A study of export demand for cofee the case of intimex viet nam jsc

100 4.3 To determine the model that fits the coffee price in the USA, commodity beverage price index of the US, tea price in the US, with the market share of Vietnam in the US with the c

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A DISSERTATION Presented to the Faculty of the Graduate School Southern Luzon State University, Lucban, Quezon, Philippines

in Collaboration with Thai Nguyen University, Socialist Republic of Vietnam

The researcher would like to thank Dr Eduardo T Bagtang and the International Center Education of Thai Nguyen University, Southern Luzon State University for guiding the researcher throughout this research and for providing me with the opportunity to conduct this research and for helping me

to carry out the necessary revisions to this dissertation

He also like to express his deepest gratitude to Vietnam Intimex Company for providing him with useful and necessary information for doing this research, to his wife, son and daughter for giving him inspiration, and to his colleagues for encouraging him to finish this research and giving him necessary feedbacks for making this dissertation successful

Finally, he would like to thank all of his classmates for giving him constant support and encouragement as well as helping him with the needed materials and references for this study

NGP

This research is heartily dedicated

To my family and to all my relatives, my colleagues, friends, classmates, administrators, staffs and employees

of Intimex Vietnam JSC

PQV

TITLE PAGE ……… i

APPROVAL SHEET ……… ii

CERTIFICATE OF ORIGINALITY ……… iii

ACKNOWLEDGEMENT ……… iv

DEDICATION ……… v

TABLE OF CONTENTS ……… vi

LIST OF TABLES ……… viii

LIST OF FIGURES ……… x

ABSTRACT ……… xi

CHAPTER I INTRODUCTION ……… 1

Background of the Study ……… 5

Statement of the Problem ……… 7

Objectives of the Study ……… 8

Hypothesis of the Study ……… 9

Significance of the Study ……… 9

Scope and Limitations of the Study ……… 10

Definition of Terms ……… 10

II REVIEW OF LITERATURE ……… 29

Conceptual Framework ……….… 71

III METHODOLOGY ……… 74

Locale of the Study ……… 74

Research Design ……… 74

Respondents of the Study ……… 75

Data Gathering Procedure ……… 75

Statistical Treatment ……… …….…… 77

IV RESULTS AND DISCUSSIONS ……… 80

Companies of Vietnam ……… 80

4.2 Qualitative Data Analysis ……….…… 100

4.3 To determine the model that fits the coffee price in the USA, commodity beverage price index of the US, tea price in the US, with the market share of Vietnam in the US with the coffee export to the US 106 V SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS Summary of Findings ……… 127

Conclusions ……… 131

Recommendations ……… 133

REFERENCES ……… ……… 135

APPENDICES ……… 137

Appendix A ……… 138

CURRICULUM VITAE ……… 146

TABLE PAGE

1 International Coffee Export of Vietnam ……… 42

3 List of Major Companies on Coffee Business in Vietnam

and their Coffee Production and Volume of Coffee Export 81

4 Current Status of Coffee Companies in Vietnam ………… 82

5 No of Companies where Coffee is the Major Export

8 Problems Encountered by Vietnam Coffee Enterprises in

9 Opportunities for Vietnam Coffee Exports ……… 86

10 Solutions to the Problems Encountered by the Coffee

11 US Import Policies that Affected the Coffee Export

Business of Intimex Vietnam JSC to US ……… 88

12 Factors that Affected the Market Share of Vietnam Coffee

Export as Identified by Intimex Vietnam JSC ……… 89

13 Vietnam Government Interventions to Help Coffee Industry 90

14 Vietnam’s Considered Competitors in the International

15 Marketing Strategies Adopted and Found to be Effective

16 Product Policies Adopted and Found to be Effective

by Intimex Vietnam JSC as Marketing Strategies ………… 94

17 Distribution Chain Policies Adopted and Found to be

Effective as Marketing Strategy as Identified by Intimex

18 Price Policies Adopted and Found to be Effective

as Identified by Intimex Vietnam JSC ……… 97

19 Advertisement Policies Adopted by Intimex Vietnam JSC 97

20 Challenges Experienced by Intimex Vietnam in Exporting

21 Measures and Strategies Recommended by Intimex

Vietnam JSC to Increase Volume of Coffee Export to the

FIGURE PAGE

1 Organizational Chart of Intimex Vietnam ……… 6

2 Coffee Productivity, Area, and Output in Province Daklak from 2006–2012 ……… 31

3 Vietnam Coffee Export Market Share 2nd Half of 2013 …… 32

4 Amount and Value of Coffee Export in the US Market from 2006–2012 ……… 33

5 International Coffee Market Share ……… 50

6 The Input-Process-Output of A study of Export Demand for Coffee: The Case of Intimex Vietnam JSC ……… 72

7 Data Collection and Procedure ……… 77

8 Coffee Market Shares ……… 92

9 World's Export Value of Coffee ……… 101

10 Heteroskedasticity Graph ……… 121

Title of Research : A STUDY OF EXPORT DEMAND FOR

COFFEE: THE CASE OF INTIMEX VIETNAM JSC

Name and Address

of Institution

: Southern Luzon State University Lucban, Quezon, Philippines and Thai Nguyen University, Socialist Republic of Vietnam

Vietnam as a member of the World trade Organization (WTO) has prioritized export of agricultural products that led this study to focus on the export demand analysis of coffee in Vietnam, specifically the INTEMEX Joint Stock Corporation (JSC) Specifically, it 1) determined the current status of the companies in terms of : a) Major business of the company b)Major market for coffee exports c) Types of coffee exported to the US ;e Expansion of coffee export to the US Also it tried 2) to determine the problems encountered in doing business in the US, 3) to identify possible solutions to the problems encountered in doing business in the US, 4) to know the specific Import policies of US that affected the Intimex Vietnam JSC coffee export business to the US, 5) to determine the factors that affected the market share

of Vietnam coffee exporting companies to the US as per experience of Intimex Vietnam JSC, 6) to determine the interventions that the Vietnam Government have introduce to help coffee export to the US, 7) to know the countries that Vietnam would consider as competitors in terms of coffee export to the US, 8)

company became Successful in terms of marketing strategy, product Policies, distributor chain policies, price policies , advertisement policies, 9) to identify the challenges experienced by Intimex Vietnam in exporting coffee, 10) to identify the measure and strategies can INTIMEX Vietnam JSC propose to increase volume of coffee export to the US, 11) to determine the model that fit the coffee price in the USA, commodity beverage price index of the US, tea price in the US, with the market share of Vietnam in the US with the coffee export to the US

It employed descriptive and documentary analysis through the use of a structured questionnaire which were administered among the twenty (20) Managers of the coffee exporters in Vietnam and two (2) representatives from the office of the Managers of US importers in HO Chi Minch city Data gathered were supported by secondary data from records, databases and strategic reports of INTIMEX Vietnam JSC Frequency distributions were ranked Multiple regression analysis was employed in which the linear model, log-log model, semi-log model, polynomial and reciprocal model were used in testing the relationship between coffee price, tea price, coffee beverage price index and coffee market share Also, Multicollinearity, heteroscedasticity and autocorrelation were tested Then, the log-log model was found out to be the best fitted model where coffee price, tea price and market share of Vietnam were the key factors to be considered by the coffee import of US

Statistics showed that there was no autocorrelation and multicollinearity between coffee price and tea or coffee export while heteroscedasticity exist where there was an unequal variation of demand as

There was no multicollenarity as manifested by the computed F value of 3.9114 while the critical F value is 4.3512, accept ing the null hypothesis; heteroscedasticity (fitness) exist between coffee and tea based on the computed value is 9.991 while the critical value is 9.4877, rejecting the null hypothesis Hence , demand or volume of import of coffee and tea to US with a change in price, likewise , there was no autocorrelation between coffee and tea demand with a computed value of 2.1156 lower than the critical value of 9.487 so the null hypothesis was accepted This implies that demand of coffee differs with a change in price The demand elasticity of the two (2) beverages are dependent on the change in price

Econometric analysis was used in the treating the time series data for eleven (11) years export data in predicting the USD income of Vietnam, at a percent increase of price of coffee and tea It was found out that the log-log model was fitted wherein Vietnam was willing to increase 1.2 % market share

on export at an increase price of eight (8) cents per kilo of coffee and eight (8) cents on tea at 2% increase of price index in the US

Further, results of the study showed that among the twenty (20) companies, eighteen (18) companies considered Robusta coffee as their major export product to US Quality control and product standard were their major problems affected by the coffee market share It was found out that the government of Vietnam enacted favorable export laws and policies that support the coffee industry Statistics showed that the key factors affecting coffee import demand were the coffee price, tea price as substitute of coffee and coffee market share of Vietnam in the US Hence, compliance on product

system, credit assistance to companies, better marketing strategies should

be employed and improved coffee production through research and development to meet the export quota of the International Coffee Organization (ICO) and to overshot the competitors Finally, a dual coffee marketing roadmap shall be formulated and reduction of import policies of US through negotiated agreement between Vietnam and US

Chapter I INTRODUCTION

Founded in 1979, Intimex Vietnam JSC has operated for 32 years with many ups and downs along with the economy of Vietnam Until now, the company has got remarkable achievements during the operation and development process, Intimex has affirmed its position in the domestic and international market, to become one of the leading companies in import and export, supermarket business and manufacturing sectors of Vietnam (Intimex Company Profile, 2010)

The success was recognized by the State, in 1986 the Government decided to put Intimex into one of the largest corporations of the Ministry of Domestic Trade, Intimex has been as important as the big corporations for many years in the industry and in 1988 the company has been honored by the State with the third class Labor medal (Intimex Business History, 2010)

A relatively new activity for beginning period, has been thoroughly exploited by Intimex was sales of foreign currency for staff and overseas students, ( called spot export) in order to take advantage of markets and products and that were legalized by the States, Intimex implemented the strategy and the results were very encouraging The creative application of this policy increased the Company's foreign currency funds a lot

In the early 90s, the subsidy economic mechanism was eliminated, Intimex and other businesses throughout the country are confident to get into the market economy State regulatory mechanism was the open but social upheaval was really complicated, the economic policies of the Party and State are in the testing phase that was a time series of companies protected by

subsidy system failed to operate to generate income Unemployment rose and there was a production surplus Intimex was also one of the units enjoying the advantages of the mechanism of the subsidy system, so it was also inevitably affected by this storm surge The company had to face lots of disadvantages now

Facing this difficulty, company leaders, trade unions and staff tried their best to overcome, the measures were set out in line with new situations, and the quota was initially formed Open regulations facilitate companies to promote creativeness in doing business Thanks to the positive measures, the company has survived and developed until now

In the following years, the company continued to perfect the piece mechanism for departments that have taken initiative in creating a dynamic business, breaking the deadlock and stagnation The company's activities were close with the market and brought about certain results, maintaining the company's development, ensuring the lives of employees, while many other state enterprises went bankruptcy or made losses

by-the-Entering the new millennium, besides the basic advantages, the company faced many difficulties and challenges The world economy faces new recession cyclones Integration process poses new issues to businesses, especially trading companies: to exist or not in the context of cumbersome structural apparatus, inappropriate labor and wage policy with market economies, outdated and seriously degraded infrastructure, working capital losses in the mechanism transition process In that context, what to do to bring the company through tough times and create the competitiveness in the market and integrate into the international economy? This is a difficult

problem that companies have to find an optimal solution The 5-year business strategy (2001-2005) was born in this situation and has demonstrated the validity through remarkable results In particular, the export performance of the Company continues to rise: exports turn-over has soared admirably A rapid rise in exports has contributed to enlarge rapidly the scope of the company

Over the past few years, Intimex had the boom in import and export business, especially exports turn-over In 1999, Intimex’s export turnover was USD 23 million and in 2007, it reached USD 227 million (Intimex Company Profile, 2010) The company's exports accounts for 70% of the total import and export with mainly agricultural products, especially coffee and pepper For many consecutive years, Intimex was number two on coffee exports and was the best pepper exporter in the country Thanks to Intimex’s export activities, Vietnam's strong traditional commodities such as coffee, pepper, agricultural and aquatic products have affirmed its position in the world's largest market The company has been very proud of the results

To achieve such great success, Intimex concentrated on developing export, export growth was the company’s first priority Intimex actively enhance the value of goods processing of exported products, production development by investing in a number of manufacturing and processing factories of agricultural products such as: Clean pepper processing plant in Binh Duong, cassava starch production plant in Nghe An, the aquatic plant in Thanh Hoa These projects are and will help ensure high-quality and stable supply of goods for domestic market and export Besides, Intimex always

focused on improving export business to raise the prestige in the domestic and international market

Besides business, Intimex also focuses on market development The company has been doing business with more than 100 countries and is continuing to looking for new customers It also actively participates in business promoting activities and trade fairs

Intimex pays special attention to human factors The staff of the company has continuously improved their knowledge and raise qualifications

as well as professional abilities The achievements of Intimex today were the contribution of the Board of Directors and Company’s employees

With these achievements, the company has received numerous awards by State agencies and organizations, namely Vietnam Gold Star Award in 2005, the title of the most satisfying supermarket in 2008, golden Cup for supermarket brand in 2009, Top 500 enterprises in Vietnam in 2008,

2009 and 2010 Especially in 2009, to commemorate the 30th anniversary, the company was honored by the State with the Second Class Labor Medal (Intimex Company Profile, 2010)

Since 2009, the Company began operating paradigm from state-owned enterprises into a joint stock companies In the early days of operation under the new model, there were difficulties to be solved, obstacles and many challenges that Intimex had to overcome, but in the context of new opportunities and challenges, the company will continue to utilize its available and potential strength to further confirm its leading position in the field of import-export and domestic business and to promote production That is the goal orientation of Intimex Corporation Vietnam today

Background of the Study

Coffee was introduced to Vietnam in 1857 by the French and slowly grew as producer of coffee in Asia The height of coffee production occurred

in the early 20th century as small scale production shifted towards plantations The first instant coffee plant, Coronel Coffee Plant, was established in Biên Hòa, Đồng Nai Province in 1969, with a production capacity of 80 tons per year

The Vietnam War disrupted production of coffee in the Buôn Ma Thuột region, the plateau on which the industry was centered Although seldom involved in conflict, the area was a crossroads between North and South and was largely depopulated After the North Vietnamese victory the industry, like most agriculture, was collectivized, limiting private enterprise and resulting in low production

Following “Đổi mới” reforms in 1986, privately-owned enterprise was once again permitted, resulting in a surge of growth in the industry Cooperation between growers, producers and government resulted in branding finished coffees and exporting products for retail It was during this time that many new companies involved in coffee production were established, including Đắk Lắk-based Trung Nguyên in 1996 and Highlands Coffee in 1998 Both of these continued on to establish major brands distributed through a widespread network of coffee shops By the late 1990s, Vietnam had become the world's #2 coffee producer after Brazil, but production was largely focused on poor-quality Robusta beans—considered inferior to Arabica due to their bitterness—for export as a commodity (Vietnam Coffee Annual Report, 2010) Recent government initiatives have sought to

improve the quality of coffee exports, including more widespread planting of Arabica beans, the development of mixed-bean coffees, and specialty coffee such as kopi luwak (Vietnamese: cà phê chồn, "weasel coffee")

By 2000, coffee production had grown to 900,000 tons per year Price decreases, however, led annual production to drop to around 600,000 tons/year in 2003 In 2009, Reuters reported Vietnamese coffee exports at "an estimated 1.13 million tons" for the previous year, stating that coffee was second only to rice in value of agro-products exported from Vietnam (GSO, 2010)

Figure 1 Organizational Chart of Intimex Vietnam

Vietnam is the second largest producer after Brazil, accounting for 14.3 per cent of the world market share (World Bank, 2010) The quality of the beans, however, has typically limited their marketability Robusta coffee accounts for 97 per cent of Vietnam's total output, with 1.17 million tons

exported in 2009, a value of USD 1.7 billion (GSO, 2010) Arabica production

is expected to rise owing to the expansion of growing areas Other types of coffee grown in Vietnam include Chari (Excelsa) and Catimor

INTIMEX Company is one of the leading coffee export enterprises in the country besides other commodities The company has got many important achievements that have been recognized by the state organizations such as Ministry of Industry and Commerce, Ministry of Agriculture and Rural Development

In 2006, the company received the title of “The company with excellent achievements” Award held by International Economic Cooperation Committee and 53 other organizations

INTIMEX Company is one of the leading coffee export enterprises in the country besides other commodities The company has got many important achievements that have been recognized by the state organizations such as Ministry of Industry and Commerce, Ministry of Agriculture and Rural Development

In 2006, the company received the title of “The company with excellent achievements” Award held by International Economic Cooperation Committee and 53 other organizations

Statement of the Problem

The coffee-exporting Vietnam companies are relatively small and medium in size These companies particularly INTIMEX aim to expand their market share in coffee in the United States of America (USA) In order to do this, companies should know and be particular with all the intricate details and transactions in this line of business Generally, this study aimed to determine

the measures and strategies in order to increase the volume of coffee export

to the USA

Objectives of the Study

1 To determine the current status of the companies in terms of:

a Major business of the company

b Major market for coffee exports

c Types of coffee exported to the US

d Expansion of coffee export to the US

2 To determine the problems encountered in doing business in the US

3 To identify possible solutions to the problems encountered in doing business in the US

4 To know the specific Import policies of US that affected the Intimex Vietnam JSC coffee export business to the US?

5 To determine the factors that affected the market share of Vietnam coffee exporting companies to the US as per experience of Intimex Vietnam JSC?

6 To determine the interventions that the Vietnam Government have introduce to help coffee export to the US?

7 To know the countries that Vietnam would consider as competitors in terms of coffee export to the US?

8 To determine the experiences of Intimex Vietnam JSC that helped the company became Successful in terms of the following:

8.1 Marketing strategy

8.2 Product Policies

8.3 Distributor chain Policies

11 To determine the model that fits the coffee price in the USA,

commodity beverage price index of the US, tea price in the US, with the market share of Vietnam in the US with the coffee export to the US?

Hypotheses of the Study

The coffee export turnover is affected by the different factors such as the following:

Qualitative data: existing competitors, product quality, coffee drink habit

and taste

Quantitative data: commodity price, coffee beverage price index, price

of the biggest substitute, and coffee market share

Significance of the Study

This study has the practical implications to coffee exporting companies

to increase their export performance as well as turnover It identified the key factors that affect export performance in general and in coffee industry in

particular The study was a reliable source of information for companies doing coffee business in American market

Scope and Limitations of the Study

This study investigated current situations of coffee export of Vietnam It also pointed out the personalities of American market and key players in coffee industry The study was focused on the eighteen (18) coffee exporters

in Vietnam It was limited to determine their status, and to know their problems encountered Also, this study identified the policies and challenges and factors that affected the export activities of INTEMEX coffee industry

Based from the nature of this study, the results and findings were mainly based on data from various secondary sources The secondary data were taken from industry reports, books, academic papers, periodicals, editorials, articles, databases, studies different authors, and websites related

to the coffee industry The gathered data of coffee export showed the trends

in coffee industry

This study discussed an in-depth analysis of coffee export to American market However, the other markets like EU and Asia have not been given enough consideration America is the biggest and most potential market for Vietnam’s coffee export It is the biggest coffee importer of the world in general and of Vietnam coffee in particular

Definition of Terms

For common understanding, the following terms are conceptually and operationally defined:

Adoption process A buying process for first-time purchases, particularly for

consumer markets and comprising: Awareness, Interest, Evaluation,

Trial, Adoption, Post-Adoption confirmation: similar to AIDA

Advertising The activity of attracting public attention to a product or business

by paid announcements in print, broadcast and electronic media

Ansoff Matrix A model showing the possible product-market strategies of an

organization; these are considered the main marketing strategies and comprise: market penetration, product development, market development and diversification The 2 x 2 matrix axes are: new and existing products along one axis and new and existing markets along

the other

BCG (Boston Consulting Group) Matrix Also known as “The Boston Box”

This 2 x 2 matrix is a model to help a firm analyses its product portfolio

The two axes are relative market share and annual market growth and the four quadrants are: Dogs - low relative market share and low annual market growth

Stars - high annual market growth and high relative market share

Cash Cows - high relative market share and low annual market growth Question marks (also known as problem children) - low relative market share and high annual market growth

Behavioral Segmentation Classifying the market into groups of people

according to the similarity in way they behave or interact with a product This includes identifying those who require the same benefit from a product or service and those who use a product or service in the

same way It is increasingly recognized that this should be the starting

point for market segmentation

Benefit The value of the product or service experienced by the consumer,

which is distinct from features Sales people should sell on benefits supported by features

Body Language The main nonverbal communication method and includes

the way you stand or sit, facial expressions, gesticulations, how you hold your head and use your eyes

Brand.A name, term, design, symbol or any other feature that identifies one

seller‟s good or service as distinct from those of other sellers

Brand Extension A strategy whereby a firm uses an existing brand name for

a new product to be marketed to the same market egg Persil washing tablets

Business Plan A plan that states the long-term direction of a company and

includes audit, mission, objectives, strategies, forecasts, cash flows and controls

Business to Business (B2B.Can refer to a market, product or industry

whereby the context is of a firm selling to another organisation to either use the product or service or change into another product or service, rather than a consumer buying for personal consumption

Business to Consumer (B2C) Can refer to a market, product or industry

whereby the context is of a firm selling to an individual for his own personal consumption, rather than to an organization for their use or consumption

Buyer A role within the Decision Making Unit (DMU) The buyer often

advises deciders and undertakes the administrative transaction and so may be a buyer in the Purchasing Department

Buyer Behavior The stages that buyers go through when buying goods or

services There are many factors that influence buyer behavior (see Consumer Buyer Behavior and Business Buyer Behavior and Decision Making Process)

Channel of Distribution Channeling goods from their origin to their ultimate

destination and involves the use of intermediaries, or middlemen such

as wholesalers and retailers Factors that impact the selection of channels include: the customers, the product, competitors, size and resources, channel power

Commercial Buyers Those who buy on behalf of a business This involves

more logic than emotion, although emotion still plays a part Factors influencing commercial buyers are: who instigates the process, competition, quantity, value, quality, repeat business and price [1] See also Business Buyer Behavior

Commercial Market This is also known as a business, or industrial, market

and is one where companies buy goods or services for consumption in their business or to transform the goods into other products to be sold

Commission Remuneration paid to a salesperson following the successful

completion of a sale; is usually a percentage of sales revenue

Communication Channel Elements within the Promotions Mix that an

organization uses to communicate with target audiences

Communications Research Research aspects of promotions decisions

Cooper identifies 4 key areas [1]: effectiveness research, media selection, copy testing and sales force effectiveness

Comparative Advertising A type of advertising that a firm uses to compare

their products or services directly with competitors Needs to be used with care and is illegal in some countries

Competition-Based Pricing This is where a product is priced according to

its perceived value against competing brands

Competitions A form of Sales Promotions that is used to gain interest from a

target audience, whereby they may win a prize

Competitive Advantage A firm’s USP (Unique Selling Proposition) that a

firm has to put them in a better position than competitors

Competitive Parity A pricing strategy whereby a firm charge a price similar

to other brands or the market leader The objective is to prevent a price war and the firm should have a differential advantage other than price

Competitors May be direct or indirect Direct competitors provide the same

products or services in the same market; indirect competitors provide similar benefits, or substitute benefits in the same market

Concentrated Strategy One of three target marketing strategies It is where

the firm targets a niche market with one specific tailored marketing mix

Consumer An individual who uses a product or service (they may not be the

buyer)

Consumer Buyer Behavior The buying process and factors that influence

the process when consumers purchase for their own use The basic process (DMP) comprises: Establish need, Identify alternatives,

Evaluate alternatives, Select, Purchase, Post-purchase evaluation Cooper [1] indicates the process for buying a car might be: Identify need, Finance, Evaluate alternatives, Trial, Negotiate, Purchase, Evaluate purchase

Factors influencing consumer buyer behavior include: Personal factors (such as situation, demographics etc.), social (such as reference groups, role) and psychological (such as learning, attitude, personality); also the marketing environment and firms‟ marketing mixes

Corporate Identity Physical reinforcement of the personality of a firm which

is reflected by consistent use of brand names, symbols, logos, colors,

typefaces; the identify aims to reinforce the Corporate Image'

Corporate Image A firm’s personality, which can only be defined by the

public Firms use corporate identity and PR to enhance their image Corporate Strategy A firms long-term business plan (see Business Strategy) Cost-Based Pricing This includes strategies where the major consideration

is covering the firm’s costs and is a favorite amongst accountants

Culture The set of beliefs, values and attitudes that underpin society Our

culture involves all things around us; it is very complex and includes our language, religion, education, social behavior, politics and social

attitudes It can have a huge impact on our buyer behavior

Organizations also have a culture, which is the organization’s philosophy of a company and is reflected in its mission and aims

Customer A person or company who purchases goods or services They

are not necessarily the “consumer”, i.e the end user

Customer Loyalty The extent to which a customer tends to repurchase from

a specific firm, organization or a particular brand

Customer Orientation A business that is marketing orientated, is by nature,

customer orientated

Customer Philosophy Considering the needs of the customer in everything

a firm does

Customer Relationship Management (CRM) The planning, implementation

and control of all interactions with customers, clients and sales prospects

Customer Service Means by which a firm provides customers with service

that equals or exceeds their expectations

Data Processing The process of obtaining, recording and maintaining

information which is able to be retrieved and used: often involves new

technology

Database Marketing The use of a database for storing information about

customers so that specific groups can be selected and targeted for marketing activity

Direct Marketing Direct marketing may refer to direct distribution or direct

promotions Direct distribution involves a firm dealing directly with the end user, rather than through a middleman Direct promotion involves a firm communicating directly with a target audience or enabling the audience to communicate directly with them and includes: direct mail, the internet, personal selling, telemarketing, direct response advertising

and e-mail

Distribution The Place element of the marketing mix It involves the process

of getting the goods from the supplier to the user and involves channel

management and physical distribution management

Distribution Channel Channeling goods from their origin to their ultimate

destination and involves the use of intermediaries, or middlemen such

as wholesalers and retailers

Distribution Research Researching to make distribution decisions Cooper

identifies 3 key areas [1]: warehouse research, transportation research,

retail outlet research

Distribution Strategy The extent of market exposure that a firm provides it

products with and depends on the type and image of product, its value and size and dispersion of customers The three strategies are:

Intensive, Selective, Exclusive

Distributor Also known as a wholesaler Tend to buy in bulk, break bulk and

sell and distribute to retailers, the trade or end users Except for cash and carry wholesalers they give credit and transport to their customers Many large retailers have undertaken Vertical Integration and

developed their own wholesaling system

Diversification A marketing strategy that a firm may pursue to develop new

products in new markets

E-commerce Selling goods electronically, usually over the Internet

E-marketing Marketing effort using electronic means such as e-mail and the

internet; incorporates e-commerce and promotion

Ethical Selling and Marketing Sales and Marketing that takes account of

the moral aspects of decisions such as telling the truth, selling products

that will not harm consumers Ethics are becoming increasingly

important in sales and marketing

Environment A firm’s environment comprises its macro- and micro-

environment (and External Analysis) These are factors beyond the company’s control

Exclusive Distribution A distribution strategy involving limited market

exposure and so a firm distributes via exclusive territory outlets i.e one outlet in each geographic area

External Analysis An evaluation of the external sales and marketing

environment, including the macro- (or wider) environment such as political, legal, economic, social and technological factors and the micro (or closer) environment such as markets and competitors These factors are usually outside the control of the firm

Geographic Segmentation A method of segmentation where the market is

classified by where they live or are located

Intensive Distribution A distribution strategy involving a firm aiming for

maximum market exposure Usually involves retailers and/or vending machines and tends to be for goods such as firms (see relevant section)

Intermediary Middlemen within channels of distribution such as distributors,

retailers and agents

Internal Analysis Where a firm analyses its internal situation suck as people,

resources, products and marketing effort, to enable them to overcome weaknesses and take advantage of opportunities in the environment

Internal Customers Internal customers are employees All employees

should be viewed as customers in several ways: each departments depends on the services of others; a marketing oriented firm needs to put customers first and that has to be “sold” to all staff and, in some firms, products and services, such as printing, are actually sold to other departments

Internal Marketing This involves marketing the marketing plan and customer

focus to internal staff to gain their support

International Sales and Marketing Sales and marketing of goods and

services to overseas countries

Market-Based Pricing This includes strategies where the major

consideration is pricing a product based on what the market considers

it to be worth and is prepared to pay in order to maximize sales

Market Development A marketing strategy of taking an existing product to

new markets

Market Entry Where a firm launches a new product into a new or existing

market

Market Penetration A marketing strategy of developing business by selling

more of existing products in existing markets This may be undertaken through cross-selling, increasing promotions or distribution, taking competitors‟ customers, expanding the market or increasing product usage

Market Research Gathering, analysing data about the market to reduce risk

and enable better marketing decisions to be made It includes: estimates of market size and potential, identification of key market

characteristics and segments, forecasting market trends and gathering information on existing and potential customers It should not be confused with Marketing Research which involves researching broader subjects

Market Segmentation The identification and classification of meaningful

buyer groups in order to target selected segments and develop a relevant marketing mix Market segmentation is the first stage of the Target Marketing

Process Consumer markets may be segmented by: geographic,

demographics, geo-demographics, psychographics, and buyer behavior Business markets may be segmented by: geographic, demographics, processes, their markets, buyer behavior

Market Share A firms sales of a specific product or range of products to a

market, stated as a percentage of total sales of all that type of product

to that market segment

Marketing Marketing is the management process responsible for identifying,

anticipating and satisfying customer requirements profitably (CIM)

Marketing Communications Techniques that an organization may use to

communicate with specified target audiences It includes advertising,

PR, sales promotion and personal selling and is also known as the

“Promotion” element of the marketing mix

Marketing Information Information that is obtained and stored to enable a

firm to make effective marketing decisions: it differs from data as it is processed data and, therefore, more meaningful

Marketing Information System Often known as a MKIS and is a planned

and controlled system for gathering, sorting, storing

Marketing Mix The blend of controllable marketing variables that a firm uses

in order to deal with the marketing environment It is called a “mix” as all elements must work effectively together to reflect a product of firm’s positioning

The mix for products involves four controllable variables, known as 'the 4 Ps': product, place price and promotion; the mix for services, known as „the 7 Ps‟, is the 4Ps plus people, process and 'physical evidence'

Marketing Orientation A philosophy of business whereby the firm puts the

customer at the centre of their business Characteristics of a marketing oriented firm are:(1) Customer philosophy, (2) Strategic orientation, (3) Use of market information, (4) Integrated organizational effort, and (5)Operational efficiency

Marketing Planning The development of a plan to identify and pursue

specific market segments by offering relevant products and services The plan includes an analysis, objectives, strategies, tactics, implementation, controls

Marketing Research Gathering, analyzing data about any internal and

external factors to reduce risk and enable better marketing decisions to

be made It includes: market research, product research, pricing research, distribution research, promotions research, sales research, environmental research(the macro and micro environment) It should

not be confused with Market Research which involves research the market only and is just one aspect of marketing research

Market Skimming A term used by Cooper [1] to refer to what most

marketers consider to be a prestige pricing strategy (also known as premium pricing); this is where a high price is charged for an exclusive product, often in a niche market

Marketing Strategy The strategic, or long-term, marketing plan

Orientation A firm’s culture

Packaging Part of both the Product element of the Marketing Mix and

Promotions element Provides functional benefits of protection and communications function of brand identity, awareness at the point of

sale and a reminder in the home; also, often has a legal function

Penetration Pricing A pricing strategy whereby a firm charges a low price in

order to increase sales Demand must be elastic i.e responsive to

changes in price and the price should not harm the image of the brand PEST Political, Economic, Socio-cultural and Technological - a way of

defining the macro environment and an alternative to SLEPT and

PESTLE

PESTLE An alternative way of defining the macro-environment from PEST

and SLEPT It stands for: Political, Economic, Socio-cultural,

Technological, Legal and Environmental

Pricing Research Research in order to determine the optimum price

Pricing Strategies Pricing strategies are the broad prices that a firm

charges: these are: Skimming (or Skin-The-Cream), Penetration

Pricing, Prestige Pricing, Competitive Parity, What The Market Will

Bear and Discrimination Pricing (also known as Segmentation Pricing Primary Research Also known as Field Research This is research that is

being undertaken for the first time, as opposed to Secondary Research It is undertaken for a specific purpose; the three types of

primary research are: surveys, observation and experimentation

Problem Identification This is the fifth stage in Cooper’s Sales Cycle [1] It

is linked with need identification as the prospect may have a problem to

be solved which has led to the need Cooper states that this is the single most important aspect of any selling situation and it is universally recognized that if the sales person does not know the real need, or problem, they cannot offer the true benefits to help resolve the situation Needs and problems are established through effective questioning and active listening, defining buying criteria, prioritizing criteria and summarizing all needs and desires have been confirmed and understood Cooper states that the process for need/problem

identification can be summarized by the mnemonic

NASA Need, Acceptance, Solution, Acceptance

Processes segmentation A method of business segmentation where the

market is classified according to processes it uses, such as the level of

technology

Product Life Cycle A model indicating the stages a product goes through

from pre-launch to withdrawal from the market: most commonly, there

are four and five stage models

The four stage model: introduction, growth, maturity and decline

The five stage model: development, introduction, growth, maturity, and decline

Product Orientation Orientation refers to a business’s philosophy Cooper

identifies product orientation as a firm that is product based rather than customer based and states that such a firm may be product driven or

sales driven

Most marketers, however, consider a product oriented to be one where the firm puts product excellence and/or technology first Some firms, such as pharmaceutical companies may have little choice as what they

develop depends on technological breakthroughs

Production Orientation A philosophy of business whereby the firm’s focus is

on product excellence or technology May be necessary in a highly

technological environment

Product Research Research aspects of product development Cooper

identifies 6 key areas [1]: generation of new product ideas, testing ideas, developing prototypes, testing prototypes, test marketing,

Adjusting the marketing mix prior to launch

Promotions Mix All marketing communications tools that are used together,

for individual campaigns, to achieve communications objectives in relation to specific target audiences The mix varies according to objectives, target audiences and budget and may include: advertising, personal selling, sales literature, public relations (which can include exhibitions and sponsorship), direct marketing (which includes direct mail, telemarketing, direct response advertising, e-mail, and internet),

and sales promotion, and packaging, point of sale and product

placement

Psychographic Segmentation A method of segmentation whereby the

market is divided into groups of people who have the same lifestyle

which encompasses values, attitudes and interests

Public Relations The planning and implementation of communication

activities to establish and maintain the reputation of a firm and its brands, within identified target audiences, often including the general public PR is often undertaken at a corporate level and PR techniques include: media releases, conferences, corporate hospitality, charitable work and the use of badging (for example giving away free t-shirts with

company logo)

Qualitative Research A form of marketing research whereby opinions and

ideas are elicited Rather than using closed question questionnaires, the researcher undertakes interviews, focus groups and similar techniques The findings are more detailed and subjective than those from quantitative research and so, although often of greater value, they

are more difficult to evaluate and present

Quantitative Research A form of marketing research whereby facts are

obtained that can be analysed in a statistical format; for example 60%

of the population read a newspaper at least once a week Quantitative data is obtained primarily through the use of closed questions in

questionnaires such as opinion polls and customer satisfaction surveys Questioning Techniques The use of effective questioning skills to establish

a prospects needs Cooper [1] indicates that these should include:

listen more than talk, ask open questions, use confirmatory closed questions, ask soft and hard fact questions and use empathy

statements

Relationship Marketing This is where a firm aims to establish and develop a

relationship with the customer with a view to engaging in a long-term association which is less expensive than continuously relying on new customers Cooper states that it involves providing the highest level of service possible and includes regular communication and visits,

reacting positively to feedback and comprehensive customer care Retailer An outlet, and part the distribution chain, that sells directly to

consumers Return on Investment (ROI)

Sales Orientation A philosophy of business whereby the firms focus is on

selling, rather than the customer Although selling is a critical activity, even in a market, or customer, oriented firm, a sales oriented firm is not

a good philosophy to have It involves a firm trying to push customers

to buy what they do not necessarily need or want

Sales Promotion One element of the Promotions Mix and involves a range

of temporary inducements that includes: coupons, free gifts, competitions, BOGOF (buy one get one free), temporary interest free credit and so on Trade sales promotions are an important form of push strategy and may include temporary interest free credit, sale or

return, free promotional material, extra boxes free

Secondary Research Also known as Desk Research This involves

collecting data from existing sources and so using that which already exists, as opposed to Primary Research Secondary sources include