Higher Education Marketing Mix

CHAPTER 3 MARKETING’S ROLE IN HIGHER EDUCATION 3. 1 INTRODUCTION Chapter 2 introduced some of the major changes and trends that have taken place in the higher education environment both internationally and locally. Although higher education institutions can be classified as non-profit organisations, the challenges discussed in Chapter 2 necessitate higher education institutions to take on the organisation-like behaviour of profit organisations and to become more marketingoriented.An understanding of the environment in which higher education institutions operate, provides an essential background against which to understand and assess the benefits of focusing on students as customers. If higher education institutions understand the landscape in which they operate, they can begin to plan to serve the market effectively and efficiently with their marketing strategy. Being marketingoriented requires that organisations have knowledge on external forces (as explained in Chapter 2), b ut also knowledge on customers’ needs and wants (to be addressed in Chapter 4).It is against this backdrop of changes in the environment, such as the decrease in government funding and the increase in competition, that the need for marketing in higher education can be seen. In order to survive and to develop a sustainable competitive advantage in a changing higher education landscape, higher education institutions should satisfy the needs of their customers by adding value. Institutions should provide more benefits to their customers than competitors if they want to stay competitive.In the competitive environment in which higher education institutions operate (refer to Chapter 2), enhanced customer satisfaction may be one of the ways in which institutions can create and sustain a competitive advantage. This can be achieved with the effective application of the marketing mix elements. Marketing, and more specific a market-orientation, can provide a detailed understanding of th e needs of ustomers and ensure that higher education institutions address the needs in as – 73 – efficient and comprehensive manner as possible. In short, higher education institutions need to set marketing objectives and formulate a marketing strategy. Given the market-oriented focus and importance of the marketing mix elements, the main focus of this chapter will be on higher education institutions’ formulation and implementation of the elements of the services marketing mix.This chapter will explore the literature available on the changing role of marketing, the marketing concept, market- and marketing-orientation, consumer behaviour and the integration of all the units of a higher education institution to formulate a service product strategy, price strategy, distribution strategy, communication strategy, people strategy, physical evidence strategy and process strategy in order to meet the needs of students. 3. 2 THE CHANGING ROLE OF MARKETING Marketing plays a major role in any organisation and is viewed by Lamb et al. 2004:5) as a process that starts with identifying customer groups, finding out about their needs and wants, matching what the organisation can offer with what the customer wants and then effectively communicating and selling it to the customer. Although the primary aim of marketing is to satisfy the needs of customers, it involves a cluster of activities such as product/service innovation, design, development, distribution, advertising, selling and how the product/service is acquired and used by the customer.Machado and Cassim (2002:2) regard marketing as the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational objectives. Mowen (1995:7) states that the importance of understanding consumer behaviour is found in the definition of marketing as a human activity directed at satisfying needs and wants t hrough a human exchange process. Effective marketing requires a higher education institution to identify their target audiences, understand them, and communicate with them as directly and interactively as possible (Laurer, 2006).According to Shoemaker (1999), marketing is the proactive management of the relationship between a higher education institution and its various – 74 – markets by using the tools of marketing: service product, place, price, promotion, process, people and physical evidence. Marketing’s greater contribution lies in its ability to facilitate the exchange process that takes place between the non-profit organisation such as the higher education institution, and each of the customer groups it addresses (Sargeant, 2005:295).Marketing can provide a detailed understanding of the needs of such customers and ensure that the institution addresses these needs in as efficient and comprehensive manner as possible. This understanding of customers’ needs can aid organisations in creating and sustaining a competitive advantage. Lynch and Baines (2004:171) found that higher education institutions’ sustainable competitive advantages are usually based on superior knowledge, reputation, innovation or architectural related advantages.However, marketing is not stagnant and over the years the marketing activities of organisations have changed. Kolter (2003) and Strydom, Jooste and Cant (2000:10) identify four stages that strongly influence the evolution of organisations’ marketing activities. These stages are referred to as production, sales, marketing and societal marketing. The production orientation focuses on the internal capabilities of the organisation rather than the needs of the market, while a sales orientation is based on the premise that people will buy more if aggressive sales techniques are used.Both of these orientations lack a customer focus. Organisations realise the importance of marketing and building long-term relationships with their customers; thus, a marketing orientation. The societal marketing orientation builds on the marketing orientation but adds that customer value must be delivered in such a way that it maintains or improves the society’s wellbeing. According to Kotler and Fox (1995:11), there are also definite stages in the evolution of marketing in higher education.The focus has moved from â€Å"marketing is unnecessary† to â€Å"marketing is promotion† to â€Å"marketing is positioning† to the stage where in some cases marketing is seen as part of strategic planning for higher education institutions. Law (2002:4) is of the opinion that higher education institutions in South Africa are moving from â€Å"marketing is promotion† to more emphasis on positioning and strategic planning. This stage is also described as the â€Å"marketing company† era. The marketing – 75 – ompany era is characterised by short- and lon g-term marketing planning and the whole organisation’s efforts are guided by the marketing concept (Perreault & McCarthy 2002:34). The marketing concept is a management philosophy with the basic premises that an organisation needs to research the needs and wants of customers and then produce products or services that will satisfy these needs and wants (Strydom, Jooste & Cant, 2000:12; and Kohli & Jaworski, 1990:467). The marketing concept will be explained in the next section. 3. 3 THE MARKETING CONCEPTChurchill and Peter (1998:12) describe the implementation of the marketing concept as an organisation that satisfies customer needs and wants as a means to achieve their own objectives. Although it seems simple, it is complex in the sense that changes within the economic, social, political and technological environment, as discussed in Chapter 2, constantly leads to changing customer needs and wants. Lamb et al. (2004:17) state that institutions who want to survive in the futur e will have to be customer-focused, market-driven, global in scope and flexible in its ability to deliver superior value to ustomers whose preferences and expectations change continuously. Foxall and Goldsmith (1998:7) feel that consumer orientation stems from an organisation’s adoption and implementation of the marketing mix (price, service product, promotion, place, people, process, physical evidence), but adds that the adoption and implementation of the marketing concept has four major implications: †¢ The success of any organisation depends above all on the consumers and what they are willing to accept and pay. †¢ The organisation must be aware of what the market wants, preferably well before production commences. Consumer wants must be continually monitored and measured so that, through service product and market development, the organisation keeps ahead of competitors. †¢ Top management must achieve the integration of all the components of the marketing s trategy into a single strategic plan, based on knowledge of consumer behaviour. – 76 – Mowen (1995:4) underlines the importance of the marketing concept by stating that the marketing concept embodies the view that an industry is a customer satisfying process, not a goods producing process.An industry begins with the customer and its needs, not a patent, raw material, or selling skill. The general acceptance of the concept that an organisation functions to fulfil consumers’ needs and wants, through understanding their exchange partner (customers), makes the study of consumer behaviour, and thus this study, essential. Mowen (1995:5) and Churchill and Peter (1998:13) agree that the basic idea of the marketing concept is to give the customers what they want.However, consumers are not always sure of their wants or what they are being offered, and are much more open to persuasion than is commonly acknowledged by the marketing concept. The marketing concept is based on four basic principles: consumer orientation or the target market; long-term maximisation of profitability or another measure of long-term success, total organisation effort, and social responsibility (Kotler, 2003:20 and Perreault & McCarthy, 2002:34). The four principles of the marketing concept will be briefly explained below. 3. 3. THE PRINCIPLE OF CONSUMER ORIENTATION Strydom et al. (2000:12) view consumer orientation as the first principle of the marketing concept, indicating that all actions should be aimed at satisfying consumer needs, demands and preferences. Although this implies that the consumer objective is to achieve total need satisfaction, it does not mean that an organisation must provide for unrealistic consumer needs. According to Kotler (2003:20), organisations have to carefully choose their target markets and then prepare a tailored marketing programme.Research conducted by Conway, Mackay and Yorke (1994:35) on higher education institutions in the United Kingdom (UK) found that more than half of the institutions did not have a customer orientation in their planning and that most institutions merely pay lip service to the variety of target markets they serve. This study will attempt to gather the necessary information to enable institutions to become more customer oriented in understanding the needs and wants of students, specifically regarding the choice factors and information sources used when selecting a university. 3. 3. THE PRINCIPLE OF INTEGRATION AND COORDINATION OF ACTIVITIES – 77 – Strydom et al. (2000:14) define a system as an integrated whole – a group of related units working together to achieve a joint objective. The second principle suggests that marketing activities of a higher education institution should be closely coordinated with each other and with other functional areas such as production, finance, administration, human resources and procurement. The marketing concept has been a useful mechanism in helping to unify the independent functional areas to increase customer satisfaction.All seven marketing mix instruments (price, service product, promotion, distribution, people, process and physical evidence) should complement and reinforce one another in such a way that the student will prefer the institution’s service offerings to that of competitors. 3. 3. 3 THE PRINCIPLE OF MAXIMISING LONG-TERM SUCCESS The third principle is directed at achieving market share, return on investment and the objectives of the organisation. Marketing plans and corporate goals must be closely coordinated to ensure profitability.Maximising profitability is the primary objective of a profit-seeking organisation and can be achieved only through the consideration of consumer needs. Non-profit organisations attempt to achieve some other objective than profit. This does not mean than they are uninterested in income, as they have to generate cash to survive. However, their primary goal is non-econom ic, and for higher education institutions that is to provide education. Although there is an emergence of for-profit higher education institutions, as discussed in Chapter 2, non-profit higher education institutions also need to focus on their long-term sustainability.For-profit organisational success is measured ultimately by profitability. For non-profit organisations, measuring success is not so easy. Higher education institutions’ success can be measured in research output terms, number of students taught, student pass rate, range of qualifications of staff or even the quality of teaching. The combination of these factors makes the measurement of success difficult and can lead to conflict. For example: more students and larger classes may reduce time needed for research by staff to deliver the required research outputs.The principle of maximising long-term success is therefore more complex in higher education institutions than for for-profit organisations. Marketing is of growing importance to non-profit organisations, because of the need to generate funds in an increasingly competitive arena. Even – 78 – higher education institutions that rely on government funding must show how their work is of benefit to society and must meet the needs of their customers. 3. 3. 4 THE PRINCIPLE OF SOCIAL RESPONSIBILITYZikmund and D’Amico (2001:20) state that the pure marketing concept disregards environmental changes and problems and focuses on short-term customer satisfaction rather than on the long-term wellbeing of society. Involvement and concern for the environment and the society in which the marketing task is performed are typical characteristics of a strategic approach to marketing management. Organisations should therefore strive to obtain the goodwill of the society, rather than only the support of the target market. By demonstrating social responsibility, higher education institutions can earn the goodwill of the public and governme nt.This has a long-term dimension that can favourably influence the future of any institution in terms of funding and a steady supply of customers. From the discussion of the marketing concept and its principles, it is clear that by accepting the marketing concept, institutions have recognised that consumers and their behaviour has a direct bearing on the formulation of a marketing strategy – and therefore the relevance of this study. The marketing concept helps to bring focus and enables an organisation to satisfy consumers’ needs (Perreault & McCarthy, 2002:41).If higher education institutions want to be successful in today’s dynamic higher education landscape, competing for resources, support and customers, they too should adhere to principles of the marketing concept, especially being consumeroriented, when conducting their business. Applied to higher education, the marketing concept holds that higher education institutions should conduct their planning bear ing in mind and recognising that they exist primarily for the purpose of providing a service product to students. Campus activities should thus focus on satisfying the needs of students (Massad & Tucker, 2000:1-5).The philosophy of the marketing concept forms the underlying basis for an organisation’s market- and marketing-orientation. These two concepts will be briefly explained in the next section. – 79 – 3. 4 MARKET-ORIENTATION AND MARKETING-ORIENTATION Throughout the literature, the term market-orientation and marketing-orientation is used interchangeably (Payne, 1988; Kohli, Jaworski, & Kumar, 1993 and Sharp, 1991). Notice should however be taken of a small group of authors, such as Cravens, Lamb and Crittenden (1996), who argue that there are slight differences between the two concepts.However, it is not the purpose of this study to argue or investigate if there are differences between these concepts, but rather to show how the adherence to these concepts can enable higher education institutions to survive and grow (Voon, 2006:598). 3. 4. 1 MARKET-ORIENTATION Market-orientation refers to everyone in the organisation being committed to the customer and adapting in a timely way to meeting the changing needs of the customer. Market-orientation is a bias towards the market, requiring knowledge of customer needs and wants, competitors and external forces (Evans, James & Tomes, 1996:209).Kasper (2002:1047) defines a market-orientation as the degree to which an organisation and all its thinking and acting (internally as well as externally) is guided and committed to the factors determining the market behaviour of the organisation itself and its customers. Kohli and Jaworski (1990:3) define market-orientation as the activities involved in the implementation of the marketing concept. An organisation with a market-orientation determines the needs and wants of the target market and delivers the desired satisfaction more effectively and efficien tly than the competition.Thus, market-orientation extends beyond the marketing concept philosophy, as it also offers a process for delivering customer value. A market-oriented organisation understands customer preference and requirements and effectively combines and directs the skills and resources of the entire organisation to satisfy customers’ needs. According to Kasper (2002:1052), a robust market-orientation has become a strategic necessity for any service organisation due to increasing market turbulence and intensifying competition.He states that the market-orientation of an organisation can be seen as a particular position on a scale ranging from being truly market-oriented to not being market-oriented at all. Results from Kasper’s research show that a market-oriented service organisation has an open, employee-oriented, result-oriented, pragmatic, – 80 – professional, well-communicated, marketing goals-oriented, market knowledge (customers and comp etition) system with dedicated employees that know what customer focus and service means.Market forces (refer to Chapter 2) changed the landscape of higher education into a competitive environment requiring a market-orientation (Koerwer, 2001). According to Couturier (2002), reduction in government support and increase in new technologies and improved learning produce students with high expectations and this further pressurises higher education institutions to become more market-oriented. Shoemaker (1999) states that glossy brochures, catchy slogans and the existence of marketing programmes do not give higher education institutions a market-orientation.Marketorientation requires a philosophy and a culture that go deep in the organisation. This means an institution where students are involved in the service production process and where administration, faculty and support staff work together effectively. A marketorientation requires a commitment and power from top management. Shoemake r (1999) states that a market-oriented higher education institution is characterised by: †¢ A top management actively involved in providing institutional marketing leadership; †¢ A marketing process integrated to reflect, recognise and involve all institutional stakeholders; Marketing plans that are well distributed among top institutional officers; †¢ Outside marketing consultants used to build and enrich the institutional culture; †¢ Regular and structured marketing research studies of all important stakeholder areas; †¢ A marketing-oriented planning culture that includes the participation of all stakeholder areas; and †¢ Marketing evaluation systems in place to assure continuous monitoring and improvement of marketing programmes and strategies. – 81 – 3. 4. 2 MARKETING-ORIENTATIONAn organisation with a marketing-orientation adheres to the principles of the marketing concept and offer customers what they need (Perreault & McCarthy, 2002: 37). Marketing-orientation implies that the main task of a higher education institution is to determine the needs and wants of target markets and to satisfy them through the design, communication, pricing, delivery of appropriate and competitively viable programmes and services (Kotler & Fox, 1995:8). Laurer (2006) states that strategic plans of higher education institutions will have to become marketing-oriented plans.This begins with an environmental scan that determines how society is changing and then outlines how programmes, pricing and access to learning (distribution), employees (people) and process will meet these changing needs. According to Massad and Tucker (2000), higher education institutions in the United States have embraced a marketing-oriented approach to admission. They state that the trend began in the late 1970’s in the USA and is driven by increased competition and a shrinking enrolment pool. Higher education institutions in Shanghai started in 1999 to re form their policies to be more marketing-oriented (People Daily, 1999).These policies include practical plans such as providing enough residence and departmental buildings for students and lecturers, logistic service renovations, and improved logistic service quality. Several reasons exist why achieving a marketing-orientation is problematic for some higher education institutions (Sargeant, 2005:297): †¢ Conflict between management and academic interest. There is a split in the responsibility for dealing with customers between departments and an institution’s central administrative function. †¢ The lack of a strategic perspective.Courses are sometimes established and maintained for the status of the department or institution rather than where there is clear evidence of an economic viability or long-term demand. †¢ The diversity of the marketing activity. Marketing is conducted by a variety of players, such as the admissions officer, school liaison officers, res earch officer and faculties, making the coordination difficult. †¢ Academic value. Some institutions still perceive marketing as being incompatible with their education mission. – 82 – Nevertheless, higher education institutions must aim to become marketing-oriented.The market concept forms the underlying philosophy for both a market and marketingorientation. A marketing-orientation is an all-embracing concept referring to both behavioural and philosophical standing of marketing, therefore incorporating the market-orientation. Thus, for the purpose of this study, the term marketing-orientation will be used to indicate a market- and/or marketing-orientation. 3. 5 MARKETING STRATEGY AND CONSUMER BEHAVIOUR According to Hawkins et al. (2001:7), an effective marketing strategy is based on knowledge of the environment, competitors and customers.The study of customers’ needs, perceptions, aspirations, motivations, culture and decision-making processes is called co nsumer behaviour (Du Plessis & Rousseau 2005:8). Consumer behaviour serves as a basis for marketing strategy formulation. Figure 3. 1 indicates that an understanding of consumer behaviour is the basis for marketing strategy formulation and will serve as a visual guide for the remainder of this chapter. It also visually shows the integration and link between Chapter 2, Chapter 3 and Chapter 4. Figure 3. begins with the analysis of the market (Step 1) in which the organisation is operating. It requires a detailed analysis of the organisation’s capabilities, strengths and weaknesses, competition, the economical and technological forces affecting the market, and the current and potential customers in the market (refer to Chapter 2). The consumer analysis component of the first step enables an organisation to identify groups of individuals with similar needs. The identified market segments, in step two, can be described in terms of demographics, media preference and geographic loc ation.One or more of these segments are then selected as target market, based on the organisation’s capabilities relative to those of its competition, taking into account current economic and technological conditions. The organisation then decides on the desired image of the service product or brand, also known as the service product or brand position. The third step entails the marketing mix/strategy formulation. Hawkins et al. (2001:14) point out that a marketing strategy basically answers the question: How will we provide – 83 – superior customer value to our target market?The answer requires the formulation of a consistent marketing mix. Thus, the marketing strategy is formulated in terms of the marketing mix. Lamb et al. (2004:12) point out that this step involves the determining of service product features, price, communications (promotion), distribution (place), people, process and physical evidence that will provide the customer with superior value. The total service product is then presented to the target market, which constantly engages in processing information and making decisions to enhance and maintain their lifestyles.The marketing strategy (as implemented in the marketing mix) intervenes between the decision-making process of consumers (Step 4) and the outcomes/goals of an organisation. The outcomes of the organisation are determined by its interaction with the consumer decision-making process. Organisations can only succeed if consumers see a need that the organisation’s service product can address, become aware of the service product, decide that it is the best viable alternative solution, proceed to buy it, and become satisfied with the results (Hawkins et al. , 2004:22-23). The consumer decision-making process will be discussed in detail in Chapter 4.Finally, the reaction of the target market to the total service product produces an image of the service product, brand or organisation, sales (or the lack thereof), and some level of customer satisfaction among those who did purchase. As the components of the market analysis (Step 1) was discussed as part of the trends in the higher education landscape in Chapter 2 and the consumer decision-making process (Step 4) will be explained in Chapter 4, the remainder of the chapter will focus on the STP process (Step 2) and marketing strategy (Step 3) as depicted in Figure 3. . – 84 – MARKETING MIX/STRATEGY (CHAPTER 3) Service product (3. 7. 1) Price (3. 7. 2) Promotion (3. 7. 3) Place (3. 7. 4) People (3. 7. 5) Process (3. 7. 8) Physical evidence (3. 7. 9) Problem recognition (4. 7) Information search (4. 8) Alternative evaluation (4. 9) Selection and purchase (4. 10) Post-purchase process (4. 11) OUTCOME Customer Satisfaction Sales Product/brand image/organisation Source: Adapted from Hawkins, Best and Coney (2001:8). – 85 – CHAPTER 3 STP- PROCESS (CHAPTER 3) Segmentation, target market and product positioning (3. 6)CONSU MER DECISION-MAKING PROCESS (CHAPTER 4) STEP 4 CHAPTER 2 MARKET ANALYSIS (CHAPTER 2) Competitors Company Consumer Conditions CHAPTER 4 STEP 3 STEP 2 STEP 1 Figure 3. 1: Marketing strategy and consumer behaviour As the components of the market analysis (Step 1) was discussed as part of the trends in the higher education landscape in Chapter 2 and the consumer decision-making process (Step 4) will be explained in Chapter 4, the remainder of the chapter will focus on the STP process (Step 2) and marketing strategy (Step 3) as depicted in Figure 3. . 3. 6 SEGMENTATION, TARGET MARKETING AND POSITIONING (STP PROCESS) Marketing strategy formulation for organisations takes place via the process of integrating segmentation, targeting, positioning and the services marketing mix. Once organisations have segmented the market, they must determine the market potential of each segment and then select segments to target. A target market can be defined as a fairly homogeneous group of customers to w hom an organisation directs its market offering.Organisations must determine a mixture of the marketing elements that they will combine to satisfy their target market. Selecting a market-oriented strategy is referred to as target marketing. A specific marketing strategy specifies a particular target customer (Perreault & McCarthy, 2002:47). Most non-profit organisations serve several groups or publics. The two broad groups are donors, who may be individuals, trusts, companies or governmental bodies. The second group consists of their clients such as students, parents, government or employers.Often higher education institutions need to satisfy both groups and this complicates the marketing task (Lovelock & Wright, 2002:233). Students, prospective students and their families are seen as customers or consumers who must be attracted to the institution, who must be satisfied, and who must have a good experience at the institution. This will ensure that they spread positive word-of-mouth and influence other potential students to select the institution (Reich, 2004).Students can be regarded as the primary clients of higher education institutions and parents, employers and society as secondary beneficiaries. As an institution’s target market changes, new needs and trends evolve (as discussed in Chapter 2), making it necessary for institutions to rethink their position and often to reposition in order to address the new needs or trends (McGolddrick, 2000:54) This study focuses on students as a target market of institutions, as traditionally most institutions’ marketing efforts are directed at satisfying 86 – the needs of students. This study will provide insight into the demographics and choice factor importance that forms part of students decision-making behaviour, which will aid higher education institutions in understanding their target market to ensure satisfaction through implementing an appropriate marketing strategy. After segmentation and t arget marketing, organisations should position their market offerings in such a way that it is perceived to satisfy the needs of customers better than the competition. According to Hawkins et al. 2001:289), a product’s position refers to the schematic memory of a brand in relation to competing brands, products, services and stores. Brand image, a closely related concept, can be defined as the schematic memory of a brand without reference to competing brands. Strydom et al. (2000:14) regard a product’s position as the way consumers perceive a product or service in terms of its character and advantages in relation to competitors. Du Plessis and Rousseau (2003:276) state that the important underlying principle is recognising that the marketing battle today is fought in the minds of the consumer.Research shows those products or services that enjoy high awareness levels usually enjoy dominant market penetration and market share. But awareness is not enough; the service prod uct must have a meaningful position in the mind of the consumer and stand for something of value to the consumer. Mowen (1995:18) defines product differentiation as the process of positioning the product by manipulating the marketing mix so that customers can perceive meaningful differences between a particular brand and competing brands.A highly differentiated brand may have strong competitive advantages, because it is easily recognisable as being different from competitors. Institutions need to know how they and their service products are positioned in the student’s mind. The stimuli that institutions employ, such as advertising or sponsorships, can influence the service product’s interpretation and thus its position. Hawkins et al. (2001:289) is of the opinion that organisations frequently fail to achieve the type of service product image or position they desire, because they fail to anticipate or test the consumer’s reaction.These positions have developed an d evolved over time. Therefore, the message received from the organisation must be consistent or change in a deliberate manner to reflect or alter a desired change in brand position. – 87 – Strydom et al. (2000:134) state that organisations must position their brands so that they are perceived to satisfy the needs of the target market better than competitors’ offerings. The institution must develop a unique appeal for the brand in the consumer’s mind and position the brand as filling a particular need of the consumer.Berman and Evans (2001:122) point out that through positioning, institutions devise their strategy in a way that projects an image relative to the institution’s category and its competitors, and elicits consumers’ responses to their image. Sargeant (2005:322) notes that positioning can also have a profound impact on the success or failure of fundraising initiatives and attempts to work closely with commerce and industry. Those h igher education institutions that are perceived as being either of high quality or as unique in some way, are likely to have the greatest success in these areas.Law (2002:3) states that it is important for institutions to distinguish themselves from competitors in terms of values that are important to the student. Therefore, higher education institutions need to develop a clear position that can be stated simply, effectively and often (Dehne, 2001). The author continues by saying that as competition becomes stronger, an integrated marketing strategy based on the identified positioning of the institution will play a crucial role.If organisations want staff and students to project a positive image, they must clearly define exactly what that image is; not vague understanding, but specifics (Sharpe & Harville, 1987). Law (2002:4) emphasises the importance of addressing the values that are important for prospective students in the publications of the institution. It can therefore be said that in the positioning of the institution, the needs and perceptions of important values of the respective public should be seriously considered.The elements of higher education institutions’ marketing are mixed to form an integrated strategy where each component plays a role to position the institution in its chosen target market (Van Biljon, 1992:65). According to Czinkota, Kotabe and Mecer (1997:217), organisations must first determine how they want to position their service products and use their service products’ position as basis for developing their marketing strategies. This means that after the STP (segmentation, targeting and positioning) process, organisations must blend the services marketing mix elements into a marketing strategy that reflect the organisation’s desired osition to their target market. – 88 – The next section focuses on the services marketing mix and its elements as it pertains to higher education institutions. 3. 7 TH E SERVICES MARKETING MIX OF HIGHER EDUCATION INSTITUTIONS The development of a marketing strategy involves the coordination and combination of the marketing mix elements (Mowen, 1995:19; and Hawkins et al. , 2001:6). It is the combination and coordination of the elements in the marketing mix that enables organisations to meet customers’ needs and provides customer value.A traditional marketing mix consists of the following elements: price, service product, promotion and place (distribution). However, due to the intangible, inseparable, heterogeneous and perishable nature of services, the traditional marketing mix was extended to include process, people and physical evidence (Goldsmith, 1999:178). Because higher education institutions mainly provide intangible service products, the extended marketing mix, better known as the services marketing mix, forms the focus of this chapter.Higher education institutions need a well-developed comprehensive marketing strategy that is caref ully communicated throughout the institution (Robinson & Long, 1987:44; Brooker & Noble, 1985:34) and the services marketing mix will help higher education institutions to shape their service offerings according to the needs of their customers. Grove, in Kraft (2006) showed that in the marketing of education, the marketing mix is the single most important determinant of marketing success.In the light of the fact that marketing can influence the consumer’s behaviour and the services marketing mix can assist higher education institutions in developing a holistic and well thought-through service offering, the seven services marketing mix elements (service product, price, promotion, distribution, people, physical evidence and process) will be discussed in the main part of this chapter. – 89 – 3. 7. 1 THE SERVICE PRODUCT STRATEGY OF HIGHER EDUCATION INSTITUTIONS The most basic decision that higher education institutions have to make is what programmes and services th ey will offer to their students, alumni and donors.An institution’s service product strategy determines its identity, position and how customers will respond to the institution. A product is anything a consumer acquires, or might acquire to meet a perceived need and thus the sum of all the products and/or services offered by an organisation. To define the term service is not easy or simplistic. Although the process may be tied to a physical product, the performance is essentially intangible and does not normally result in ownership of any of the factors of production. Services create value and provide benefits for customers at specific times and places.Lovelock and Wright (2002:3) define services as an act or performance offered by one party to another. Irons (1997:12) defines services as perishable, transient acts that have no lasting material, being mainly presented by people that cannot be separated from the provider. Therefore, the personal characteristics of the provider are an important part of the service. Du Plessis and Rousseau (2003:175) state that these definitions reveal that the nature of service centres on the characteristic of intangibility and that it is this feature that distinguishes services marketing from the marketing of physical goods.The goods and services continuum is shown in Figure 3. 2 below. Figure 3. 2: Goods and services continuum Tangible dominant Complete tangible products Tangible products with supporting services Intangible dominant Hybrid offers Source: Adapted from Palmer (2005:24). – 90 – Major service with supporting products Pure services It is evident that in services, the intangible element is dominant. The provision of education, although intangible, also contains tangible elements. Institutions provide service activities such as the teaching process and contact with customers (intangible element) as well as learning aterial such as textbooks (tangible element). McCollKennedy (2003:6-7) regards goo ds and services’ tangibility on a continuum, rather than in one category. At one end of the continuum are the intangible services and at the other end are tangible products. Higher education, which can be described as a major service (intangible) with minor supporting products (tangible), are leaning towards the intangible side of the continuum. In addition to categorising services based on their tangibility, it is also useful to identify who or what is the direct recipient of the service.Services can either be directed at people’s bodies, intangible assetes, physical possessions or people’s minds such as education (Lovelock, 1996:29). In order to better understand the concept of services, the distinguishing characteristics of services will now be explained. The basic characteristics of services are briefly outlined below (Lovelock & Wright, 2002:14-16): †¢ Customers do not obtain ownership. Customers usually derive value from a service without obtaining ow nership of any tangible elements; †¢ Service products are intangible performances.Intangible refers to something that is experienced and cannot be touched or preserved. Although services often include tangible elements, the service performance itself is basically intangible; †¢ Customer involvement in the production process. Customers are often actively involved in helping to create the service product by helping themselves or by cooperating with the service personnel. Customers cannot sit back and wait for the experience to be delivered as they do with the purchase of tangible products they have to participate. †¢People as part of the service product. Given the fact that different service personnel may deliver the service product to customers, it is difficult to achieve – 91 – uniformity in service delivery. This difference (heterogeneity) in attitude and action will typically result in very different customer perceptions of the quality and overall sati sfaction levels. People are such an important component of service delivery that it is added as an element to service organisations marketing mix and will be discussed in Section 3. 7. 5; †¢ Importance of time.Customers have to be physically present to receive services. Customers are becoming increasingly time sensitive and speed is often a key element in good service delivery; and †¢ Services are perishable and cannot be stored like physical goods. Thus, although education includes tangible elements such as textbooks, chairs and notes, students derive value from higher education without obtaining ownership. Students are involved in the education production process as they participate in and help make the final service product, by giving inputs in class or participating in campus events.As higher education is perishable and cannot be stored, students must be physically present to receive education. It is evident that offering educational services involve special challenges , since most services education is intangible, inseparable, variable and perishable. Developing service products that satisfy consumers’ wants and needs are a critical marketing activity for institutions (Hoyer & MacInnis, 2001:40). Consumer research can provide useful information for service product decisions.According to Czinkota et al. (1997:109), information provided by consumer behaviour research, such as this study, can help organisations to decide which attributes to add to or change in an existing offering; aid them in correctly naming or re-naming their organisations and make effective packaging and branding decisions. Higher education institutions should evaluate its academic programmes and service product mix periodically, and particularly when considering modifications. Some programmes are more central than others.Education offerings are specifically essential programmes that institutions cannot do without. Other programmes may be easier to modify, like recreation al activities that are usually auxiliary programmes. Certain programmes will play a major role in attracting customers and these are called flagship programmes (Kotler & Fox, 1995:282). – 92 – Information provided by this study will enable institutions to determine the importance of some components of their service product (variety of study courses, academic quality and sport programmes) in the institution selection process of students.Higher education institutions must also develop a pricing strategy for their service products. The pricing decision is of utmost importance, as this will ensure income for higher education institutions that will enable them to implement al the other decisions such as promotion, distribution, processes, physical evidence and people. Section 3. 7. 2 will focus on the pricing strategy of higher education institutions. 3. 7. 2 THE PRICING STRATEGY OF HIGHER EDUCATION INSTITUTIONSIn this section, the pricing strategy of higher education insti tutions will be discussed by defining the term price, explaining possible pricing objectives of higher education institutions, explaining discounts and highlighting the role of price. Price plays an important role in the marketing mix, quality perception, attracting customers and providing revenue to institutions. Price is the amount of money (or some other item that is exchanged or bartered) that the buyer exchanges for a service product provided by the seller. Lamb et al. (2004:570) describe prices as that which is given up in exchange to acquire goods and services.The price of a service plays two major roles. Firstly, it influences how much of the service product the customer will purchase, and secondly, it influences whether selling the service will be profitable for the organisation or not (Machado & Cassim, 2000:99). Prices can be seen as the amount that a customer (students, parents or employers) must pay to be educated. The price of higher education institutions are influenc ed by the subsidy from government as well as donations and the cost of presenting the course, prices of competition and inflation.Price, for students, consists of a monetary cost as well as other costs, for example effort cost (completing long essay application forms), psychological cost (stress of enrolling in an institution far from home) and time cost (visiting or attending open days at different institutions) (Kotler & Fox, 1995:311). Students and their parents are not just interested in the institution’s list price (official – 93 – tuition and fees printed in a catalogue), but also the effective price. According to Kotler and Fox (1995:312), the effective price is the amount the customer will actually pay for all the educational benefits and value received.Prospective students may find it difficult to measure effective price early in the decision process, since effective price can only be known after the student has gone though the application process and h as been accepted and financial aid has been allocated. Tuition fees represent only a fraction of the total cost of attending a higher education institution and living cost and other education related expenses must also be considered by students (Anon, 2006b). Diederichs (1987:112) found that price plays an important role in students’ choices of a higher education institution.The first aspect organisations should consider when pricing a service product is to decide on the pricing objectives they want to achieve. Pricing objectives can influence the price of the service product and include: maximising profit (short- or long-term), building market share, maximising long-term customer perceptions of the value of the service product, maximising immediate cash flow, positioning the service product in a certain place in customers’ minds, and targeting a given segment of the market.Higher education institutions may pursue more than one of these objectives at the same time depe nding on the situation they are facing. A new higher education institution emerging after a merger may aim to position their service product, as well as targeting a given segment and maximising long-term perceptions of value (McColl-Kennedy, 2003:270 and Machado & Cassim, 2002:106-107). Higher education institutions should take into account three factors when setting prices for their educational programmes: †¢ Firstly, cost, by determining the amount of revenue needed to cover expected operating expenses; Secondly, customer demand, which emphasises that the final price decision is always made by the customer; and †¢ Thirdly, competition, as institutions have to weigh their â€Å"value† and establish their price relative to their competitors. Institutions should always consider the effects of a given pricing policy on enrolment, the nature and mission of the institution, the prices charged by competition and the – 94 – effect of their prices and price c hanges on actions of competition (Kotler & Fox, 1995:309).The pricing objective of a higher education institution will also affect its discount policy, as discount influence profit, market share, cash flow and positioning. Once the basic price is established, organisations need to establish some flexibility in terms of that price. Discount can be defined as the reductions to the basic price (Machado & Cassim, 2002:116). Higher education institutions need to determine and publish their prices (tuition fees) and discounts. Financial aid is seen as a form as discount by students.Kotler and Fox (1995:310) state that financial aid is not just used to attract students to increase the size of classes, but also to ensure the needed composition of the class to meet diversity objectives. Student aid or financial aid makes it possible for many students from low- and middle income families to afford higher education (Anon, 2006b). Cabrera and La Nasa (2000:10) found that financial aid especiall y influences students positively to select a particular institution and also allows parents to consider a wider range of institutions.This study will include the importance of financial aid in selecting a higher education institution. Diederichs (1987:114) found that a higher education institution’s price policy should take into consideration the facilities needed, quality of education and competitiveness, as students often use the price of a product or service as an indicator of quality. For example, more expensive institutions may be viewed as providing better education. Some institutions make use of their price/quality relationship by trying to raise the prestige and attractiveness of their institution by raising the tuition fees.Higher education institutions must carefully consider the role of price in the marketing mix, as price can be used as a quality indicator and thereby influence the perception of the institution’s position. Higher education institutions ofte n offer substantial amounts of financial aid to talented students to maintain their competitive advantage. Students and parents are looking for the best overall deal in terms of educational quality and prices (Laurer, 2006).Courant (2006:4) is of the opinion that higher education institutions prepare students to lead an examined life and should therefore price higher education as an expensive, high value proposition. Wallace (2003:32) argues that higher tuition fees will enable institutions to improve the quality of education and in countries where higher education is subsidised or offered for free, education would be held in higher esteem if a price were attached to it. However, Beckett (2005) warns that institutions – 95 – should be aware that charging top fees may cause institutions to loose students and not widen the participation.Wallace (2003) states that universities in France, England, the United States and Germany are facing the same problems with the price of education, as government funding for education is decreasing and institutions have to look at increasing tuition fees. The result is that students in these countries are protesting the price increases. The increased value of a higher education degree, increased research at universities, reduced state funding for public higher education institutions and monopolistic behaviour of higher education institutions are other possible reasons for higher prices (Barry, 1998:84).Higher educational institutions rely on tuition fees, donors and government subsidies as sources of revenue. As discussed in Chapter 2, changes in the financial environment emphasise the trend of institutions to cut cost, increase productivity and offer more financial aid to students. Most educational institutions depend heavily on tuition fees to keep operating and pricing therefore becomes very important. Price plays a role in determining who will apply, who will attend, who the institutions will serve, what the ins titutions will be able to offer and whether the institutions will meet its enrolment objectives and revenue needs.From the discussion it is evident that a pricing strategy is important for education institutions because they depend on revenue to operate, especially in the light of the decrease in subsidies (refer to Chapter 2). Price is part of the marketing mix and should be considered as an element of the institution’s strategy planning. When setting price, decision-makers should understand how students perceive price and the importance of price in selecting institutions.According to Cosser and Du Toit (2002:77), price is an important factor considered in choosing a higher education institution. It is important that higher education institutions know the cost of producing the service, know the price of competitors, identify pricing factors that are relevant to pricing decisions, and decide on a pricing strategy that will attract enough students. It is evident from the above -mentioned that higher education management needs information on the students and market to make effective pricing decisions.This study will provide some insight on the importance of price in the institution selection process. – 96 – Higher education institutions can have good quality educational services offered at the right price to students, but if students and parents are not aware of these services and prices, they will not consider the institution. It is thus important that higher education institutions communicate with their prospective students and parents. The next section will focus on the promotional or communication strategy of higher education institutions. 3. 7. THE PROMOTIONAL STRATEGY OF HIGHER EDUCATION INSTITUTIONS Educational institutions need to effectively communicate with their target market(s) and publics. Institutions must inform students and parents about its goals, activities and offerings and motivate them to take an interest in the instituti on. To identify and satisfy consumers’ needs, an institution must have a good understanding of the consumer in order to gain a competitive advantage through its marketing mix (service product, price, distribution, promotion, process, people and physical evidence).Persuasive communication is central to the marketing of service products as features, benefits and values must be communicated to the consumers to influence their purchase behaviour. Everything and everybody in an institution has a role to play in communication. Examples include the organisation’s brand name or logo, campus grounds, service product quality, prices, employees, delivery vehicles, buildings, the technology the organisation has at its disposal, the capital the organisation has at its disposal and the organisational philosophy.Kelley and Mahady (2003:2) are of the opinion that promotion is an element sometimes overlooked by non-profit organisations. They argue that even if an institution offers som e of the best programmes and services, these will not be utilised to the fullest if the market they were intended for has no knowledge of their existence. The remainder of Section 3. 7. 3 will focus on the definition of promotion, the communication process and the integrated services marketing communication (ISMC) mix available for higher education institutions. According to Hawkins et al. 2001:19), promotion or marketing communication includes advertising, the sales force, public relations, packaging and any other signals that the – 97 – organisation provides about itself and its products and services. Lamb et al. (2004:466) describe the promotional strategy as a plan for the optimal use of the elements of promotion, namely advertising, sales promotion, publicity and personal selling. Many higher education institutions are returning to promotional or communication tools to promote courses in an attempt to maintain and/or expand their market share.The importance of com munication can be seen in the establishment of communication departments, more funds that are allocated to marketing and appointing marketing managers or external communication experts to help with promotional activities. Higher education institutions are making use of radio, television, newspapers, buses, taxis and open days as well as more professional brochures and promotional material as vehicles for communication (Jones, 2002:41). This is necessary, since higher education institutions can no longer depend on pass rates alone to attract students.In order to utilise the promotional tools to their fullest and to ensure effective communication, higher education institutions need to understand the communication process. Communication involves the creation of shared meaning between participants. The intangibility, inseparability, perishability and heterogeneity of services create special communication requirements and involve the risk of miscommunication that is not so evident in the marketing of goods (McColl-Kennedy, 2003:236). Communication can be viewed upon as the transfer of a message from a sender to a receiver by means of a signal of some sort via a channel or medium.The sender translates his/her objectives, ideas and concepts through language into a message also known as encoding (Strydom et al. , 2000:344). The receiver tries to decode the message before he/she can comprehend its meaning and then the receiver reacts or responds to the message (Lamb et al. , 2004:326). The disturbances (physical or psychological) that prevent the successful transfer of the message are known as noise. Noise influences all the components of the communication process and places obstacles in the way of effective communication.Higher education institutions are the senders, while the receivers of the message are the potential students, existing students, parents, employers or alumni. For the purpose of this study, the focus is on the students of a higher education institutio n. This does not mean that institutions do not need to communicate with other publics such as alumni, parents, donors, government or the general public as well. According – 98 – to Jones (2002:44) the student’s ability to decode the message is influenced by his/her past experiences, feelings, emotions, attitudes and perceptions of the institution.Thus, higher education institutions need to fully understand their target market to identify the appropriate intended messages for the target market. The communication process gives higher education institutions the opportunity to influence prospective students’ behaviour by developing a message that creates awareness, position themselves in the mind of the student, change the student’s attitude towards the institution, or encourage the student to apply to the institution (Jones, 2002:45). The most popular communication/promotion objectives are general image enhancement and awareness of the institutions (K ittle, 2000).According to Jones (2002:43), emotions or feelings also play an important part in the encoding process and it is vital that higher education institutions should have empathy for other people’s cultural backgrounds. Higher education institutions need to select a medium that will attract attention, arouse interest and present the message clearly (Kotler & Fox, 1995:353). Higher education institutions need knowledge about the language of the prospective students, knowledge of forms of communication and general background information about the prospective students in order to encode successfully.The media that will be investigated in this study include: printed media (advertisement in magazines, newspapers or outdoor media), broadcasting media (advertisements on radio and television), direct mail or direct marketing (newsletters and brochures of higher education institutions), body language and direct communication through representatives of the institution (school v isits by staff or open days attended by students), word-of-mouth (conversations with alumni, friends or family members), or websites. In Chapter 4 the different media will be further discussed as part of the sources of information used by students.The promotional mix that an institution uses is determined by the student market’s expectations and requirements of the service products, together with the other elements of institutions’ marketing decisions. Machado and Cassim (2002:157) describe the promotional mix as the blend of promotional methods used by the organisation to communicate. A huge array of promotion elements exist, such as direct marketing, sales promotions, advertising, Internet and sponsorships. The communication process and the promotional mix elements (advertising, public – 99 – elations, personal selling and sales promotions) are used by organisations to communicate to their prospective customers. The message that reaches the customer sho uld be the same regardless of whether it is an advertisement on the radio, websites, open days, or a newspaper insert. To ensure the careful coordination of all the promotional mix elements, organisations must adopt the concept of Integrated Marketing Communications (IMC) (Du Plessis & Rousseau, 2005:345). For a higher education institution, this means that the institution coordinates all its communication activities.Zeithaml and Bitner (2000:405) suggest that a more complex integrated form of communication is needed for services, hence the ISMC approach as shown in Figure 3. 3. This concept requires a complete communication strategy that involves staff, every interface the institution has with its students, stakeholders and the community at large (Jones, 2002:450). Laurer (2006) suggests that institutions must coordinate all the promotional elements so that they meet the needs of students and parents who will pay for their products and services. Figure 3. serves as a visual guide f or the discussion