MANAGNG THEMARKETNG FUNCTION

What is the Marketing Concept?

The Engineer and the Four P's of Marketing

The Product

The Price

The Place

The Promotion

Strategic Marketing for Engineers

Selecting a Target Market

Developing a Marketing Mix

226 227

Chapter 11

Engineer managers are engaged in the productionof tangible or intangible goods. Some of these engineermanagers are directly responsible for marketing thecompany's products or services. If he is promoted as gene-ral manager, both the production and marketingfunctionsbecome his overail concern.

At whatever management level the engineer mana-ger works, he must be concerned with convincing othersto patronize his outputs. If he is the general manager ofa construction firm, he must convince people with con-struction needs to avail of the services of the company.Ifhe is the staff officer of a top executive, he must convincehis boss to continuously rely on him regarding the staffsenrices he provides.

If the foregoing statements are true, the engineermanager has a marketing problem. He needs to under-stand certain concepts related to the marketing discip-line.

WHAT IS THE MARKETING CONCEPT?

Marketing is a group of activities designed to facilitateand expedite the selling of goods and services.

The marketing concept states that the engineer musttry to satisfy the needs of his clients by means of a setof coordinated activities. When clients are satisfred withwhat the company offers, they continually provide busi-ness.

THE ENGINEER AND THE FOUR P,S OFMARKETING

The engineering organization will be able to meet therequirements of its clients (or customers) depending onhow it uses the four p's of marketing which ur" u. roui*s,

1. the product (or service)2. the price

3. the place, and

4. the promotion.

The Product

In the marketing sense, the term .,product,'inciudesthe tangible (or intangible) item and its capacity tosatis$ra specific need.1Whe.1a customerbuys a car, he is actuallybuying the comfortabre ride he anticipates to derive fromthe car. This is not to mention th psychological lenentsattached to the ownership of a car.

. The services provided by the engineer manager willbe evaluated by the client on the basis of whethei or nothis or her" exact needs are met. When a competitor comesinto the picture and sells the same type ol service, theq{".:-r1r" to improve the quality of services sold wiil befelt. When improvement is not possible, .,ext

as,, or*bonu_ses" are given to clients. An example is the construction!o-p1"V that provides ,,free estimates', on whateverrnqulnes on construction are received.

The Price

Price refers to ,,the money or other considerationsexchanged for the purchase or use of the product, idea,or service."2 Some companies use price as a competitivetool or as a means to convince the customer to buv.

lMcCarthy and perreault, Jr., p. 27g.zEric N. Berkowitz and others, Marketlng (Homewood, Illinois: Irwin, 1992)r:. 726.

228 229

When products are similar in quality and othercharacteristics, price will be a strong factor on whetheror not a sale will be made. This does not hold true, how-ever, in the seliing of services and ideas. This is becauseofthe uniqueness ofevery service rendered or every ideagenerated.

Figure 11.1 The Engineer Manager and the Four P's ofMarketing

OBJECTIVES VEHICLE RESULT

When a type of service becomes standardized, pricecan be a strong competitive tool. When a construction firm-,

for instance, charges a flat 10 percent service fee for ailof its construction services, a competitor may charge a

Iower rate. Such action, however,,will be subject to whetheror not the industry will allow such practice.

The Place

If every factor is equal, customers would prefer tobuy from firms easily accessible to them. If time is of theessence, the nearest frrm will be patronized'

It is very important for companies to locate in placeswhere they can be easily reached by their customers' Notevery place is the right location for any company.

Wtren a company cannot be near the customers, ituses other means to eliminate or minimize the effects ofthe problem. Some of these means are:

The MarketingObjectivesof theEngineerManager

1. hiring sales agents to cover specifrc areas;2. selling to dealers in particular areas;3. establishing branches where customers are

located:

4. establishing franchises in selected areas.Manufacturing companies can choose or adapt all ofthe above-mentioned options. Service .o*purriu, tit

"construction firms adapt the modified versions. A";";;_ple is the engineer manager of a construction firm whogives commissions to whoever could negotiate " "orr._truction contract for the firm.

The Promotion

when engineer managers have products or servicesto sell, they will have to convince buyers to buy from thernBefore the buyer makes the purchasing decisio.r, fro*_ever, he must first be informed, persuaded, and i"ffi;;;.The activity referred to, in this case, is called promotion-.

McCarthy and Perreault define promotion as ,,com_municating information between selier and potentiar u,ru",to influence attitudes and behavior."B

. There are promotiopar tools available and the en-'grneer manager must be familiar with them if he wantsto use them effectively. These tools are as follows:a1. advertisins

2. publicity

3. personal selling4. saies promotion

Aduertising. Nylen defines advertising as ,,a paidmessage that appears in the mass media foithe dd;;

3McCarthy and perreault, Jr., p. 365.

,,",Yf #Il,u,8Hl?*fi ii;:,K#3:"':::;3:":l!:'.!i^f;i::\'":,;r,{,;

of informing or persuading people about particularproducts, services, beliefs, or action."s The mass mediareferred to include television, radio, magazines, and news-papers. If the engineering manager wants to reach a largenumber of people, he may use any of the mass mediadepending on his specific needs and his budget. Each ofthe public advertising carriers, i.e., radio, television,magazines, and newspapers, has their own specificaudiences and careful analysis must be made if theengineering manager wants to pick the right one.

An example of an advertising message is shovrn inFigure 11.2.

Publicity. The promotional tool that publishes newsor information about a product, service, or idea on behalfof a sponsor but is not paid for by the sponsor is calledpublicity.G The mass media is also the means used tbrpublicity. If the engineer manager knows how to use it,publicity is a very useful promotional tool. His messagemay be presented as a news item, helpful information,or an announcement.

An example of a publicity release is shown in Figure11.3.

Personal Selling. A more ag6pessive means of pro-moting the sales of a product or serwice is called personalselling. It refers to the "oral presentation in a conversa-tion with one or more prospective purchasers for thepurpose of making a sale."?

Personal selling may be useful to the marketingefforts of the engineer manager. If, for instance, he is thegeneral manager of a firm manufacturing spare parts, hemay assign some employees to personally seek out spare

sDavid W. Nylen, Aduerfising, Plattning, Intplemen.tatitsn, an.d Con.tntl(Cincinnati: South-Western Publishing Co., 1986) p. 3.

'JStanley, p. 8.TPatrick Dunne and others. Retailirtg (Cincinnati: South-Western

Publishing Co., 1992) p. 283.

231

Figure 11.2 An Example of an Advertising Message

ALECTO GENERAL TECHNOLOGY

AND

DEVELOPMENT CORPORATION

ENGINEERS . DESIGNERS . CONTRACTOF . SUPPLIER

Computer FacilitiesDesign and Installation

Local Area Network-CablingData Communication andTelecomrnunication Works

Electrical Wiring

Mechanical and Civil Works

Fiber Optic Cabting Instailation andTermination

Supplier of UTP Fiber Optic andCoaxial Cable

1495 D. Oliman St., Makati CityTels. 890-2571, B9A-2492

890"3604, 890-3607Fax No. 890-2978

'r'From the PLDT Yellow pages, Luzon Visayas, Mindanao'felephone Dir.ectory, October 1996. p. 160.

232 233

Figure 11.3 An Example ot a Publicity Release

NOKIA PRESENTS THE FIRST PHONE DESIGNEDFOR LOCAL NEEDS

Manila, July 1, 1997 - Nokia Mobile Phones, the largestEuropean and world's second largest manufacturer of mobilephones and a world leader in digital technology, has introducedto the Philippines the Nokia 3810 "8i9 Face", the first mobile phonedesigned specifically for the needs of the Asia-Pacific cellularmarket.

"This new design which was inspired by a regional researchis another step in our aim to strengthen our market position", MartinFernandez, Nokia Mobile Phones Philippine Country Manager said.

The Nokia 3810 is a product of extensive regional researchand feedback. According to the research, there is a demand fora design that would easily accommodate longer and more detailedmessages Asians, including Filipinos, are accustomed to. Iaggedas Nokia "Big Face", the 3810 has a larger screen contained ina small and sleek European styled body, making it easier to readmessages. With its unique full graphic display, the Nokia 3810displays large or smalltext, depending on the length of the message.Combined with Nokia's state of the art menu syslems, it is easierto find what you are looking for.

Moreover, Nokia 3810 provides a comprehensive range offeatures like call management, memory functions, shoft messageservices, securityicode control, optional controls, data transmissionand has the most complete range of accessories.

Nokia Mobile Phones is a part of the Nokia Group, a globaltelecommunications company headquartered in Helsinki, Finland.Nokia employs nearly 34,000 people in 45 countries and has netsales of US$8.5 billion in 1996. Nokia can be visited on the world-wide web http:/www nokia, com.

+From Manila Bulletin, Special Supplement, July 7, L997,p. SS-7.

\

parts dealers and big trucking companies to carry theirproduct lines.

Sales Promotion Any paid attempt to communicatewith the customers other than advertising, publicity, andpersonal selling, may be considered sales promotiorr.This includes displays, contests, sweepstakes, coupons,trading stamps, prizes, samples, demonstrations, refer_ral gifbs, etc.8

Contests and sweepstakes are very popular salespromotion tools. An example is shown in Figure 11.4.

STRATEGIC MARKETING FORENGINEERS

Companies, including those managed by engineermanagers, must serve markets that are best fitted to theircapabilities. To achieve this end, a very important activitycalled strategic marketing is undertaken.

Under this set-up, the following steps are made:1. selecting a target market

2. developing a marketing mix

Selecting a Target MarketA market consists of individuals or organizations, or

both, with the desire and ability to buy a specific productor service. To maximize sales and profits, u

"ornpu.ry has

the option ofserving entirery orjust a portion ofits chosenmarket. Within ma?kets are segments with commonneeds and which will respond similarly to a marketingaction.e Figure 11.5 shows an example of rhe various seglments of a given market.

rBarry Bernan and JoelYork: MacMillan Publishing

"Berkowitz and others

R. Evans,.Reta il Management, Fifth Edition (NewCo., 1992) p. 504.p. 723.

234

Figure 11.4 An Example of a Company Using Sweepstakesas a Sales Promotion Tool

GET A BAYANTEL PHONE, CALL LONG DISTANCE, PAYYOUR MONTHLY BILLS AND GET A CHANCE TO DRIVE

AWAY A WINNER!

F-r-rl. BAYANTELIBMWIu i 119"3 -r

THERE HAS NEVER BEEN A TELEPHONE PROMO BIGGERTHAN THIS!

NOW, BayanTel, the phone company that's helping you com-municate not tomorrow, but today, is giving away not one, not

two. not even three, but FIVE, brand-new BMW 3 Series model316 lor its telephone subscribers.

lT'S SO EASY TO GET A CHANCE TO WIN! This promo

is open to BayanTelTELEPHONE SUBSCRIBERS in designatedBayanTel franchise areas (see coverage below) only.

ONE: Get a BayanTel phone and pay your first monthly chargesright away!

Two: Use your BayanTel phone to call anywhere. Better ifinternationaland domestic long distance. Every P200 worth of paid

charges (over and above the basic installation charge and firstmonth advanced service) entitles you to one raffle ticket.

THREE: Pay your montly bills promptly so you can earn more raffle

tickets right away.

Get a BayanTel phone now. Get a BMW to drive soon. Just keepon using that BayanTel phone to call anywhere - more raffle ticketsfor long distance!

PROMO ENDS DECEMBER 31, 1997

l'From an advertisement, Philippine Daily Inquirer, July20, 1997, p. E-2.

236

An analysis of the various segments ofi the chosenmarket will help the company make a decision on whe-ther to serve all or some of the segments. The segmentor segments chosen become the target market.

In selecting a target market, the following steps arenecessary:

1. Divide the total market into groups of people whohave relatively similar product or service needs.

2. Determine the profit potentials of each segment.

3. Make a decision on which segment or segments' will be served by the company.

,As shown in Figure 11.5, a company may choose anyor all of the residential, industrial, and government seg-ments. This decision will depend, however, on the profitpotentials of each segment and the capability of the firm.

A smaller company may find it most profitable tosupply only the construction material needs of theresidential segment. A bigger company, however, mayfind it more profitable to perform actual construction inaddition to selling construction materials.

Factors (Jsed in Selecting a Target Marhet. Atarget marketmust have the ability to satisfy the profit objectives of thecompany. In selecting a target market, the following factorsmust be taken into consideration:

1. the size of the market, and

2. the number of competitors serving the market.The total demand for the product or service in a given

area must be determined frrst if the company wants toserve that particular market. If there are existingbusinesses serving the market, the net demand must beconsidered. Figure 11.6 illustrates an example of therelationship between demand and supply of a particularproduct. The figures presented indicate that there is still

,i

i

Figure 11.5 The Construction Market and lts Segments

constructionrnaterialssub-segment

actualconstructionsub-segment

actualconstructionsub-segment

constructionmaterialssub-segment

actualconstructionsub-segment

constructionmaterialssub:segment

237

room for another company in the market for telephoneIines in Cabanatuan City.

Developing a Marketing MixAfter the target market has been identified, a

marketing mix must be created and maintained. Themarketing mix consists of four variables: the product, theprice, the promotion, and the place (or distribution).

Given a marketing environment, the engineer man-ager can manipulate any or all variables to achieve thecompany's goals. As such, the quality of the product maybe enhanced, or the selling price made a little lower, orthe promotion activity made a little more aggressive, ora wider distribution area may be covered. Any or all ofthe foregoing rnay be undertaken as conditions warrant.

As shown in Figure 11.7, ail marketing activities arefocused on the target market.

Figure 11.6 Totat Demand and Net Demand as a Guide forDetermining Target Market

Telephone Lines in Cabanatuan CityDemand and Supply Situation

1997

Total Demand

Supply

. Company.A

Company B

Company C

Total Supply

NET UNSATISFIED DEMAND

150,000 lines

50,000 lines

30,000

10,000

90,000 lines

60,000 lines

298 239

Figure 11.7 The Company, The MarketingMarket

THE COMPANY

Mix and the Target

SUMMARY

To survive, companies must continuously. generateincome. To be able to do so, they must be abie to sell enoughquantity of their products or services. Engineering firmsare no exception.

The proper management of the marketing functionhelps the engineer manager convince customers topatronize the firm. Specifically, the engineer managermust know how to use effectively the four P's of market-ing which are the product, the price, the place, and thepromotion.

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An activity called strategic marketing is designed tomake sure that the marketing objectives of the firm areachieved. Strategic marketing calls for selecting a targetmarket and developing an appropriate marketing mix.

The marketing mix consists of the appropriate levelsof product quality, price, promotion, and place.

240 ur

QUESTIONS FOR REVIEW AND DISCUSSION

1. How may the marketing ioncept be explained? Is itapplicabie to engineering firms?

2. What is meant by the term "product"?

3. How may the engineer manager meet the threat ofa competitor's product?

4. Why is price said to be a strong competitive tool?

5. What are some of the possibie measures to makeproducts easily available to customers?

6. How may the engineer manager convince the buveror client to patronize the firm?

7 . What is advertising? What are the types of advertisingmedia?

8. May the engineer manager use publicity in promo-ting his firm? Cite an example.

9. In selecting a target market, what must bhe engineermanager do?

10: What factors must be used in selecting a targetmarket?

SUGGESTED ITEM FOR RESEARCH

Choose an engineering firm with an existing mar-keting unit. Draw the organization chart of the firm strow-ing the marketing unit and its relationship rvith otherunits.

Gase 11. BUGTAG CHEMTCAL CORPORATTON: Hetp

Samuel Bugarin and Antonio Tagorda were class-mates at the chemical Engineering Departr'ent of De rasalle university. After passiirg the boa'd examinationsin 1981, Engineer Bugarin applied for a job in a chemicalmanufacturing co'rrpany. He first worked as an assis_tant in the quality control unit. Later, he ber:ame chiefof the unit. He handled various jobs in the productiondepartment. Because of his good performance, he waspromoted to production manager in 1993.

Engineer Tagorda got a job in 19g2 as productionplanner of Reliance Chemical Conipany. In 1990, he wasassigned as assistant production manager. When thecompany's rnarketing manager resigned in 1g91, he wastransferred to the marketing department and was namedas the new marketing manager. His main function wasto market the company's products consisting of syntheticresins, aluminum paste, adhesives, plasticizers, calciumsulfate, etc. When he assumed his post as marketingmanager, the company is already serving a group of loyalcustomers. The increasing requirements of these cus_tomers also meant additional orders for the company'sproducts. The company's sales increased even if thenumber of its customers did not.

In a ciass reunion held in Aprii 1g97, Samuel andAntonio met and they conversed for more than three hours.Samuel mentioned that he had started organizing hisown chemical manufacturing firm and he wanted Antonioto join him. Antoni.o agreed and in a subsequent meet_ing decided to divide the work between the two of them.Samuel was to take care of production andAntonio wouldhandle marketing. They decided to invite an experiencedfinance officer and a high school classmate, EdgardoAbuan. He became the company's finance manager.

The company was registered as a stock corporation

and the capital contribution of the stockholders wele as

follows:

Name of the Stockholder Amou@

1. Samuel Bugarin

2. Antonio Tagorda

3. Edgardo Abuan

4. Jesus Ualat

5. Rosario Mariano

6. Ausberto Taguinod

7. Francisco Bundoc

8. Amparo Paragas

9. Andres Nicolas

Total

P30,000,000

15,000,000

3,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

P54.000,000

The three agreed to produce caustic soda liquid,hydrochloric acid, soda ash, sodium sulphate, sodium

tripolyphospate, and sulfuric acid. The construction of the

companyt planthas alreadybegun in Dasmarifras, Cavite'

The-compay has been named the Bugtag Chemical Cor-

poration.

Samuel has already started organizing the product-

ion department by hiring a production planner' Antonio

is stif considering what steps to take in organizing his

departrnent.oneofhisproblemsisthelackofinforma-tion regarding the nature of the rnarket the company must

tap. Also, Antonio is aware of the utmost importance of

ptlnidittg the production department with a demand fore-

cast for the comPanY's Products'

243