer are willing to purchase foods from McDonalds. McDonalds also ensure a high quality service that also attract customer. Society’s top-level people whose income level is higher like businessman, banker, teacher they want high quality service and environment. McDonalds ensure this that why these types of people purchase from McDonalds because here they get both quality foods and services at a reasonable price (Rajagopal, 2010).

4.3: How and why international marketing differs from domestic marketing in the case of McDonalds.

When marketing activities of an organization is designed based on domestic market and domestic market condition then it is said domestic marketing. On the other hand when marketing activities is designed based on international market and international market situation then it is called international marketing. To be the global leading company every company need to run their business internationally. International marketing is very much different from domestic marketing. Maximum organizations starts their business first in domestic market. When they totally capture their domestic market then they want to enter in the international market because there are some advantage of go global. Marketing activities of international marketing are different from domestic marketing (Shma, 2012). Basic differences between domestic marketing and international marketing are given below:

·         Scope: Domestic marketing has less scope than the international marketing. As McDonalds run their business internationally so they get broaden scope to broaden their business.

·         Obstructions: Domestic marketing face less barriers than the international marketing.  Now McDonalds faces very tough competition in the overseas market like they have to compete with KFC, Pizza Hut etc.

·          Profits: Usually when any company run their business internationally than can earn more profits than the domestic business. As for example McDonalds earn most of their income from international market.    

·         Technology: in international marketing all the organizations use all new technology to facilitate customer service and attract customer.

·         Political relations:  in international marketing organizations have to main good political relationship with the foreign country that is not mandatory for the domestic marketing. McDonalds also keep good relationships with foreign countries and they follow every rules and regulation very strictly (Shma, 2012).

Conclusion

Finally from this case we find out what are the various stage of a marketing process and what activities are done by McDonalds in these various stages. What advantage McDonalds get from following marketing orientation. What are the impacts of micro and macro environmental factors on McDonalds? We find that McDonalds mainly segment the total market based on three criterion that are demographic, psychographic and behavioral. They ensure product quality and standard service. They always try to deliver their product according to the customer needs and demands. We also find out that McDonalds follow penetration pricing for their product that is helpful to achieve their organizational goal and objective. They use newspaper and television for their promotional activities although they sponsored various events. They choose the busiest place as their location because as much as the population as much as they can sell their product. They do not charge same prices from around the world. They differ their prices based on various segmentation prices. At the end of this assignment we gave some basic differentiation point between domestic marketing and international marketing. We acknowledged that McDonalds get most of their revenue from international marketing.