Awareness Raising - HAW Hamburg

This project is funded by the European Union.

Training module

Marketing Keywords: Marketing, product diversification, presentation, labeling, market packaging, distribution system.

After completion of this sub module, you would have learnt about the definition of marketing and the specific marketing strategies required in increasing product awareness amongst consumers, buyers, producers and retailers. In addition, you would be able to familiarize with the current marketing strategies used, to understand the definition of the terms used in marketing, and also to differentiate the differences between the marketing strategies currently implemented.

Hamburg University of Applied Sciences May 2009

MARKETING In this sub module, you will be introduced to the definition of marketing and its specific strategies required in raising awareness amongst consumers, buyers, producers and retailers. Besides that, this section also explains the current marketing strategies used which are product diversification, presentation, labeling, market packaging and distribution system. You will also be exposed to the different current marketing terms used in the marketing world of today and the terms’ own uniqueness of how they are able to create awareness amongst the global society.

1

Introduction to Marketing Marketing deals with customers and is defined as a social and managerial process whereby individuals and groups obtain what they need and want through creating and exchanging products and value with others/1/. Understanding consumer behavior is always a challenging task for companies marketing within the borders of a single country. As for global multinational companies such as Starbucks or Nestle, operating in many countries and trading internationally, however, understanding and serving the needs of consumers can be daunting. Although consumers in many parts of the world may have some things in common, their attitudes, values, and behaviors vary greatly/2/. In light of the development in International Trade, the industry and government needs a better understanding of consumers’ acceptance of commercial, fair trade and organic farming products. Despite the potential benefits, these methods are moving at a very slow rate due to consumers’ lack of awareness regarding such matter. There are five marketing strategies used to raise the product awareness in consumers’ which are:     

product diversification; presentation; labeling; packaging; and distribution systems.

2.

Product Diversification The meaning of product diversification is to increase the range of products or the variety of things the product can do/3/Therefore, it can be said that the diversification of a product is a form of growth marketing strategy for the company. It is one of the most risky strategies to implement as it means penetrating through a new market with a new product. Figure 1 shows the Ansoff Matrix Model/4/ which shows the four main marketing strategies.

Figure 1: The Ansoff Matrix Model

Source: Adapted by the authors from Jobber (2001, p.260), originally from Ansoff (1987)/4/

There are three types of diversification: concentric, horizontal and conglomerate. Concentric diversification means that there is a technological similarity between the industries which means that the firm is able to leverage its technical expertise to gain some advantage. Horizontal diversification is desirable if the present customers are loyal to the current products and if the new products have a good quality and are well promoted and priced. Conglomerate diversification or better known as lateral diversification is used to firstly improve the profitability and the flexibility of the company, and then to get a better reception in capital markets as the company gets bigger/5/. An example of product diversification in the international and domestic trade of agriculture product is bananas. Bananas are mainly consumed as a fresh produce or fruit. Product diversification strategies have led to diversification of fresh bananas into other processed banana food products such as dried bananas, banana alcohol, banana puree and even banana flour and powder.

3.

Product Presentation In today’s highly competitive business environment especially in international trading, one of the key elements of success is the product’s presentation. A presentation is vital as it can either captivate the audience or make the audience lose interest quickly. For processed product or fresh produce, it should have a distinctive style or design which is a way to add customer value. Style is defined as the appearance of a product which could either be eye-catching or yawn producing. However, design is a larger concept than style as it goes to the very heart of a product and good designs always contributes to product’s usefulness as well as to its looks /6/. For example, the style that fresh produce such as bananas should be marketed is by appearing fresh, and not damaged. Bananas whether fresh produce or processed products bores down to the dietary or nutrition facts which is designed to assist in consumers’ healthy-eating lifestyle. One of the marketer’s major positioning tools is in the product quality. Quality is closely linked to customer value and satisfaction hence the direct impact on product. In any processed product or fresh produce, quality can be defined as “freedom from defects” /7/. Therefore, the quality of a product is always associated with the way it is presented. In addition to the above, the most distinctive skill in product presentation is the marketer’s ability to create, maintain, protect and enhance brands of their products. Branding is becoming stronger each day as hardly anything goes by unbranded/6/. Consumers view a brand as important part of the presentation of a product. For example, the Chiquita Brands International/8/ bananas would be perceived as a better quality of bananas compared to bananas not of that brand even if the bananas were identical. Therefore, the product’s presentation consists of its style and design, quality of the product and also it’s branding.

4.

Labeling Labeling on products such as food and beverage products is basically complete information about its ingredients, date of manufacturing and expiry, and nutritional data. Labels could also consist of information about the conditions under which the product was produced. Labels are usually to identify the product or brand such as Colgate for toothpaste. In Malaysia, food labeling is regulated whereby some products have to be labeled HALAL as there are Muslim consumers. However, most consumers these days are looking for better information about the price-building of food to have the choice to buy products which are free from too much chemical usage and also from fair trade.

Consumers are better enabled to make the right choice when buying products with labeling that provides all relevant information about the production process/9/. Labeling would also be able to build up markets for quality products as it should consists transparent information about specific qualities of a product and also have more strict controls established to avoid fraud. In the Netherlands, the Dutch Environmental Quality Label has been used for a steadily increasing number of agricultural products and foodstuffs since 1995. Products with this label meet the most stringent environmental criteria during their entire life cycle /10/. Figure 2 shows examples of the labels used in European countries. Figure 2: Examples of three European environmental labels: the EU flower, the Nordic Swan and the German Blaue Engel

Source: http://www2.mst.dk/common/Udgivramme/Frame.asp?http://www2.mst.dk/udgiv/Publications/2006/877052-180-8/html/kap03_eng.htm /11/

Environmental labels give the producer a simple message whereby products with the eco-label are less environmentally harmful than those without the label. ISO is in the midst of developing standards for environmental labels and the standardization of products/11/. These labels assist to raise awareness to producers, retailers, and also consumers on making the right choice of choosing products which are environmentalfriendly produced.

5.

Product Packaging Product packaging involves designing and producing the container or wrapper for a product/12/. Traditionally, packaging functions as a protection for the product it contained which is in transit to the final consumer. In any international or domestic trade, packaging physically protects the objects from temperature, compression and others which also reduces the security risks of shipment. Product safety is also a major packaging concern. Products are packaged with improved tamper resistance to deter tampering. Child-proof packages are one of the reason why products have tamper-evident features to help indicate tampering/13/. Numerous factors have now made packaging an important marketing tool such as instant consumer recognition of the company or brand and also help deter counterfeiters. In a supermarket setting, a buyer would come across thousands of items; hence the package may be the seller’s last chance to influence buyers. It is also termed as a “five second commercial”. On a different note, some packaging may cause lost of sales due to the complicated or poorly designed packages. A company can have an advantage of raising awareness of its product or brand to its potential buyers by its innovative packaging which may help deter counterfeiters/14/. Figure 3: Examples of various household packaging types for food product.

Source: http://en.wikipedia.org/wiki/Packaging#cite_note-5/15/

Market packaging plays important marketing roles whereby it captures attention and increases consumption or sales of product, to ensuring consumer safety and even to a point of gaining access to new distribution system.

6.

Distribution Systems Firms constantly evaluate their distribution systems as it is recognized that the distribution of goods to and from their facilities can represent as much as 25% of the cost of the products/16/. There are five kinds of distribution system which are applicable to the international or domestic trade for agriculture which are distribution system via wholesale auction markets, trucking, railroads, airfreight and waterways. Fresh produce such as fresh fruits and vegetables uses a distribution system called the wholesale auction market. This is because of the geographical proximity between production and consumption areas, and a large number of producers, middlemen, and retailers/17/. However, with the change of human beings’ lifestyle and the impact of technological innovations such as domestic refrigerators, there is a tendency to encourage the development of shopping at supermarkets on a once-a-week basis. Wholesale auction markets then face a challenge to retain turnover by providing its services to commercial places such as hotel, catering sectors and supermarkets/18/. Most agriculture goods are moved by trucks. Realizing that shipping via truck could be just as quick as airfreight for relatively short-haul shipments, many carriers have started moving time sensitive freight such as fresh produce or processed products via ground using 100% truck delivery/19/. Due to the time sensitive freight, truckers are pressured to pick up and deliver on time, with no damages at a low cost. Another mode of distribution system for agriculture product via land is known as the railroads system. A popular means of distribution via the railroad system is to have containerization whereby intermodal shipping of truck trailers on railroad flat cars, often piggybacked as double-deckers. However, the share of rail transport has been declining because small-batch manufacture requires frequent, smaller shipments that are likely to move via truck or air/20/. The fastest mode of shipping goods for international trading is by airfreight. To date, airfreight represents only about 1% of tonnage shipped in the United States. Air freight offers speed and reliability for national and international movement of lightweight items such as fresh produce – fruits, flowers, and vegetables/21/. Lastly, waterways are one of the nation’s oldest distribution systems of freight transportation. Usually, the cargo which utilizes the waterway is bulky, low-value cargo such as iron ore, grains, cement, coal, chemicals and others. For international trade, millions of containers are shipped out at very low cost via huge oceangoing ships each year /22/. When speed is not an issue but shipping cost is, water transportation will have the upper hand. For example, since 50 years the Geest Line has been involved in the transport of perishable fruits eastbound and claims to carry more cargo between

Europe and the Windward and Leeward islands than any other shipping line. Figure 4 shows an example of a Geest Line vessel. Figure 4: Geest Line vessel (Distribution via waterways)

Source: http://www.geestline.com/ships/timor-stream.html /24/

7.

Summary Awareness-raising amongst buyers, producers, and growers in the agriculture trade can be achieved via five marketing strategies. These strategies are known as product diversification, presentation, labeling, and market packaging and distribution systems. According to the Ansoff Matrix Model, product diversification is riskiest as it involves introducing a new product to a new market. There are three types of diversification: concentric, horizontal and conglomerate. Presentation is one of the key elements of success to international and domestic trade. The product’s presentation is vital as it holds the upper hand in the marketing strategy. It is usually judged by its style and design, quality and branding. Besides that, labeling is also an important marketing strategy as the buyer is able to make a right choice before purchasing. Labels play an important role in raising awareness to people of today. This is because buyers are now not only health conscious but also beginning to be environmental-friendly, and the label on the products which has certain logos or trademarks that can be identified is crucial to their purchase decision. All products have to be packaged securely due to food safety, to avoid tampering and also deter counterfeiters. This marketing strategy that also includes having the product

packaged with innovative designs would help booster sales for the firm and at the same time raise awareness on product safety before purchased. In addition to all these, there are several distribution systems which are used for the distribution of products or fresh produce internationally and domestically. These distribution systems are done via wholesale auction markets, trucking, railroads, air freight and waterways.

1 P Kotler, G Armstrong, S W Ang, S M Leong, C T Tan, D K Tse, 2005. Principles of Marketing: An Asian Perspective, Pearson Education Inc Publication, pg 5. 2 P Kotler, G Armstrong, S W Ang, S M Leong, C T Tan, D K Tse, 2005. Principles of Marketing: An Asian Perspective, Pearson Education Inc Publication, pg 163. 3 C Cobuild, 1996. Learner’s Dictionary: Helping learners with real English, Harper Collins Publishers, pg 320. 4 Jobber D, 2001. Principles & Practice of Marketing, McGraw Hill, Maidenhead, page 260. 5 Wikipedia official website. Diversification (Marketing Strategy) URL: http://en.wikipedia.org/wiki/Diversification_(marketing_strategy) 6 P Kotler, G Armstrong, S W Ang, S M Leong, C T Tan, D K Tse, 2005. Principles of Marketing: An Asian Perspective, Pearson Education Inc Publication, pg 227. 7 O Lamikanra, 2002. Fresh-cut fruits and vegetables: science, technology, and market, CRC Press, pg 12. 8 Green America Today official website. Chiquita brands. URL: http://www.coopamerica.org/programs/responsibleshopper/company.cfm?id=202 9 Memorandum for Food Safety and Quality, Position Paper; GREEN/EFA Group in the European Parliament. 18th September 2003. URL: http://www.greens-efa.org/cms/topics/dokbin/102/102822.pdf 10 B Mattsson, U Sonesson, 2003. Environmentally-friendly food processing, Woodhead Publishing, pg 20.

11 N J Busch, S H Ramboll, 2004. Guidelines for the Inclusion of Environmental Aspects in Product Standards, URL: http://www2.mst.dk/udgiv/Publications/2006/87-7052-180-8/pdf/87-7052-181-6.pdf 12 P Kotler, G Armstrong, S W Ang, S M Leong, C T Tan, D K Tse, 2005. Principles of Marketing: An Asian Perspective, Pearson Education Inc Publication, pg 228. 13 Johnston, R.G. (July 1997). "Effective Vulnerability Assessment of Tamper-Indicating Seals". J. Testing and Evaluation 25 (4). 14 P Kotler, G Armstrong, S W Ang, S M Leong, C T Tan, D K Tse, 2005. Principles of Marketing: An Asian Perspective, Pearson Education Inc Publication, pg 228. 15 Wikipedia Official Website. Packaging and Labeling. URL: http://en.wikipedia.org/wiki/Packaging#cite_note-5 16 J Heizer, B Render, 2008. Operations Management, Pearson Education Inc Publication, pg 449 17 Jussaume, R.A.Jr., Suzuki, N., Judson, D. H. (April 1991). "Characteristics of Japanese wholesale auction markets for fresh fruits and vegetables". Quarterly Journal of Agricultural Economy (Japan,) 45 (2), pg 45-75. 18 Andrew W. Shepherd, “The implications of supermarket development for horticultural farmers and traditional marketing systems in Asia”, FAO, Rome 2005. URL: http://www.fao.org/ag/ags/subjects/en/agmarket/docs/asia_sups.pdf 19 T Boyaci, R Saibal. (Winter 2003), “Product Differentiation and Capacity Cost Interaction in Time and Price Sensitive Markets”. Manufacturing and Service Operations Management 5 (1), pg 19. 20 J Heizer, B Render, 2008. Operations Management, Pearson Education Inc Publication, pg 449 21 Ballou, Ronald H. 2004. Business Logistics Management, 5th ed. Upper Saddle River, NJ; Prentice Hall. 22 J Heizer, B Render, 2008. Operations Management, Pearson Education Inc Publication, pg 450 23 Trade and Logistics Malaysia Website. URL: http://logistics-malaysia.blogspot.com/2009/06/misc-liner-division-will-exit-asia.html

24 Geest Line Website. URL: http://www.geestline.com/ships/timor-stream.html