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Your Marketing Investment
Part Eight

By Mark Levit

In previous papers we’ve addresses establishing your marketing investment, the most common budgeting exercise, competitive position and market environment, new product activity, market growth, capacity utilization, budgeting for low ticket items and budgeting for the lower percentage of a customer’s total purchases.

This month we’ll discuss “budgeting considerations and your product’s characteristics.”

A firm’s level of marketing depends not only on the competitive climate of the market and the nature of its customer base, but also on its products. Specifically, the appropriate positioning, market share strategies, and investment levels will vary a good deal with the quality and price of the product relative to its competition.

Much is being made today of quality issues by the Media. But behind the talk, there is little in the way of objective standards for measuring quality, particularly across industries. We are fortunate that for several years, several organizations have been working to perfect a model for quantifying relative product quality. This model applies across all industries and markets. Hence, the information on relative quality in these new databases is perhaps the most unique source of empirical evidence available for studying the effects of product quality on marketing across a broad range of businesses.

Before proceeding, let’s spell out what researchers mean by “relative product quality.” First, they use the term to refer to the performance of a product, as the customer group, not the marketer, perceives it. The perceptions of all prospective customers in the served market, and not just the business’s actual customers, are considered. Secondly, “quality” encompasses features both intrinsic to the product, such as its design, and extrinsic to it, such as delivery time and warranties. Thirdly, the concept of quality excludes price as a separate issue. A product is not usually perceived as high quality because it is expensive. Finally, the quality rating assigned to the product reflects its performance as perceived relative to the quality of competing products. Manufacturing a product perceived as equal in quality gives a firm no competitive advantage.

If you’d like to discuss the budgeting cycle and how to plan for it, contact our Managing Partner, Mark Levit, at 212.696.120 now.

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