The state of marketing of smme's in Durban : a South African case study

THE STATE OF MARKETING OF SMME'S IN

DURBAN: A SOUTH AFRICAN CASE STUDY

CORLEA PEARCE

Mini-dissertation submitted in partial fulfilment of the requirements for the

degree Masters in Business Administration at the Potchefstroom campus

of the North-West University

Supervisor: Prof C A Bisschoff

ABSTRACT

One of the challenges to marketers is not only to know who the business's customers are, but also to be knowledgeable about their values. To further enhance the concept of a customer-based competitive advantage, marketers are challenged to develop and implement marketing

strategies that will deliver superior customer value based on customer needs within markets and segments. This concept requires a re-focusing and re-thinking process by companies who enters the market, relating to the key issues to be confronted in identifying, creating and delivering value to customers better than the competition.

This research primarily focuses on gaining insight into the current state of marketing as perceived by South African business executives, and aims to demystify those elements deemed important to achieve success in marketing for companies operating in the twenty-first century. In essence, this study thus focuses on the true purpose of marketing, how it is currently perceived by business people, current and future trends in marketing and those elements that are vital for the sustainable success of a marketing plan as part of a business strategy. A literature and empirical study was undertaken.

The study concluded that correct market definition and market segmentation is fundamental to successful marketing. Marketing has become much more than just a sales support function that deals with advertising and promotions. Businesses need to include marketing as part of the core strategy-making engine of an organisation. Through marketing, product offerings are linked to customer needs in a specific target market. These offerings may be personalized or differentiated to best suite specific segments within the target market. Due to the turbulence in marketing with no clear indication of its stance in South Africa, exploratory research was conducted to evaluate how effective Durban companies are in using marketing as a core part of their strategy.

The study employed an established questionnaire developed by McDonald and Dunbar (2004) and used descriptive statistics to analyse the data.

TABLE OF CONTENTS

Page

CHAPTER 1 1

1.1 INTRODUCTION 1 1.2 BACKGROUND TO THE STUDY AND PROBLEM STATEMENT 2

1.3 RESEARCH GOALS 6 1.4 RESEARCH METHOD 7 1.5 DEMARCATION OF RESEARCH 8 1.6 SUMMARY 9

CHAPTER 2 11

2.3 THE SCOPE OF MARKETING 15 2.4 THE IMPORTANCE OF MARKETING 17

2.5 DEFINING THE MARKET 19 2.6 MARKET SEGMENTATION 20 2.7 MARKETING IN THE TWENTY-FIRST CENTURY 21

2.8 METHODOLOGY 25 2.9 SAMPLE AND RESPONDENTS 25

2.10 QUESTIONNAIRE 28 2.11 FINDINGS / RESULTS 28

2.12 SUMMARY 45 2.13 CONCLUSION AND THE WAY FORWARD 47

CHAPTER 3

3.1 INTRODUCTION 50

3.2 CONCLUSIONS 50

3.3 RECOMMENDATIONS 58

3.4 LIMITATIONS OF TfflS STUDY 59

3.5 SUMMARY 59

APPENDIX 2: T H E ORIGINAL QUESTIONNAIRE BY

LIST OF TABLES

Page

TABLE 2.1: OVERVIEW OF THE IMPACT OF MAJOR CURRENT TRENDS 14

TABLE 2.2: MEAN OF MEASUREMENT ITEMS 46

LIST OF FIGURES

FIGURE 2.1: CORE MARKETING CONCEPT 16 FIGURE 2.2: THE MARKETING DOMAIN 23 FIGURE 2.3: MARKET DEFINITION, SEGMENTATION AND VALUE

PROPOSITION 24 FIGURE 2.4: FUNCTIONAL AREAS OF RESPONDENTS 27

FIGURE 2.5: POSITIONS OCCUPIED IN THE COMPANY 27 FIGURE 2.6: THE EXTENT TO WHICH COMPANY HAS A CLEAR AND

UNAMBIGUOUS MARKET DEFINITION 28 FIGURE 2.7: THE EXTENT TO WHICH MARKETS IS CLEARLY MAPPED,

SHOWING THE FLOW OF PRODUCTS AND SERVICES AND THE

ASSOCIATED VOLUMES AND REVENUES 29 FIGURE 2.8: THE EXTENT TO WHICH THE MARKET IS CLEARLY MAPPED,

SHOWING WHERE BUYING DECISIONS ARE MADE AND WHAT

QUANTITIES THEY ACCOUNT FOR 30 FIGURE 2.9: THE EXTENT TO WHICH SEGMENTS ARE CLEARLY DESCRIBED

FIGURE 2.10:THE EXTENT TO WHICH SEGMENT NEEDS IS PROPERLY QUANTIFIED AND PRIORITIZED IN TERMS OF RELATIVE

IMPORTANCE 31 FIGURE 2.11:THE EXTENT TO WHICH MARKET SEGMENTS ARE CLEARLY

LINKED TO A SET OF CHARACTERISTICS THAT CAN HELP TO

IDENTIFY THE CUSTOMERS IN THAT SEGMENT 32 FIGURE 2.12-.THE EXTENT TO WHICH ALL SEGMENTS ARE

UNAMBIGUOUSLY CLASSIFIED ACCORDING TO THEIR

RELATIVE ATTRACTIVENESS TO THE BUSINESS 33 FIGURE 2.13:THE EXTENT TO WHICH CLEAR AND QUANTIFIED ANALYSIS

OF HOW WELL CUSTOMER NEEDS ARE SATISFIED RELATIVE

TO COMPETITORS 34 FIGURE 2.14-.THE EXTENT TO WHICH EACH CUSTOMER SEGMENT HAS

MARKETING OBJECTIVES 34 FIGURE 2.15:THE EXTENT TO WHICH EACH SEGMENT HAS A MARKETING

STRATEGY THAT IS CONSISTENT WITH THE OBJECTIVES 35 FIGURE 2.16-.THE EXTENT TO WHICH STRUCTURES AND SYSTEMS ARE IN

PLACE TO SERVE EACH SEGMENT EFFECTIVELY 36 FIGURE 2.17.-THE EXTENT TO WHICH CUSTOMER RETENTION FOR EACH

MARKET SEGMENT IS MEASURED 36 FIGURE 2.18:THE EXTENT TO WHICH COST CAN BE ATTRIBUTED TO

INDIVIDUAL CUSTOMER ACCOUNTS 37 FIGURE 2.19:THE EXTENT TO WHICH THE REAL PROFITABILITY OF THE

TOP TEN ACCOUNTS IS KNOWN 38 FIGURE 2.20:THE EXTENT TO WHICH THE FINANCIAL IMPACT OF

MARKETING EXPENDITURE IS UNDERSTOOD 3 8 FIGURE 2.21 :DURBAN SA - COMPANIES MEASURING CUSTOMER

FIGURE 2.22:CRANFIELD UNIVERSITY SCHOOL OF MANAGEMENT -COMPANIES MEASURING CUSTOMER RETENTION BY

MARKET SEGMENT 40 FIGURE 2.23:DURBAN SA - EXTENT TO WHICH COSTS ARE ATTRIBUTED TO

INDIVIDUAL ACCOUNTS 41 FIGURE 2.24.CRANFIELD UNIVERSITY SCHOOL OF MANAGEMENT

-EXTENT TO WHICH COSTS ARE ATTRIBUTED TO INDIVIDUAL

ACCOUNTS 41 FIGURE 2.25:DURBAN SA - THE EXTENT TO WHICH THE REAL PROFITABILITY

OF THE TOP TEN ACCOUNTS IS KNOWN 42 FIGURE 2.26:CRANFIELD UNIVERSITY SCHOOL OF MANAGEMENT - THE

EXTENT TO WHICH THE REAL PROFITABILITY OF THE TOP

TEN ACCOUNTS IS KNOWN 43 FIGURE 2.27:DURBAN SA - UNDERSTANDING THE FINANCIAL IMPACT

OF THE COMPANY'S MARKETING EXPENDITURE 44 FIGURE 2.28:CRANFIELD UNIVERSITY SCHOOL OF MANAGEMENT

-UNDERSTANDING THE FINANCIAL IMPACT OF THE

COMPANY'S MARKETING EXPENDITURE 44 FIGURE 3.1: DURBAN SA - COMPANIES MEASURING CUSTOMER

RETENTION BY MARKET SEGMENT 53 FIGURE 3.2: CRANFIELD UNIVERSITY SCHOOL OF MANAGEMENT

-COMPANIES MEASURING CUSTOMER RETENTION BY

MARKET SEGMENT 53 FIGURE 3.3: DURBAN SA - EXTENT TO WHICH COSTS ARE ATTRIBUTED

TO INDIVIDUAL ACCOUNTS 54 FIGURE 3.4: CRANFIELD UNIVERSITY SCHOOL OF MANAGEMENT

-EXTENT TO WHICH COSTS ARE ATTRIBUTED TO

FIGURE 3.5: DURBAN SA - THE EXTENT TO WHICH THE REAL

PROFITABILITY OF THE TOP TEN ACCOUNTS IS KNOWN 56 FIGURE 3.6: CRANFIELD UNIVERSITY SCHOOL OF MANAGEMENT - THE

EXTENT TO WHICH THE REAL PROFITABILITY OF THE TOP

TEN ACCOUNTS IS KNOWN 56 FIGURE 3.7: DURBAN SA - UNDERSTANDING THE FINANCIAL IMPACT

OF THE COMPANY'S MARKETING EXPENDITURE 57 FIGURE 3.8: CRANFIELD UNIVERSITY SCHOOL OF MANAGEMENT

-UNDERSTANDING THE FINANCIAL IMPACT OF THE

CHAPTER 1

1.1 INTRODUCTION

The purpose of this study is to obtain insight into the current state of marketing as perceived by business executives within South Africa and more specifically the Durban area. This study will aim to demystify those elements deemed important to achieve success in marketing for companies operating in the twenty first century. The goal is to evaluate the current state of marketing and suggest a way forward.

South African companies are experiencing more competition than ever before. Stiff international competition is a reality. As an example, since 1992 the number of US companies operational in South Africa has increased by 300% to 450 and growing today. South Africa is served by 40 airlines and 82 banks. Motor vehicle manufacturers and importers have increased from 7 in 1994, marketing 200 model derivatives, to 28 today with over 1000 model derivatives (Pretorius 2006). South Africans spend R428,000,000 online in the retail sector (Goldstuck 2006) and it is said the emerging (or maybe rather emerged) black market has arrived and is an economical force to be reckoned with, now referred to as the Black Diamond (Unilever 2006).

The business environment is constantly evolving in ways that are not completely predictable. Marketing, as a business function and strategic tool, has to keep up with these changes.

"Effective marketing represents one of the most formidable business challenges today", was recently said by Brand Pretorius, CEO of McCarthy Limited. He further stated that the South African business environment remains somewhat volatile, unpredictable and ever changing. This could be contributed to globalisation, increased competition, the impact of information technology, and the ever-changing customer demographics (Pretorius 2006).

At the same time marketing is under attack. Naomi Klein of No Logo fame condemns marketing for the way it is used to target segments to the point where consumers are almost

brainwashed. Academics view it as manipulative and CEOs view marketing as an expense with an imprecise and unquantifiable bottom line contribution (Brown 2005).

McDonald and Dunbar (2004) found that marketing, as a business function, has increasingly been moving away from core strategy-making to assist as a sales support function. This poses questions about the relevancy and importance of marketing, what it constitutes and what information is vital for marketing to significantly contribute to business strategic decision making and bottom line.

Literature review for this study has shown that marketing efforts can only be effective once a market has been property defined. This defined market can then be segmented into target groups at whom specific marketing initiatives can be aimed. If the market is not correctly defined and properly segmented, marketing efforts can not hope to have the effectiveness it should have.

Empirical research for this study was based on a study done by McDonald and Dunbar on more than 500 leading European companies over a five-year period. Their questionnaire was used to focus attention on the essential deliverables of market segmentation.

1.2 BACKGROUND TO THE STUDY AND PROBLEM STATEMENT

Marketing is accused of "manipulative pseudo intimacy" and disparaged by CEOs for its imprecise and unquantifiable contribution to the bottom line (Brown 2005). A study conducted by McDonald and Dunbar (2004) revealed that marketing, as a function, has been increasingly relegated away from the core strategy-making of organisations towards a sales support department. Business is faced with the polarity of constant pressure to decrease budgets in one pole whilst simultaneously facing pressure with ongoing increased pressure from competition in the other pole. An effective marketing effort can develop sound business strategies to increase return-on-investment, allow for more successful innovations, leads to better branding efforts, increase the effectiveness of promotional effort and strengthen web marketing efforts (Leventhal 2005). This all sounds simple, but what exactly is an effective marketing effort, and how does one measure this effectiveness?

It seems that not only the South African business environment is volatile, unpredictable and ever changing, but that the same would apply to the marketing function. This creates very real challenges to marketers all over South Africa, irrespective of the kind of business or the industry in which they operate.

Very few managers would deny the importance of marketing, but it is the way this term is operationalised and how efforts are implemented in organisations that differ vastly. It is thus important to agree on the role of marketing within an organisation and the orientation employed by the organisation that would be required to obtain marketing success. The overview will also include the key strategic functions of marketing.

The traditional marketing approach that advocated the marketing mix principles and the quest for market share dominance through mass marketing techniques and a focus on new customer acquisition is unlikely to be effective in developing sustainable competitive performance in complex and rapidly changing markets (Gronroos 1994).

Several authors have drawn attention to the inadequacies of the traditional marketing approach (Gronroos 1004; Keegan 2004; Verhoef 2003) and agreed on various new drivers that should guide marketing efforts. These include the evolving recognition of the importance of customer retention, market economics and customer relationship economics. Customers should be seen as important intangible assets and be valued and managed accordingly. The calculation of customer equity has become a reality and return on marketing should be measured in order for competing marketing strategy options to be traded off on the basis of projected financial return. This could enable the organisation to focus marketing efforts on strategic initiatives that generate the greatest return. Customer selection could successfully be based on customer lifetime value and this value could facilitate resource allocation decisions.

In an era of turbulent marketplace change, ever-more demanding and sophisticated customers, intense competition from new sources, and powerful electronic business models (Piercy 2002), marketing is more relevant and important than ever before. However, companies need to move on from a traditional approach to an approach where markets are clearly defined and

customer selection is based on sound segmentation criteria driven by customer needs and preferences.

An effective strategy analysis hinges on the proper definition of the market and contains levels of synergy sufficient to make them cost effective. This suggests that entering a new market that has been inaccurately or incompletely defined, introduces error into the decision process at a preliminary stage. This error will likely multiply as future decisions build on this misinformation causing potentially significant incorrect specifications of the marketing strategy and, in turn, outcomes that are either ineffective or inefficient. A market is the aggregation of all the products and services which customers regard as being capable of satisfying the same need (McDonald & Dunbar 2004).

Correct market definition is crucial for (McDonald & Dunbar 2004):

• Measuring market share and market growth; • The specification of target customers; • Recognition of relevant competitors, and

• The formulation of marketing strategy, for it is this, above all else, that delivers differential advantage.

Market definition thus supports the contention that the most fundamental step in developing a marketing strategy is defining the market the strategy will be deployed in, as this is what sets the parameters of engagement. For instance, from the economic perspective, it determines the meeting place and other potential suitors. From the marketing perspective, it addresses the issue of whom we want a relationship with and why they might concur. From the enactment perspective, it identifies what the manager thinks is most important to the establishing of a relationship.

Early marketing theory indicates that customers demonstrate heterogeneity in their product and service requirements and buying behaviour (Wind 1978). This is even more relevant today as the new concept of marketing has shifted the focus of marketing from the product to the customer (Keegan 2004). Market segmentation is necessary to balance diverse customer

needs with the capabilities and resources of competing organisations in the marketplace. In most markets the breadth of customer requirements is too extreme to allow single organisations to satisfy all customer products and services needs all of the time. Companies are more likely to achieve a match between their particular assets and the diversity of needs by concentrating efforts on customer groups with fairly homogeneous requirements.

The purpose of market segmentation is to identify the taxonomy of consumption patterns by dividing the market into several homogeneous sub-markets. Although demographics, lifestyle, and usage behaviours help to shape customer needs, they are not always the best ways to identify groups of similar customers. Simply too many variables and too many meaningless combinations exist. Instead, the market segmentation process should start with customer needs. Market segmentation, therefore is the process of splitting customers, or potential customers, within a market into different groups, or segments, within which customers share a similar level of interest in the same, or comparable, set of needs satisfied by a distinct marketing proposition (McDonald & Dunbar 2004).

The outcome of segmentation leads to a better understanding of customers' needs and characteristics. This understanding allows more carefully timed marketing programs to be developed and a greater insight into the competitive situation to be achieved. Marketers can formulate product strategies, or product positions, tailored specifically to the demands of these homogeneous sub-markets. Segmentation analysis also helps companies identify new opportunities in under-served customer groups. It can lead to more efficient resource allocation as companies strive to assess the relative attractiveness/future potential of particular markets and segments within them. For companies that operate across a wide range of markets, such analysis plays a vital role in ensuring that the balance of marketing activities continues to contribute to market share and profitability. Low market share companies with limited resources can use segmentation to focus marketing assets by identifying, developing and sustaining activity in lower risk market segments. Used effectively, market segmentation should help also to develop and maintain an edge over rival organisations (Dibb & Simkin 1997).

The research problem therefore resolves around the role of marketing within local South African companies. It is envisaged that not all companies have embraced the notion that marketing has evolved from the traditional role of a sales support function to that of a core strategic unit. Little formal and documented research deals with benchmarking South African data against that of first world countries to indicate the way forward for South African executives.

1.3 RESEARCH GOALS

The goal of this study was to find an insight into the true purpose of marketing, how it is currently perceived by business executives, current and future trends in marketing and those elements that are vital for the sustainable success of a marketing plan as part of a business strategy.

Market definition and segmentation is fundamental to successful marketing in the twenty-first century. An organisation should define the markets it is operating in, or wishes to be in, and then divide these into segments of customers with similar needs. The choice of the markets will be influenced by the corporate objectives as well as the asset base. Markets will also be evaluated on the market size and growth, with estimates for the future.

Once each market has been defined, it is necessary to understand what value the customers, within each of the segments, are looking for. Value propositions are then designed to meet the needs of each segment, the output from which is commonly referred to as a strategic marketing plan (McDonald & Dunbar 2004). The success of this plan should be measured against customer satisfaction, retention rates and real customer profitability.

Activities listed above should form the core of the marketing function and would indeed place marketing as the core strategy-making engine within an organisation taking the lead in developing sustainable competitive performance.

Due to the turbulence in marketing with no clear indication of its stance in South Africa, exploratory research was conducted to evaluate how effective local South African companies

are in using marketing as a core part of their strategy. Measurement items have been adopted from an established questionnaire developed by McDonald and Dunbar (2004).

This study will investigate the success achieved in above objectives in marketing activities by various sized businesses in the Durban area. The aim is to evaluate the level of understanding these businesses have around the purpose and contribution of marketing and marketing activities on their business.

1.4 RESEARCH METHOD

The research method employed for this study considered secondary data in the form of a literature review to understand the role of successful marketing efforts as part of the core strategy-making engine of an organisation. Subsequently an empirical study was conducted to measure company performance within the South African, more specifically within the Durban area, context. The empirical data was benchmarked against research done by McDonald and Dunbar (2004) where possible as discussed in detail later in this document.

A questionnaire has been used in order to measure how respondents perceive the performance of the companies in which they are employed. Respondents have been asked to rate how well their company is performing in a particular area on a scale of 0 to 10, where 0 = don't do it at all, and 10 = performing extremely well. Measurement items have been adopted from an established questionnaire developed by McDonald and Dunbar (2004) and includes the following questions:

1. Our company has a clear an unambiguous definition of our market in terms of the need we serve (as opposed to products or services).

2. Our market is clearly mapped, showing the flow of products and services and the associated volumes and revenues.

3. Our market is clearly mapped, showing where buying decisions are made and what quantities they account for.

5. The segment needs are properly quantified and prioritized in terms of relative importance.

6. Our market segments are clearly linked to a set of characteristics that can help us to identify the customers in that segment.

7. All segments are unambiguously classified according to their relative attractiveness to the business.

8. There is a clear and quantified analysis of how well we satisfy customer needs relative to our competitors.

9. We have marketing objectives for each of our customer segments.

10. We have a marketing strategy for each of our segments, consistent with the objectives.

11. We have the structure and systems in place to serve each segment effectively. 12. We measure customer retention for each market segment.

13. We are able to attribute costs to individual customer accounts. 14. We know the real profitability of our top ten accounts.

15. We understand the financial impact of our marketing expenditure.

In order to evaluate the current state of marketing within South Africa, managers representing various industries and companies have been approached to rate the marketing performance of the company in which they are employed. A quantitative approach has been used for this research.

There is currently no widely recognized sampling frame of South African managers to draw from, and for this reason the sampling methodology employed a random convenience sample, but specific to the Durban area. The research has been done through the distribution and collection of a questionnaire (McDonald & Dunbar 2004). Respondents represented a wide variety of industries.

1.5 DEMARCATION OF RESEARCH

Chapter 1 provides an introduction, problem statement, research goals, research method and a demarcation of research. The aim of the research was to find an insight into the current state of marketing, with specific attention to the relevancy and importance of marketing in business today, what it constitutes and what a proper market definition and segmentation should be about.

Chapter 2 focuses on an empirical and literature research in order to find existing literature on the topic with suggested solutions to the problem stated. This chapter contains an abstract, introduction and a literature and empirical research. The literature research investigates the current and future trends in marketing, what marketing constitutes of, the importance of marketing, defining a market, segmenting a defined market and marketing in the twenty-first century. The empirical research consists of a description of the methodology, the sample and respondents, the questionnaire, the findings and a conclusion and suggested way forward.

Chapter 3 concludes what has been found in the preceding chapter. These findings are compared to some of the findings in a similar study conducted by McDonald and Dunbar and conclusions are drawn and the way forward is suggested,

The intent of this study is to find a way to link company growth, profitability and sustainability to an effective marketing strategy.

1.6 SUMMARY

Knowing who your customers are, but not knowing what their values are, will not provide a sustainable competitive advantage. The challenge to marketers is to develop and implement marketing strategies that will deliver superior customer value based on customer needs within markets and segments. Without this shift in thinking about marketing, achieving sustainable competitive advantage will remain little more than a dream for most companies. A start in this essential re-thinking is to focus on the process by which a company goes to market and the key issues to be confronted in identifying, creating and delivering value to customers better than the competition. This involves a core value strategy, developing a clear strategic pathway, integrating all initiative, managing key organisational processes to achieve total

integration across functions, and actively measuring customer satisfaction and retention per segment.

CHAPTER 2

2.1 INTRODUCTION

Marketing is under attack, beset by the attacks of anti-capitalist protesters - such as author Naomi Klein of No Logo fame - marketing is condemned for targeting from tiny tots to the terminally tubby. It is denounced by academics for its "manipulative pseudo intimacy" and disparaged by CEOs for its imprecise and unquantifiable contribution to the bottom line (Brown 2005). A study conducted by McDonald and Dunbar (2004) revealed that marketing, as a function, has been increasingly relegated away from the core strategy-making engine of organisations to become a sales support department, in charge of T-shirts and promotion. Yet, in these times of constantly shrinking budgets and increased competition no company can shy away from marketing. An effective marketing effort can develop sound business strategies to increase return-on-investment, allow for more successful innovations, leads to better branding efforts, increase the effectiveness of promotional efforts and strengthen web marketing efforts (Leventhal 2005).

South African companies are experiencing more competition than ever before. Stiff international competition is a reality. As an example, since 1992 the number of US companies operational in South Africa has increased by 300% to 450 today. South Africa is served by 40 airlines and 82 banks. Motor vehicle manufacturers and importers have increased from seven in 1994, marketing 200 model derivatives, to 28 today with over 1000 model derivatives (Pretorius 2006). South Africans spend R428,000,000 online in the retail sector (Goldstuck 2006) and it is said the emerging black market has arrived and is an economical force to be reckoned with, now referred to as the Black Diamond (South Africa's black middle class) - no longer emerging (Unilever 2006).

Mpho Makwana said that "When you have a diverse marketing profession you will see diverse

marketing. You will see people asserting themselves. Creativity thrives on diversity. We need more diversity, because in the end it can only benefit us" (Koendenman 2002). This is true;

however it seems that the marketing fraternity is in somewhat of disarray as the Marketing Federation of Southern Africa decided to wound down its operations, following a decision by

its Board on Friday September 30, 2005 (MFSA, 2005). In February 2006 a new body, the Marketing Association, was formed to represent the interests of marketers and to establish a credible national organisation for marketers. The purpose of this body is to "sustain and develop the credibility of marketing as a profession through the implementation of credible standards and ethics by its members." (Marketingweb, 2006). The success of this association remains to be seen.

It thus seems that not only the South African business environment is somewhat volatile, unpredictable and ever changing but that the same would apply to the marketing function. This creates very real challenges to marketers all over South Africa, irrespective of the kind of business or the industry in which they operate. This study aims to evaluate the current state of marketing within South African organisations and suggest a way forward.

2.2 CURRENT AND FUTURE TRENDS IN MARKETING

Very few managers would deny the importance of marketing, but it is the way this term is operationalised and how efforts are implemented in organisations that differ vastly. The first point of departure for this study was the realisation and confirmation by means of a thorough literature survey that successful marketing efforts should be the core strategy-making engine of an organisation. It is important to agree on the role of marketing within an organisation and the orientation employed by the organisation that would be required to obtain marketing success. The overview also includes the key strategic functions of marketing, which were employed in the empirical study to measure company performance.

Goldsmith (2004) argues that the effects of globalisation, technological changes, personalisation and integration are not independent, but that they interact to influence the way marketing will be practiced and taught in coming decades. He states that the impacts of these changes increase the speed and scope of marketing decision making as well as the amount of information used. Marketers should incorporate knowledge of these trends into their research.

Indeed, the practice of marketing management is continually changing as it reflects the organisational, scientific and technological, economic and social contexts in which it is

embedded. Marketing practitioners, in addition to using timeless marketing principles, must also focus on the real world where changes are taking place.

Today, marketing conditions change more rapidly than in the past. Thus, marketers must develop strategies and implement strategies more swiftly to react to new competitors and to new customers. New products must be developed and brought to market faster than ever before. Therefore, activities should integrate the various elements of the new marketing environment more effectively than in the past. No longer can business operate successfully in the global marketplace by changing their strategies piecemeal. Entire systems must be adapted to the challenges of the contemporary marketplace. Furthermore, the amount of information available to decision makers grows with each new technological advance in marketing research. Managers must therefore learn to use this information in an integrated way to react to changing market conditions (Goldsmith 2004).

In summary, Goldsmith (2004) identifies globalisation, technology and personalisation as the three "big trends" marketing practitioners currently face. This has an impact on marketing management, marketing research and marketing theory. Table 2.1 illustrates an overview of this impact.

Table 2.1: Impact of major current trends on the marketing discipline

GLOBALISATION TECHNOLOGY PERSONALISATION

MARKETING MANAGEMENT

Management and strategies should have a broad, global focus.

New tools for managers.

New strategies. Individualization of 4 P's. MARKETING

RESEARCH

More research into markets in other countries.

New technologies in MR give new insights.

New focus on methods to uncover individual wants and tastes.

MARKETING THEORY

Marketing theory must be universal or take into account cultural differences.

Marketing theory must expand its scope and include new types of products.

Marketing theories should not only address large markets but also individuals.

Source: Goldsmith (2004)

Joan Damico, a B2B marketing communication expert from J. Damico Marketing Communications, based in Walden, NY (as quoted by Simone 2007) says: "Successful

marketers will incorporate the latest and greatest tools into their marketing mix, which includes creation of a consistent brand.'''' Technology has become an increasingly important

trend in marketing, but, says Damico "Technology - whether it's cool or unique - is NOT going to get you more business, or help you market your product or service better." She views the secret of successful marketing by firstly knowing your objectives and markets and secondly developing a consistent message that speaks powerfully to each segment targeted in order to articulate value and benefits.

This view is shared by Schelfhaudt (2005). He argues that technology is reshaping marketing. Consumers want immediate access to content and information where they are and when they want it. In his mind, to reach a broad cross section of consumers, the message has to be offered over several different technologies. He views technology as "The great equalizer" that gives marketers an even playing field. Small business can be more nimble and responsive than giant competitors with the clever use of technology as advertisers aim at reaching consumers through messages that offers something of interest. This implies that advertisers are aware of who they want to interest, and what the selected target group is interested in. If they get this wrong, no matter how interesting the message, it will not have the desired impact.

2.3 THE SCOPE OF MARKETING

Many people think of marketing only as selling and advertising. However, selling and advertising is only the tip of the marketing iceberg that consists of many marketing functions. The old sense of marketing revolved around making a sale - telling and selling, but the new sense focuses on satisfying customer needs. If the marketer does a good job of understanding consumer needs, develops products that provide superior value, and then prices, distributes and promote these products effectively, the products will sell easily. Selling and advertising are only a part of a larger marketing mix that consist of a set of marketing tools that work together to affect the marketplace (Best 2005; Kotler & Keller 2006; Perreault & McCarthy 2005).

Creating exchange relationships involves efforts where sellers must search for buyers, identify their needs, design good marketing offers, set prices on products, promote products and store and deliver these products. Activities such as product development, research, communication, distribution, pricing and service are core marketing activities (Blyth 2006; Brassington & Pettitt 2003).

Kotler and Armstrong (2004) define marketing as "a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others."

From this definition these authors identified the following important core marketing concepts as shown in figure 2.1.

FIGURE 2.1: CORE MARKETING CONCEPTS Markets I Exchange, transactions, and relationships Needs, wants, and demands. Core Marketing Concepts Marketing offers (products, services, and experiences) Value and satisfaction

Source: Kotler and Armstrong (2004)

Accotrding to Blyth (2006) and Brassington and Pettitt (2003) Marketing as a function is responsible for:

Understanding market dynamics;

Defining possible customers and markets;

Quantifying and qualifying the needs of the defined customer groups (segments) within these markets:

Determining the value propositions based on product/service offerings and costs to meet these needs;

Communicating these value propositions internally and externally to both employees (responsible to deliver promises) and customers segments (responsible to purchase offerings);

• Playing an appropriate part in delivering these value propositions (usually only communications); and

• Monitoring the value actually delivered.

In addition, for this processes to be effective, organisations need to apply a marketing orientation and should operate in a customer driven manner. Above all, organisations need to understand that, without correct market definition and correct market segmentation, marketing will never occupy a central role in strategy-making.

2.4 THE IMPORTANCE OF MARKETING

"Simply put, the aim of marketing is to build and manage profitable customer relationships" (Kotler & Armstrong 2004). Marketers study consumer needs and wants, select target markets they can serve best, and design products, services and programs to serve these markets. They attract new customers by promising superior value, and keep and grow current customers by delivering superior satisfaction. Marketing is much more than just an isolated business function. Kotler and Armstrong (2004) describe this as a philosophy that guides the entire organisation toward sending, serving and satisfying consumer needs. In order to achieve these customer relationship-building goals, the marketing department of a business has to partner closely with other departments in the company and with other organisations throughout its entire value-delivery network to provide superior customer value and satisfaction. Thus, marketing calls upon everyone in the organisation to "think customer" and to do all they can to help build and manage profitable customer relationships.

Marketing is all around us and is used by everyone who has a product or service to sell. For marketing to succeed at its purpose, the marketer has to know how to define and segment markets, develop attractive value propositions, and build strongly positioned brands (McDonald & Dunbar 2004; Best 2005). This information assists in correctly pricing the offering, choosing and managing intermediaries to make the products available to customers and show how to advertise and promote products. Even more important, this information assists in decisions on adapting marketing strategies to a host of new technological and global realities.

It is difficult to find companies who actually do not want marketing to take the lead in the development of sustainable competitive performance in the complex, confusing, paradoxical and rapidly changing markets they face (Piercy 2002). The traditional marketing approach that advocates the marketing mix principles and the quest for market share dominance through mass marketing techniques and a focus on new customer acquisition is, however, unlikely to be effective (Gronroos 1994; Ahmad & Buttle 2001, Piercy 2002).

Several authors have drawn attention to the inadequacies of the traditional marketing approach (Gronroos 1994; Gupta & Lehmann 2003; Gupta, Lehmann, & Stuart 2003; Keegan 2004; Rust, Lemon & Zeithaml 2004; Venkatesan & Kumar 2004; Verhoef 2003) and agreed on various new drivers that should guide marketing efforts. These included the evolving recognition of the importance of customer retention, market economics and customer relationship economics (Gronroos 1994; Verhoef 2003). Customers should be seen as important intangible assets (Gupta & Lehmann 2003) and be valued and managed accordingly (Gupta, at al., 2003; Hogan, Lemon, & Rust 2002). The calculation of customer equity has become a reality and return on marketing should be measured in order for competing marketing strategy options to be traded off on the basis of projected financial return. This could enable the organisation to focus marketing efforts on strategic initiatives that generate the greatest return (Rust, Lemon & Zeithaml 2004). Customer selection could successfully be based on customer lifetime value and this value could facilitate resource allocation decisions (Venkatesan & Kumar 2004).

In an era of turbulent marketplace change, ever-more demanding and sophisticated customers, intense competition from new sources, and powerful electronic business models marketing is more relevant and important than ever before (Piercy 2002). However, companies need to move on from a traditional approach to an approach where markets are clearly defined and customer selection is based on sound segmentation criteria driven by customer needs and preferences.

2.5 DEFINING THE MARKET

An effective strategy analysis hinges on the proper definition of the market and contains levels of synergy sufficient to make them cost effective. This suggests that entering a new market that has been inaccurately or incompletely defined introduces error into the decision process at a preliminary stage. This error will likely multiply as future decisions build on this misinformation causing potentially significant mis-specifications of the marketing strategy and, in turn, outcomes that are either ineffective or inefficient (Forlani & Parthasarathy 2003). A market is the aggregation of all the products and services which customers regard as being capable of satisfying the same need. Correct market definition is crucial for (McDonald & Dunbar 2004):

• measuring market share and market growth; • the specification of target customers;

• recognition of relevant competitors; and, most important of all,

• formulation of marketing strategy, for it is this, above all else, that delivers differential advantage.

Market definition thus supports the contention that the most fundamental step in developing a marketing strategy is defining the market the strategy will be deployed in, as this is what sets the parameters of engagement. For instance, from the economic perspective, it determines the meeting place and other potential suitors. From the marketing perspective, it addresses the issue of whom we want a relationship with and why they might concur. From the enactment perspective, it identifies what the manager thinks is most important to the establishing of a relationship (Forlani & Parthasarathy 2003).

A market is the set of actual and potential buyers of a product. These buyers share a particular need or want that can be satisfied through exchange relationships. Unless in a new business without a customer base at all, market research should begin with learning as much as possible about the present customer base. Berry and Wilson (2001) suggest that customer surveys, random interviews, feedback sheets and a lot of common sense is needed to acquire

information about who your clients are, how they found you and what they like or do not like about you. In other words, who do we want to sell our product or service too and how will they want us to focus our efforts? Defining the appropriate market, in this sense, is thus the first step towards effective marketing. Considering the diversity of customer needs and wants it becomes necessary to refine this definition through well researched segmentation.

2.6 MARKET SEGMENTATION

Early marketing theory indicates that customers demonstrate heterogeneity in their product and service requirements and buying behaviour (Assalel & Roscoe 1976; Wind 1978). This is even more relevant today as the new "concept" of marketing has shifted the focus of marketing from the product to the customer (Keegan 2004). Market segmentation is necessary to balance diverse customer needs with the capabilities and resources of competing organisations in the marketplace. In most markets the breadth of customer requirements is too extreme to allow single organisations to satisfy all customer products and/or services needs all of the time. Companies are more likely to achieve a match between their particular assets and the diversity of needs by concentrating efforts on customer groups with fairly homogeneous requirements (Dibb & Simkin 1997).

Customer needs and buying behaviour are simply too diverse to be satisfied by a mass market approach. Businesses applying a segmentation approach are able to deal with this heterogeneity by targeting their marketing and resources at attractive customer groups (Hooley, Sanders & Piercy 2004). This is achieved by grouping customers with similar needs and characteristics into homogeneous segments. Kotler and Armstrong (2004) describe a market segment as a group of consumers who respond in a similar way to a given set of marketing efforts.

The purpose of market segmentation is to identify the taxonomy of consumption patterns by dividing the market into several homogeneous sub-markets (Lin 2002). Although demographics, lifestyle, and usage behaviours help to shape customer needs, they are not always the best ways to identify groups of similar customers. Simply too many variables and too many meaningless combinations exist. Instead, the market segmentation process should

start with customer needs (Best 2005). Market segmentation, therefore, is the process of splitting customers, or potential customers, within a market into different groups, or segments, within which customers share a similar level of interest in the same, or comparable, set of needs satisfied by a distinct marketing proposition (McDonald & Dunbar 2004).

The outcome of segmentation leads to a better understanding of customers' needs and characteristics. This understanding allows more carefully timed marketing programmes to be developed and a greater insight into the competitive situation to be achieved (Dibb & Simkin 1997). Marketers can formulate product strategies, or product positions, tailored specifically to the demands of these homogeneous sub-markets (Lin 2002). Segmentation analysis also helps companies identify new opportunities in under-served customer groups. Segmentation can lead to more efficient resource allocation as companies strive to assess the relative attractiveness/future potential of particular markets and segments within them. For companies which operate across a wide range of markets, such analysis plays a vital role in ensuring that the balance of marketing activities continues to contribute to market share and profitability. Low market share companies with limited resources can use segmentation to focus marketing assets by identifying, developing and sustaining activity in lower risk market segments. Used effectively, market segmentation should help also to develop and maintain an edge over rival organisations (Dibb & Simkin 1997). A clear and well defined target market thus creates an effective platform for marketing in the twenty-first century.

2.7 MARKETING IN THE TWENTY-FIRST CENTURY

It seems that market definition and segmentation are fundamental to successful marketing in the twenty-first century. An organisation should define the markets it is operating in, or wishes to be in, and then divide these into segments of customers with similar needs. The choice of the markets will be influenced by the corporate objectives as well as the asset base. Markets will further be evaluated on the markets' size and growth, with estimates for the future.

Once each market has been defined, it is necessary to understand what value the customers, within each of the segments, are looking for. Value propositions are then designed to meet

the needs of each segment, the output from which is commonly referred to as a strategic marketing plan (McDonald & Dunbar 2004). The success of this plan should be measured against customer satisfaction, retention rates and real customer profitability. Marketing is thus described by these authors as a process for:

• defining markets;

• quantifying the needs of the customer groups (segments) within these markets; • determining the value propositions to meet these needs;

• communicating these value propositions to all those people in the organisation responsible for delivering them and getting them to buy-into their role;

• playing an appropriate part in delivering these value propositions (usually only communications); and

• monitoring the value actually delivered.

In order for this process to be effective, organisations need to be consumer/customer driven. Above all, organisations need to understand that, without correct market definition and correct market segmentation, marketing will never occupy a central role in strategy-making. Failure of marketing has a major influence in the boardrooms and much of this failure can be attributed to a lack of understanding the importance of market segmentation in successful marketing. Marketing is a strategic function, encompassing much more than merely sales and support. McDonald and Dunbar (2004) argue that there are three fundamental determinants of corporate success that are poorly understood in the corporate world at large. These are:

FIGURE 2.2 : THE MARKETING D< 3M AI N i Define markets and understand value 4 Monitor value <--'' _{/ Asset \ '~--^ Determine} value proposition . 4 Monitor value H Rase Determine value proposition 2 Monitor value ""*'- V Determine value proposition

'"*>. \ y ,-'*''

V

T

i 1 .'

Source: Adapted from McDonald and Dunbar (2004)

McDonald and Dunbar (2004) illustrate that market definition is a clearly cyclical process. Monitoring the value delivered will update the organisation's understanding of the value that is required by its customers. It can be seen that the first two boxes are concerned with strategic planning processes (developing market strategies), whilst the third and fourth boxes are concerned with the actual delivery in the market of what was planned and then measuring the effects.

They concur that the segmentation process should be positioned as being central to every corporate function. The process involves four major sub-processes, illustrated in Figure 2.3.

FIGURE 2.3: MARKET DEFINITION, SEGMENTATION, AND VALUE PROPOSITIONS

E)

Corporate _^r mission/objectives

External data inc. market research Internal date

Understand value required (by the customers)

mission/objectives External data inc. market research Internal date

Understand value required (by the customers)

from value delivery

r v Evaluate market/ segment attractiveness and select Understand competitor value positioning Evaluate market/ segment attractiveness and select Understand competitor value positioning

.a

Source: Adapted from McDonald and Dunbar (2005)

As illustrated in figure 2.3 it is firstly necessary to define the markets the organisation is in, or want to be in, and how this is divided into segments of customers with similar needs. Once each market has been defined, it is necessary to understand what value the customers within each of the segments it divides into are looking for. This value is most simply thought of as the benefits gained from the product or service, but it can also encompass the value to the customer of surrounding services such as maintenance information.

'Understand competitor value positioning' refers to the process of establishing how well the organisation and its competitors currently deliver the value that the customers seeks. McDonald and Dunbar (2004) also state that this involves future planning to predict how competitors might improve whilst considering internal responses. From these three processes, the relative attractiveness of the different markets, and segments within these markets, can be evaluated. One relevant tool here is Porter's five forces model, showing the forces which

shape industry competition and hence the attractiveness of a given segment (Thompson,

Strickland & Gamble 2007). The output will be some form of analysis, and provide a good summary of the key information in a portfolio matrix. Such a matrix provides a sensible basis for prioritization amongst the many possible product/segment combinations which the organisation could address.

Activities as listed above should form the core of the marketing function and would indeed

place marketing as the core strategy-making engine within an organisation taking the lead in

developing sustainable competitive performance.

2.8 METHODOLOGY

In order to evaluate the current state of marketing within Durban, South Africa, executives representing various industries and companies were approached to rate the marketing

performance of the company in which they were employed.

Since the research was exploratory by nature and of general interest, seeking to establish a

pattern of organisational behaviour around marketing practices, a quantitative approach was

selected. Nominal data was collected, so non-parametrical statistics were used to describe frequencies and other trends. For this reason descriptive statistics existing of frequencies and mean were calculated.

2.9 SAMPLE AND RESPONDENTS

Since there is no widely recognised sampling frame of South African managers to draw from, the sampling methodology had to be a random convenience sample. In this case, the sample

frame consisted of a variety of business leaders/managers and owners in the Durban area, and

it presented a large and diverse distributed sampling frame. In response to this elicitation, 241

usable responses were gathered.

The profile of the respondents is illustrated in Figure 2.4 and Figure 2.5. Figure 2.4

a wide range of different functional areas is represented. As mentioned before, the sampling frame is a diverse group of respondents from the Durban area, and the results confirm it.

Positions occupied in the company by respondents ranged from director to specialist as indicated in Figure 2.5. Respondents represents education, utility, medical, financial,

communication, mining and energy, automotive, transport, manufacturing, food and

beverages, public service, information technology, media and advertising, tourism and entertainment, agricultural, non governmental organisations, consulting and military

industries.

The corpographics show that there is a fairly even distribution between responses from small, medium and large companies (Note the group 2 000-8 000 employees - 14%):

• 22% of respondents work for organisations with less than 100 employees.

• 19% of respondents work for organisations with more than 100 and less than 500 employees.

• 21% of respondents work for organisations with more than 500 and less than 2000 employees.

• 14% of respondents work for organisations with more than 2 000 and less than 8 000 employees.

FIGURE 2.4: FUNCTIONAL AREAS OF RESPONDENTS

Other

Purchasing and Logistics

Finance Operations HR and Admin Sales and Marketing

1 ! 1 1

Other

Purchasing and Logistics

Finance Operations HR and Admin Sales and Marketing

Other

Purchasing and Logistics

Finance Operations HR and Admin Sales and Marketing

Other

Purchasing and Logistics

Finance Operations HR and Admin Sales and Marketing

Other

Purchasing and Logistics

Finance Operations HR and Admin Sales and Marketing

Other

Purchasing and Logistics

Finance Operations HR and Admin Sales and Marketing

Other

Purchasing and Logistics

Finance Operations HR and Admin Sales and Marketing

Other

Purchasing and Logistics

Finance Operations HR and Admin Sales and Marketing

Other

Purchasing and Logistics

Finance Operations HR and Admin Sales and Marketing

Other

Purchasing and Logistics

Finance Operations HR and Admin Sales and Marketing

Other

Purchasing and Logistics

Finance Operations HR and Admin Sales and Marketing

Other

Purchasing and Logistics

Finance Operations HR and Admin Sales and Marketing

Other

Purchasing and Logistics

Finance Operations HR and Admin Sales and Marketing

0% 5% 10% 15% 20% 25% 30%

FIGURE 2.5: POSITIONS OCCUPIED IN THE COMPANY

Other ' j Specialist ' j -' j Junior Manager ' j ' j Middle Manager Senior Manager Director

t

The reader should note that the author aimed at a general perspective with regard to the state of marketing and that this study did not aim to present the views of marketing practitioners only. Rather, the overall company perspective was measured in line with the requirements of the marketing orientation, which require all employees to base their actions on the impact it will have on the customer.

2.10 QUESTIONNAIRE

A questionnaire was employed in order to measure how respondents perceived the performance of the companies, in which they were employed. Respondents were asked to rate how well the company is performing in a particular area on a scale of 0 to 10, where 0 = don't do it at all and 10 = performing extremely well. Measurement items were adopted from an established questionnaire developed by McDonald and Dunbar (2004). (See Appendix A.)

2.11 FINDINGS / RESULTS

Descriptive statistics were used to analyse the data and will be presented graphically to illustrate the current state of marketing in Durban, South Africa. No substantial differences were indicated based on the size of the company. Different industries did, however, show more variations on the overall ratings with mining and government contributing mostly to the lower ratings, unless otherwise indicated. As this paper considers the general state of marketing in South Africa, cross tabulations and industry specific numbers will not be showed. Overall response frequencies should provide a general pattern of organisational behaviour around marketing practices across industries.

FIGURE 2.6: THE EXTENT TO A WHICH COMPANY HAS A CLEAR AND UNAMBIGUOUS MARKET DEFINITION

Figure 2.6 illustrates that most respondents (74% scored 6 and above) had the perception that their organisations have a clear market definition.

FIGURE 2.7: THE EXTENT TO WHICH MARKETS IS CLEARLY MAPPED, SHOWING THE FLOW OF PRODUCTS AND SERVICES AND THE ASSOCIATED VOLUMES AND REVENUES

30 25 20 c 1) -a _c o ^ 10 Not at 1 Durban 5 6 7 24 15 17 — 12 10 17 — 3 3 * 12 17 — 2 2

n , n , , H ,

Figure 2.7 illustrates that 66% of respondents rated the ability of their companies to map markets, that show the flow of products and services and the associated volumes and revenues, as seven or higher.

FIGURE 2.8: THE EXTENT TO WHICH THE MARKET IS CLEARLY MAPPED, SHOWING WHERE BUYING DECISIONS ARE MADE AND WHAT QUANTITIES THEY ACCOUNT FOR

Durban 2 a -a c o ex 18 16 14 12 10 8 6 4 2 16 14 14 10 6 r< 4 4 1

m

Figure 2.8 supports Figure 2.7 and it seems apparent that respondents believe that Durban, South Africa companies are familiar with, and users of, market mapping. OnJy 18% of the respondents scored themselves below 5.

FIGURE 2.9: THE EXTENT TO WHICH SEGMENTS ARE CLEARLY DESCRIBED AND SIZED IN TERMS OF CUSTOMER NEEDS

a u -a c o ex o 25 20 15 10 Durban za za 14 10 9 — 11 — za 9 ■ 4 _{— —} 11 — za ■ 3 2 2

n n n.

Figure 2.9 illustrates that 30% of respondents (scored five and lower) felt that their companies have not clearly described and sized segments in terms of customer needs whilst 70% of respondents thought they did.

FIGURE 2.10: CO 1—'• c to -a a a Q _ C/3 o4 2 5 2 0 15

THE EXTENT TO WHICH SEGMENT NEEDS ARE PROPERLY QUANTIFIED AND PRIORITIZED IN TERMS OF RELATIVE IMPORTANCE N o t a t 1 a l l Durban ■ 22 22 12 12 u 22 10 ! J -6 6 12 12 u 22 ! J -* 2 6 6 12 12 u 22 ! J -9 Totally

Figure 2.10 illustrates that the majority of respondents (70% scored six and more) perceived that companies placed more focus on quantifying and prioritizing segments according to its relative importance.

FIGURE2.il: THE EXTENT TO WHICH MARKET SEGMENTS ARE CLEARLY LINKED TO A SET OF CHARACTERISTICS THAT CAN HELP TO IDENTIFY THE CUSTOMERS IN THAT SEGMENT

D u r b a n a 2° -a 21 a 2° -a 21 16 o CO a ! 10 o 10 12 13 21 10 16 o CO a ! 10 o 5 5 A 12 13 21 16 1 I 1 3 12 13 21 16 N o t a i 2 4 6 8 To! ally all

Figure 2.11 illustrates that respondents perceive companies to be mostly able to describe segments by using a set of clear characteristics to identify customers within different segments with 72% of respondents scoring 6 and above.

FIGURE 2.12: THE EXTENT TO WHICH ALL SEGMENTS ARE

UNAMBIGUOUSLY CLASSIFIED ACCORDING TO THEIR RELATIVE ATTRACTIVENESS TO THE BUSINESS

a -a a o a. Pi o 18 16 11 12 10 B 6 4 2 N o t a l all D u r b a n 17 1 < _j 14 12 q « -7 -6 -< — -2 —

-u

u

From figure 2.12 it seems that the classification of segments according to their relative attractiveness to the business is used to a lesser extent by Durban companies than linking segments to a set of characteristics as seen in figure 2.11. Here, only 67% of respondents scored 6 and above.

FIGURE 2.13: THE EXTENT TO WHICH CLEAR AND QUANTIFIED ANALYSIS OF HOW WELL CUSTOMER NEEDS ARE SATISFIED RELATIVE TO COMPETITORS 16 14 a u -a e; o ex in £> C 12 10 8 ■ 6 4 2 N o l at a!) Durban 14 ^43^ 12 12 10 -I T o i a l l y

In figure 2.13 fewer respondents still (62% scored 6 and above), believe that their companies perform well in measuring customer satisfaction.

FIGURE 2.14: THE EXTENT TO WHICH EACH CUSTOMER SEGMENT HAS MARKETING OBJECTIVES V3 c T 3 C o 18 16 14 12 -10 B 5 4 2 0 L Noi ai a l l D u r b a n 16 J3_ JZ Z Z_ 12 1 3 -T o l a l i >

The declining trend from figure 2.12 continues in figure 2.14 as fewer respondents (59% scored 6 and above) believed that their companies are performing well in setting marketing objectives per customer segment.

FIGURE 2.15: THE EXTENT TO WHICH EACH SEGMENT HAS A MARKETING STRATEGY THAT IS CONSISTENT WITH THE OBJECTIVES

Supporting Figure 2.14 and Figure 2.15 illustrates that, with this question also, only 59% of respondents scored 6 and above in their perception that companies perform well with developing a marketing strategy to the support marketing objectives per segment.

FIGURE 2.16: THE EXTENT TO WHICH STRUCTURES AND SYSTEMS ARE IN PLACE TO SERVE EACH SEGMENT EFFECTIVELY

a -a a o n. in 1J o~^ 4 - — N o l a l a)] D u r b a n 17 16 14 1 3 i ! "J i - 9 i ! "J i 7 i ! "J i 6 6 i ! "J i 4 i ! "J i -i ! "J i -i ! "J i T o t a l l y

It is also apparent that fewer respondents (62% scored 6 and above) think their company has structures and systems in place to serve each segment effectively, as illustrated in Figure 2.16.

FIGURE 2.17: THE EXTENT TO WHICH CUSTOMER RETENTION FOR EACH MARKET SEGMENT IS MEASURED

c -a a o o-oi 16 14 12 10 8 6 4 2 N o l a t 1 all Durban ^-rr ^ 3 -12 -15-1 Totally

As companies are not performing as well in measuring customer satisfaction they also seem not to be performing that well with measuring customer retention. Figure 2.17 illustrates that 9% of companies do not measure retention at all and only 55% of respondents scored 6 and above.

FIGURE 2.18: THE EXTENT TO WHICH COST CAN BE ATTRIBUTED TO INDIVIDUAL CUSTOMER ACCOUNTS

c -a a o a, 3 o "-? 20 18 16 14 12 ia s 6 4 2 0 12

0

Figure 2.18 indicates that although 12% of responding companies cannot attribute cost to individual accounts at all, 45% (score eight and higher) believe that they perform this function very well.

FIGURE 2.19: THE EXTENT TO WHICH THE REAL PROFITABILITY OF THE TOP TEN ACCOUNTS IS KNOWN

Supporting figure 2.18, Figure 2.19 illustrates a similar distribution of responses with 8% not measuring the real profitability of their top 10 accounts at all while a total of 28% believe that they do measure this totally.

FIGURE 2.20: THE EXTENT TO WHICH THE FINANCIAL IMPACT OF MARKETING EXPENDITURE IS UNDERSTOOD

" D u r b a n 22 C/5 c -a c 15 -C/5 c -a c 15 - _{IJ IO} a , ad, a 10 -11 10 a , ad, a 10 -6 6 8 5 0 -b 5 0 -3

n

n

Figure 2.20 show that most of the respondents (64% scored 6 and above) perceive their company to understand the financial impact of marketing expenditure well.

While specific data results on McDonald and Dunbar's study is not available, they referred to a study done by Cranfield University School of Management in April 2002 (McDonald & Dunbar: 2004). The last four questions added to the adopted questionnaire, used for this study, were based on the CranfieJd research. They have a database of over 500 leading European companies and their results compare as follows against the results obtained from Durban companies:

Question 12: We measure customer retention for each market segment.

FIGURE 2.21: DURBAN SA - COMPANIES MEASURING CUSTOMER RETENTION BY MARKET SEGMENT

c to T 3 C o ex <s> u Durban 16 M 12 10 8 ■ G 4 2 15 4 3 15 -12 A±-Not at T a l l Totally

FIGURE 2,22: CRANFIELD UNIVERSITY SCHOOL OF MANAGEMENT COMPANIES MEASURING CUSTOMER RETENTION BY MARKET SEGMENT McDonald & D u n b a r 60 T ■O D O 3 O 5 0 4 0 3 0 2 0 10 4 9 12 TO No! at all

_□_

The results from companies based in Durban, South Africa differ dramatically from the data obtained by Cranfield. 49% of their respondents are of the opinion that customer retention by market segment are not measured at all with only 13% of respondents scoring 6 and above compared to the Durban study where 55% of respondents scored 6 and above as illustrated in figures 2.21 and 2.22 above.

FIGURE 2.23: £3 c <u -a c o CL, to H Dd o 2 0 18 IS M 12 10 6 6 4 2 12

DURBAN SA - EXTENT TO WHICH COSTS IS ATTRIBUTED TO INDIVIDUAL ACCOUNTS N o t at all Durban _jt@_ 12 T o t a l l y

FIGURE 2.24: CRANFIELD UNIVERSITY SCHOOL OF MANAGEMENT

-EXTENT TO WHICH COSTS ARE ATTRIBUTED TO INDIVIDUAL ACCOUNTS t/5 C ■U -a c o CL, in & o 3 5 3a 25 2 0 15 10 5 3 0 N o t 31 a l l

McDonald & Dun bar

19

T o t a l l y

Figures 2.23 and 2.24 illustrate a similar differentiation in the compiled data compared. The results from companies based in Durban show that 12% of respondents do not know the

extent to which cost are attributed to individual accounts, compared to 30% of the European counterpart while 65% of the Durban respondents score 6 and above compared to only 18% of the European respondents.

Question 14: We know the real profitability of our top ten accounts.

FIGURE 2.25: & a u -C! a o O H <y u-o 3 0 25 20 15 10

DURBAN SA - THE EXTENT TO WHICH THE REAL PROFITABILITY OF THE TOP TEN ACCOUNTS IS KNOWN

Not ai all Durban -43- 14 12

0 _