Business 101: Principles of Management

In this lesson, we will explain the purpose of marketing controls and explore related concepts, such as market research, test marketing, and marketing statistics.

Marketing Plan Review

In this lesson, we will explore various marketing controls used to determine whether a marketing plan is performing. Market research, which includes test marketing and marketing statistics, serves as a way to measure the success of the marketing plan.

To better understand how marketing controls work to monitor the success of marketing activities, let us first review the function of a marketing plan. A marketing plan is an organizational plan, generally written for a three-year time frame, that describes the marketing goals, strategies, and action plans for the overall marketing of products or services that a company has to offer.

Now that we are familiar with the function of a marketing plan, let's explore the various marketing controls.

Marketing Controls

Marketing controls are a set of procedures used to monitor the success of marketing activities set forth in a company's marketing plan. They are like checkpoints to determine the marketing plan's effectiveness in meeting organizational goals. Marketing controls have three major interests:

• Customer satisfaction
• Pricing
• Delivery

Customer satisfaction refers to the ability a product or service has to please a customer, entice a customer to purchase and re-purchase the product or service, and encourage a customer to refer the product or service to others by word of mouth.

Pricing refers to charging a fair price, providing value for the price, offering payment options, collecting a return on investment, and maintaining profitability.

Delivery refers to getting the word out to potential customers through advertising and promotion and having the product available at the right time, in the right place, and in the right quantity.

Let's take a look at the Three Wheel Bicycle Shop. Inventor Tre' Wheeler developed the concept of a three-wheeled bicycle. By having three wheels in a row rather than the standard two-wheeled bicycle, the bicycle would be more streamlined, faster, and provide less of a bumpy ride.

Tre' built the bicycle, calculated the costs, found a great storefront, ran ads, and decorated his store windows with colorful displays. Tre' did all the right things to create a marketing mix for this new product. However, Tre' cannot rest on his laurels. He must come up with a plan to monitor his product's success in the marketplace.

Tre' can do this through marketing controls. Marketing controls will determine whether he has the right target market, whether he is charging the right price and offering the product in the right place, and whether the promotional activities are attracting new customers all the time. Tre' will use market research by collecting data through a combination of two marketing controls to determine the success of his plan to sell three-wheeled bicycles.

Market Research

Market research is an overall term for ways to gather data about how satisfied customers are with the product. It is also a way to gather data about the product's potential in attracting new customers and what influences buying decisions. Collecting market research data can be done in several ways. The activities performed in market research are known as test marketing, and the results of test marketing are compiled into marketing statistics.

Let's focus on the following two controls in detail:

• Test marketing
• Marketing statistics

Test Marketing

Test marketing is a form of market research that helps to determine how a customer actually feels about a product or service. Test marketing can be done at different stages of development, from testing the initial concept for appeal to monitoring the roll-out of the final product for potential customer satisfaction. Test marketing is important for a company to make decisions at every step of product development.

Test marketing involves testing the market, or potential market, to find out what customers want. This can be done in several ways:

• Focus groups
• Experiments
• Observations
• Surveys and questionnaires

Focus groups are groups of people, chosen because of a demographic like age, lifestyle, income, or other variable, who test a product or service and provide feedback to the researchers about the product or service's attributes - like quality, convenience, ease of use, price, value, and many other things. Tre' can use focus groups to determine whether the new bicycle packaging, name, logo, price, or promotion will attract new customers. Gathering and analyzing data will help Tre' make important decisions about what to keep and what to change about his bicycle.

Experiments involve testing the product or service with real users to see if the product or service works the way the company intends it to work. Ordinary people are given the product or service to use for a period of time. This could be for a few minutes or hours or even to take home and use for an extended period of time. Testers will record their experiences.

Tre' can benefit from having potential customers take the new three-wheeled bicycle, along with a set of questions, to their homes to test-ride for a week. The tester can use the bike as they would their own bike. The tester will log important data about their experiences and return this data (and the bike) to Tre' after the predetermined time has lapsed. Tre' will use the feedback to make important decisions about the bicycle's features.

Observations involve actually watching a test group or person use a product. In observation, the tester will use the product while the observer watches and takes notes about what they see. Tre' can benefit from observing potential customers as they ride his bicycle while he jots down important notes about their experience. Tre' can see first-hand whether the bicycle is easy to use, fun to ride, and attractive to customers. This data will help Tre' make any changes necessary or just keep the bicycle the way it is.

Surveys and questionnaires involve a set of open- and closed-ended questions about a product or service. The survey or questionnaire can be broken down into different sections depending on the information the researcher is hoping to uncover. Tre' can benefit from administering surveys and questionnaires about the three-wheeled bicycle to determine who would be interested in making a purchase. Tre's research may reveal a new target market that he didn't know existed.

Marketing Statistics

Marketing statistics are measurements of data collected regarding profitability, market share, and sales. The data is collected and analyzed to create ratios, or how two numbers compare.

Tre's test marketing activities and the data collected from those activities will create a set of ratios for analysis. For example, Tre' employed a focus group to find out the best place to sell bicycles. He also analyzed his competition to pinpoint where other bike shops are located in his area. Tre' compared the data and determined that most people prefer to buy bicycles at malls and most competitors are located in malls.

Lesson Summary

In summary, marketing controls are a set of procedures used to monitor the success of marketing activities set forth in a company's marketing plan. Marketing controls begin with market research. Market research is used to determine whether a marketing plan is successful. There are several ways to collect data needed to perform market research.

Test marketing, which includes focus groups, experiments, observations, surveys, and questionnaires, is used to collect data about how likely a customer would be to purchase a company's product.

Marketing statistics are compiled using the results of the above controls. Data collected from any of the above controls can be used to make comparisons. These comparisons can be about price, features and benefits, sales, or even market share.These checkpoints will reveal any fluctuation in customer satisfaction, product delivery, and a customer's willingness to purchase the product or service.