Marketing Flashcards
What is marketing?
Marketing is a hard term to define satisfactorily. Many definitions have been proposed, some of which are very complex and technical. A useful and simple definition is given by the Chartered Institute of Marketing (CIM), which states that marketing is: ‘the management process which is responsible for identifying, anticipating and satisfying consumer requirements profitably’[1].
As can be seen from this definition, identifying the target consumer and understanding their needs and wants is fundamental to successful marketing. However, it is often not simply the wine that the consumer wants but also the experience the wine will bring: for example, confirmation of social status, ownership of something perceived as valuable or return on investment capital. The marketing should therefore emphasise how the product can give the consumer the experience they are looking for.
The ultimate aim of marketing is to create profits, whether this is through volume of sales (attracting new consumers, encouraging existing consumers to buy more) and/or value of sales (convincing consumers that it is worth spending more money on this product, compared to its lower-priced competitors). Marketing campaigns cost money and resources; a successful campaign is one which achieves an adequate level of profit within a specified timetable.
Explain the marketing process?
Given that the entire company will be involved in the marketing process, it is important that there is a clear marketing strategy in place so that everyone knows what is expected of them. Creating and implementing the marketing strategy consists of a number of key stages:
- identifying the product/brand to be marketed;
- analysing the current market;
- identifying the target market;
- setting the objectives of the marketing strategy;
- devising the marketing strategy (the ‘marketing mix’);
- implementing and monitoring the marketing strategy.
This is not necessarily a linear process: for example, stages 3, 4 and 5 are closely interlinked. However, for the purposes of this guide, each of these stages will be taken in the above order.
How do you identify the product/brand to be marketed?
At its most basic level, marketing is about a product (or a range of products): a bottle of wine, a wine shop, bar or restaurant. Understanding the product’s characteristics is essential to a successful marketing campaign. The product may be brand new, launched to fill a perceived gap in the market, which may have been identified by the company through market analysis or as a result of market research. Alternatively, the marketing strategy may be for an existing product, which may or may not have been updated.
All products have a ‘life cycle’. As shown by the figure below, sales of most new products start slowly but, if the product establishes itself in the market, will then start to grow quickly as more and more people buy the product. Eventually, sales will stabilise as there are fewer people left who have not yet bought it or if competition increases and, finally, sales will begin to decline.
A different marketing strategy is needed in each of the stages:
- Introduction – The strategy should focus on getting the product into the market and gaining recognition and reputation. Initially, distribution may be limited to a few carefully-selected channels to begin with.
- Growth – The product should be increasingly widely distributed and aimed at a broader target market, to encourage strong growth.
- Maturity or stabilisation – The strategy should highlight the differences between the product and the other competing products which, by now, will have entered the market.
- Decline – Faced with the prospect of declining sales, a company may take steps to extend the life cycle, perhaps by improving the product, updating the packaging, reducing the price to make it more competitive or seeking new markets. Each of these will need to be communicated to prospective customers through an appropriate marketing strategy.
What is branding?
Without branding, products would simply become commodities. Provided a product meets a certain standard of quality and style, the consumer would buy the cheapest option available and sales of the more expensive options would decline.
The term ‘brand’ also has multiple definitions. The CIM defines a brand as ‘the set of physical attributes of a product or service, together with the beliefs and expectations surrounding it - a unique combination which the name or logo of the product or service should evoke in the mind of the audience’[1]. To be successful, a brand must create a positive image in the consumer’s mind and this can be achieved in a number of ways:
Substance – Successful brands consistently deliver the same level of quality and style. For example, Champagne houses produce a non-vintage (NV) wine in a house style that is consistent from year to year and which is not marked by vintage variation.
Consumer trust – As a result of this consistency, consumers come to trust a brand always to give them what they want.
Consumer engagement – The consumer should have a relationship with the brand and will ask for it by name. They will feel that the brand’s marketing strategy is aimed directly at them (although this will clearly not be the case).
Brand story – Successful brands have a ‘story’ to which consumers can relate – this creates an emotional attachment between the consumer and the brand.
Price premium – Many successful brands command higher prices than similar generic products. Many consumers view higher prices as a guarantee of quality.
Longevity – Many leading brands have been in existence for a long time. This is particularly true of leading Champagne brands.
Strong brand name – Choosing the correct brand name is very important. The name must be easy to remember and, if the wine is to be sold in countries which speak different languages, easy to pronounce in all the relevant languages.
Why is the story of wine so important?
Many marketers believe that the story of a product or brand is one of its most valuable attributes. Research has shown that many consumers, especially millennials (i.e. those between legal drinking age and their mid-30s), are attracted to products with strong stories.
Compared to some products, it is relatively easy to tell the story of a wine. For example:
- What is the producer’s history? Have they been producing wine for generations? In newer wine-producing regions, did their ancestors come from older wine-producing regions and bring vines with them? Did the producer have an interesting previous career?
- Where are the grapes grown? Do they come from a single vineyard, perhaps with an unusual or evocative name? What is the vineyard like? Is it steep, rocky, prone to mist in the morning etc.? What other vegetation or animal life is there in the vineyard?
- How is the wine made? Is there a particular philosophy used, such as e.g. organic, biodynamic or natural? Does the winemaker use any distinctive processes? Do they use unusual or especially old equipment?
- Is there a story behind the name of the wine, the label design or the bottle design?
This type of information creates a sense of authenticity; it links a wine to a particular place and a particular producer in a way that bulk production wines do not.
However, there is more to a successful story than just this. The story also covers matters such as price, where the wine is sold and how it is sold (i.e. the ‘marketing mix’). Significantly, it also includes what other people say about the product, making consumers part of the story.
What are the different types of aspects of branding most relevant to the wine industry?
Brand position –
Where a brand ‘sits’ within a market and the cues used to indicate that position. It is often linked to retail price. Various ways of categorizing brand position within a market have been suggested, one common method being:
- value;
- standard;
- premium;
- super-premium;
However, the use of these terms, and the price ranges to which they apply, can vary considerably even within the same market.
A brand’s position is usually set at launch, having been intended to hit a particular price point. If competition increases, a brand may have to lower its position to remain competitive. It is rare, but nevertheless possible over time and with a lot of work, to raise a brand’s position.
Nevertheless, the cheapest end of the market should not be ignored as this offers the opportunity for high-volume sales.
Private label –
As discussed in Supermarkets and Deep Discounters, in many countries, such as the USA and the UK, supermarkets, deep discounters and larger chains of bars and restaurants have created a range of wines from different regions under their own brand name.
Ladder brand –
These are intended to give consumers easy-to-understand ‘rungs’ to help them trade up to a
higher-priced and better-quality expression of the brand. The whole range benefits from the identity of the most prestigious expression of the brand.
Ladder brands tend to have three rungs:
- Accessible – the least expensive with the greatest distribution and the one that consumers will buy most often;
- Stretch – affordable but only for special occasions;
- Aspiration – the most prestigious expression of the
brand. Most of the brand’s consumers will never buy it as it costs far more than they are willing or able to spend on wine.
Soft brand –
A term sometimes used to describe any cue used by a consumer when choosing to buy one product in preference to another. In the wine industry, this could be a country of origin (e.g. ‘Brand Australia’); region (e.g. Rioja); geographical indicator (e.g. Pouilly-Fumé); grape variety (e.g. Merlot); or even a style of wine (e.g. oaky Chardonnay).
Luxury brand –
As with ‘fine wine’, there is no agreed definition of what makes a luxury brand. These tend to be super-premium priced wines which only a very few consumers can afford, including Champagne prestige cuvées, Bordeaux Premier Cru Classé and the most expensive Californian wines.
Luxury brands promote the idea that they are scarce even if, as in the case of many Champagnes, this is not always the case. This perceived scarcity is one reason why luxury brands can usually charge a large premium. The marketing may also promote other assets of the product such as the quality of the fruit or of the vineyard in which it was harvested, no expenses spared during winemaking, a rich heritage, etc. Every aspect of marketing strategy for the product is likely to promote the idea of luxury; for example, sponsorship of exclusive and luxury events, and positioning in the most upmarket retailers and on the wine lists of fine dining restaurants.
How do you analyze the current market?
Another important activity when preparing to create a market strategy is to identify and analyse the factors (both internal and external) which affect the product, the company and the market in which it operates. This should be an objective analysis of the health of the business, its current and potential customers, trends within the particular market and the position of the business within it.
The most common way to achieve this is by carrying out a ‘SWOT’ analysis to identify Strengths, Weaknesses, Opportunities and Threats. A SWOT analysis can be done very simply by taking a sheet of paper and dividing it into four quarters as in the diagram below. The diagram highlights examples of what might be included under the various headings by a wine producer.
In simple terms, strengths and weaknesses are those of the particular product or company, whereas opportunities and threats are external factors which affect the market as a whole.
Once they have been identified, strengths and opportunities can be exploited; where possible, these should be highlighted in the marketing campaign. Steps should also be taken to eliminate weaknesses and mitigate threats as far as possible. It may be possible to achieve some of this through marketing (e.g. improving a poor brand image, lowering prices to compensate for exchange rate rises).
How do you identify target consumers?
The next stage is to identify the target consumers for the product through a process known as segmentation and then understand the needs and wants of those consumers through market research.
It would not be profitable to design and produce a specific product for every individual consumer. For that reason, companies need to try and define the group of consumers (often called a market segment or simply a segment) who will be attracted to their product and tailor the product and the marketing of that product to them.
Although the principle of consumer segmentation sounds simple, the practice is much more complex. Because everyone is different, the consumers in a particular segment will never be identical. The aim is to choose a group who have sufficiently similar preferences and needs to create a meaningful segment that can be targeted by companies. On the other hand, the segment should not be so small, with so few potential customers, as to make it unprofitable.
Segmentation is often based on four sets of variables: geographic, demographic, psychographic and behavioural. A segment will usually be defined as a combination of variables.
GEOGRAPHIC VARIABLES
These relate simply to where the consumers live (e.g. a country, region or city) and whether they live in an urban or rural area. Usually, these are too broad and cover too wide a range of people to be meaningful on their own.
DEMOGRAPHIC VARIABLES
These include:
- age;
- gender;
- ethnicity;
- family status (e.g. are they single? Do they have children?);
- income;
- level of education (e.g. are they university-educated?);
- occupation;
- socioeconomic status: this is an individual or family’s position in society relative to others based on their income, level of education and occupation.
PSYCHOGRAPHIC VARIABLES
These are psychological characteristics, such as:
- lifestyle (e.g. people who like to go out to eat and drink, the health-conscious);
- personality (e.g. people who like to show off their wealth or knowledge of wine);
- values and beliefs (e.g. vegetarians, people who prefer products that are organic, environmentally-friendly or Fairtrade);
- interests (e.g. those who are interested in wines from a particular country or region).
BEHAVIOURAL VARIABLES
These are variables based on consumers’ observable behaviour such as:
- what benefit do they want from wine (e.g. quality, value for money, prestige)?
- when do they buy wine (e.g. regularly, only on special occasions)?
- where do they buy wine (e.g. supermarkets, specialist wine retailers)?
- how often do they buy wine and in what volume?
- what is their level of brand loyalty?
- what is their level of interest in wine (e.g. enthusiast, moderate interest, indifferent)?
- are they early adopters (i.e. people who are keen to buy new products when they come on to the market) or late adopters?
People who share psychological or behavioural characteristics are more likely to behave in a similar way than those who live in the same area or are in the same age group.
There has been a number of attempts to divide wine consumers into narrower segments (mainly in the context of wine tourism rather than wine buying). An early attempt was made by Hall[1], who split wine consumers into three groups:
- wine lovers – those with a great interest in, and knowledge of, wine; high income and high level of education;
- wine-interested – those with a great interest in wine, moderate wine knowledge, university-educated with moderate income;
- wine curious – those with a moderate interest in wine but limited knowledge, moderate income and medium level of education; they see wine as an opportunity to maintain social relations.
How do the portraits created by Wine Intelligence look like?
Who they are?
Experienced Explorers
Aged primarily 35-54, higher spenders who are confident in their wine knowledge
Millennial Treaters
Frequent and adventurous wine drinkers, highest spenders
Premium Brand Suburbans
Frequent, ‘core’ wine drinkers from across the US and across all age groups
Bargain Hunters
Older drinkers, more preoccupied with price and looking for a cheap deal
Senior Sippers
Older, less frequent wine drinkers, low spenders, unconfident and unknowledgeable
Kitchen Casuals
Middle-aged or older and infrequent wine drinkers, typically disengaged with the category
Why do they drink wine?
Experienced Explorers
Wine allows them to relax or socialise with friends and family, it’s a regular treat for them
Millennial Treaters
Wine is a part of their social lives, they enjoy it as part of their lifestyle and it’s good for their image
Premium Brand Suburbans
A glass of wine at the end of the day is a frequent treat
Bargain Hunters
Drink wine infrequently, mostly at home
Senior Sippers
A relatively affordable and healthy choice for an occasional drink
Kitchen Casuals
To relax at home with an informal meal
What do they drink?
Experienced Explorers
Large repertoire, and enjoy trying new styles and regions
Millennial Treaters
Open to a large repertoire, enjoy trying new styles and regions, yet with limited awareness of brands
Premium Brand Suburbans
Looking for good value everyday wine and know their brands
Bargain Hunters
Tend to stick to ‘easy choices’ in terms of brands and varietals
Senior Sippers
Consume from a narrow repertoire that is driven by low prices
Kitchen Casuals
Like Senior Sippers, consume from a narrow repertoire that is driven by low prices
What is market research?
Market research is the gathering and analysis of data about a particular market segment in order to understand what that segment wants or needs.
Market research can be useful at all stages of the marketing process. Prior to starting work on a new product, a company can use market research to understand whether there is a need in the market for that product and, if so, what features people would like it to have and how much they might pay for it.
However, market research is especially important in creating the market strategy as it can confirm whether the approach suggested by the segmentation exercise is accurate or not, before the company embarks on a potentially expensive and time-consuming marketing campaign.
Market research takes time and effort to arrange and some methods can be relatively expensive, such as setting up a focus group. It is therefore important to be clear about the aims of the research from the outset.
- what information is needed: e.g. what price are consumers prepared to pay for a particular product?
- from whom will the researchers gather data: e.g. a small group of consumers from a particular segment or a cross-section of the public?
- how will the research be carried out, for example:
+survey – a series of questions designed to investigate the opinions, feelings, actions or behaviours of a large group of people;
+focus group – a small group of people drawn from the relevant consumer segment, brought together to discuss and comment on the topic being researched;
+interviews – one-to-one discussion of the topic being researched;
+observing consumer behaviour – (see below);
+secondary research – market research is carried out by using data already available in the public domain or available as a report from a market research company.
Once the market research has been conducted, the data can be analysed and acted upon.
OBSERVING CONSUMER BEHAVIOUR
Another form of research involves observing and analysing the behaviour of target consumers. This may be to find out the needs and wants of these consumers, or it may be used later in the marketing process to monitor the success of a campaign and possibly make adjustments to make it more successful.
Marketing can have an influence on consumer behaviour in several ways. It can bring to the attention of the consumer something that they need or want.
Methods of observing and recording consumer behaviour include watching how consumers move around a shop, interacting with consumers, store loyalty cards (records of purchases), web analytics (information recorded about what web pages you have visited, how long you spent on the page, etc.).
How to set the objective of the marketing strategy?
The first vital part of creating a marketing strategy is to define its objectives. Clearly defined objectives will help people in different parts of the company understand their role in the marketing process. Objectives will also make it easier for the company to analyse whether the strategy is working or not.
The objectives should cover four key areas:
- What type of marketing strategy does the company want to pursue? There are three broad options:
- Undifferentiated or mass – appealing to the whole market, or a large section of it, with a single product; for example, many branded wines available in supermarkets and other large retailers.
- Niche – aiming a product at a specific segment of the market; many wines are niche products.
- Multiple – either appealing to numerous segments with one brand (each segment will potentially require a different marketing approach) or launching several brands each targeting different segments.
- What are the aims of the marketing strategy? For example:
- launch a new product;
- communicate improvements to existing product;
- increase sales;
- increase market share;
- improve brand awareness;
- improve brand identity;
- attract new consumers. - How will the success of the strategy be measured; for example, profits, value of sales, market share?
- Within what time period should the objectives be achieved? It could be a short-term strategy or be for a period of several years.
Another important element is to set the marketing budget. Marketing can be a very expensive activity and, whilst some large companies have enormous budgets, most can only set aside a limited amount of money to promote their products. The budget should be set by reference to the profits which the marketing campaign is expected to produce; there is little point to a marketing campaign which costs more than it ever brings in.
How to devise the marketing strategy?
Having understood the product or brand to be marketed, identified the target market including their needs and wants, and set the objectives of the marketing strategy, a company can then devise the marketing strategy to achieve those objectives.
The elements of the strategy are often referred to as the ‘marketing mix’, a combination of factors that must work together for the strategy to work. If any one element is weak, this will weaken the entire marketing effort.
One common way of identifying those factors is the ‘5 Ps’: Product, Price, People, Place and Promotion. Some marketers omit ‘People’ and refer only to the ‘4 Ps’. Others use the ‘7 Ps’, although the additional factors (Physical Evidence and Process) relate mainly to the delivery of services rather than products, they are not covered here.
What importance does the product have in marketing?
This is the product which is being marketed, including all packaging and branding and any value-added features; for example, gift wrapping in a wine shop and a winery’s wine club.
Marketing should communicate the characteristics of the product that will appeal to target consumers and how it will satisfy their needs and wants. The presentation of the product (i.e. the bottle, label and any other packaging) should be designed to appeal to the target consumer; different types of consumers are often attracted to different features on labels. The marketing should also describe the experience that the product will deliver to the consumer as this is seen as an increasingly important part of marketing.
The wine market is often described as ‘saturated’; in other words, there are already enough products to satisfy consumers’ needs and there are few gaps in the market. There is therefore strong competition between relatively similar products. In such a market, companies need to explain clearly how their product is different to that of a competitor, such as higher quality, better value for money, organic, vegetarian/vegan, Fairtrade, etc.
What’s the importance of price in terms of marketing?
This is the amount which a consumer pays for a product. It is not just the price of a product on the shelf; it includes any additional costs such as delivery as well as discounts. It also includes the cost (in time or effort) which the consumer is willing to go to in order to buy the product.
In an ideal world, the pricing strategy for a product would strike a balance between the producer’s desire to make a reasonable profit and the price that sufficient numbers of consumers are willing to pay for it. However, this balance will be affected by the various factors which contribute to the price of wine discussed in the chapters on Supply and Demand and Costs through the Supply Chain.
In addition, there are many different pricing strategies which a company may use when setting the price of its products. For example, the price of a new product may be set relatively low (or enter the market on a price promotion) to undercut the competition and rapidly reach a wider section of the market – the expectation is that consumers will permanently switch to the new brand because of the lower price (this is known as a penetration strategy). However, subsequent attempts to raise the price of the product may not be successful if the consumer feels that the product now offers less value for money than its competitors.
Academic studies have shown that consumers are strongly influenced by price when making their purchase decision. Research using brain scans indicates that many people get more pleasure from a wine they think is expensive than from the same wine if they think it is cheap. Consumers with lower wine knowledge who are looking to buy a wine for someone with greater knowledge are therefore more likely to buy a more expensive bottle on the assumption that it will meet the recipient’s expectations.
On the other hand, some studies emphasise the psychological importance of certain price points; whilst these vary from country to country, consumers may, for example, be more likely to buy a wine priced at USD 9.95 than USD 10, simply because it is in single figures. Knowing this, a producer may reduce the price of their wine slightly so that retailers can hit the desired price point.
What importance do the people have in terms of marketing?
The ‘people’ element is sometimes interpreted in different ways depending on the model. Some marketers will use ‘people’ to mean the attitudes and behaviours of the target consumer. The other aspects of the marketing mix will need to be tailored accordingly; for example, if the target consumers are not very active on social media, there is little to be gained by running an intensive social media campaign.
In other models, ‘people’ refers to the relationship between the company, its staff, its partners, and its customers, and includes aspects such as employee attitudes and skills, and customer service (whether that customer be the target consumer or a business customer such as a distributor). The attitudes and behaviours of the target consumers may be considered separately, usually initially as this factor impacts all other aspects of the marketing mix.
Wine producers should ensure they have enough sufficiently knowledgeable and trained staff to sell their products, either to final consumers at a cellar door or consumer event, or to distributors or retailers. It is important that any companies a producer works with, such as distributors and PR agencies, share the producer’s image and vision. This should make it easier to present a consistent message at all stages of the supply chain. This may require resources supplied by the producer; for example, a winemaker or a sales representative of the producer may conduct a complimentary masterclass for the employees of the distributor or retailer to highlight the brand image and story as well as showcase the products.
