Free Marketing Essays - Factors Influencing Marketing Strategy In The Small Services Sector
The construction industry in the UK is one of the lucrative businesses where the investment of the general public as well as multinational organizations is increasing with time. In this literature review, an overview on the factors that influence the marketing strategies of the small and medium enterprises in the construction industry of the UK. The increase in the number of the small and medium enterprises and mainly the growth of the self-employed construction professionals in the UK since the dawn of the twenty-first century, has also increased the level of competition in this area of business apparently requiring an investigation into the factors influencing the marketing strategies of the competitors.
The review commences with an overview on the construction industry and the growth of the small-scale enterprises in this industry. The overview will justify the need for efficient marketing strategies in the construction industry among the small and medium enterprises. This is followed by the critical analysis of the marketing strategies and the factors that influence them in order to achieve competitive advantage in the business. A conclusion on the analysis conducted in the sections of the chapter is then presented to the reader.
2: Small Business in the Construction Industry - Overview
Construction industry in the UK contributes for more than 10% of the gross domestic product of the nation (Emily Pattullo, 2003) and continues to increase the revenue through providing innovative and customised solutions in the construction business. Furthermore, Emily Pattullo (2003) argues that the construction industry in the twenty-first century not only comprises the businesses involved in the manufacture of building raw materials and those companies involved in building structures, but also includes the building services including interior decorations and also the process of contracting and managing the entire building service right from the conception to the delivery of the final product (i.e.) the building. Alongside, Hedley Smyth (2004) has argued that the construction industry in the UK is increasingly focusing on the area of service rather than a technology business involved in the construction of civil structures mainly because of the increase in the competition and the increase in demand from the customers for quality service as well as efficient delivery of the end product. The fact that the construction services and the construction products (i.e.) building materials are equally important for the harmonic operation of the construction industry as argued by Emily Pattullo (2003) makes it further necessary for the competitors in the industry to adopt innovative business development techniques lie Customer Relationship Marketing etc in order to gain competitive advantage. Alongside, Roger Bennett (2005) argues that the construction industry in the UK is one of the sectors where the fluctuations are endemic. Furthermore, Roger Bennett (2005) says that the construction industry in the UK is one of its kind where even though the method of developing business like innovative advertising and utilizing information technology for the design etc., can aggravate the competition, the actual process of construction is never altered like in the case of the retail sector where the traditional high-street sales methods were replaced by the electronic commerce solutions and e-retailing initiatives by many organizations.
Small and Medium Enterprises in the construction industry:
The keynote, market assessment by Isla Gower (2004) has revealed that the small business and mainly the self employed people in the UK have increased drastically since 2001 and have accounted for more than 15% of the annual revenue of the country. Alongside, in the light of the construction industry, which is under debate, the small and medium enterprises contribute to more that 5% of the total revenue generated from the small businesses in the construction industry itself. This is mainly because of the increase in the self-employment among the UK general public in the construction industry. The department of trade and industry review (2004) on self-employment and small businesses in the UK has revealed that construction industry has seen the maximum growth in the small business since 2001.
Furthermore, Isla Gower (2004) has also established that the growth of small business enterprises is equally high in both the construction services and the construction products segments of the industry. The above arguments clearly justify that the competition in the construction industry is very high and an effective marketing strategy especially for the small business sector is essential in order to achieve sustainable growth in the market. Further to the argument of Roger Bennett (2005) that the construction industry in the UK is not only catering many small businesses but also numerous self-employed builders who specialise in specific areas of the construction or building process itself thus making it essential for an effective marketing strategy to be deployed in order to leverage revenue.
Hence it is proved that innovative marketing strategies are essential for the growth of the small businesses in the construction industry and a critical analysis of the factors influencing the marketing strategies is essential for the effective deployment of the marketing plan in the construction industry.
3: Factors influencing the marketing strategies of small businesses in the small services sector of the construction industry
Since it is clear that the construction industry is a cyclical industry with both recession and growth as argued by Simon Taylor (2002), the marketing strategies of the self-employed building contractors or the small business organizations operating over a smaller geographical area are influenced not only by the competition and the issues associated with the growth in the market but mainly the stability and the demand in the industry itself. This is because of the fact that many self-employed building contractors cannot afford to invest large amounts of money for a short-term increase in their revenue as identified by Roger Bennett (2005). The major factors influencing the marketing strategies of the small services sector in the construction industry as identified by Low Sui Pheng (2003) are
Customer Spending: Customer spending is one of the essential elements to be considered whilst devising a marketing plan/ strategy in any business sector as argued by Philip Kotler (1988). This is mainly because of the fact that the net disposable income of the customers is the primary element that contributes for the sales of any product in the target market and in the case of construction industry this is more critical because of the fact that the costs involved with the construction services and the products are the major elements considered by the customers.
Alongside, Hedley Smyth (2004) also argues that the spending level of the customers is also essential for the customisation of the products and services in the target market in order to leverage revenue. The fact that the construction industry is increasingly becoming a customer driving industry with the increase in the number of competitors has obviously made it clear that the bargaining power of the customer in the construction industry is high and hence it is essential for the competitors especially the small business enterprises and the self-employed contractors to effectively market their products taking into account the customer spending level in the target market.
Michael E. Porter (1995) further argues that the buyer power in any business sector not only contributes to the stability of the business but also contributes to the growth of the business itself. In the light of the small business in the construction industry, this argument is imperative because of the fluctuating nature of the industry itself. Furthermore Roger Bennett (2005) has also established that the marketing strategies of the small businesses and the self-employed contractors in the construction industry will be effective only when they reflect upon the consumer spending levels and in their target market.
Electronic commerce: Low Sui Pheng (2003) argues that the effective use of electronic commerce in order to promote the products by the organizations in the small services sector will mainly increase the awareness among the customers in the target market, which is the initial stage for instigating their buyer behaviour. Furthermore, Frances Brassington and Stephen Pettit (2003) have established that many organizations increase their market share mainly through having a healthy web presence even though they do not conduct transactions over the Internet itself. In the light of the construction industry, the small business organizations as well as the self-employed building contractors can establish effective web presence in order to advertise their products and services to the customers in the target market.
Furthermore, the fact that the self-employed contractors in the construction industry predominantly operate over a smaller geographical area further makes it essential for the competitors to have an effective web presence in the target market in order to meet the competition. Efraim Turban et al (2004) has further argued that even though small business services cannot afford to invest on a robust electronic commerce set-up in order to conduct financial transactions over the Internet, a mere web presence will fetch new customers to the company mainly because of the increase in the Internet usage by the general public.
Alongside, the costs involved with the advertising and promotion through the Internet is far lesser than the traditional methods of advertising, which will apparently increase the return on investment over marketing by the small businesses in the market. It is further interesting to note that not only the web presence will increase the awareness among the customers but also reach a larger target market which will server for the future development of the business itself. Since the message can be conveyed to the customers quickly, the small business enterprises in the construction industry can communicate their products and offers quickly over the Internet.
Apart from the above mentioned, it is also clear that the extensive use of electronic commerce by large organizations like B&Q, to conduct sales and provide DIY (Do it Yourself) services to the customers, has drastically affected the growth the small business organizations in the construction industry especially in the segment of the construction products range of companies. Alongside, the electronic commerce venture of many leading industries like Aggregate industries Plc to provide design solutions over the Internet has further justified that the electronic commerce influences the marketing strategies of the organizations in the construction industry and hence it is essential for the small businesses and the self-employed building contractors to maintain web presence in order to meet the competition. Even though, this is a hurdle to the growth of the small business organizations, the web presence and the effective marketing communication through emails and other forms of electronic advertising will increase the sales of the small business organizations in the UK irrespective of the kind of industry itself.
Political factors: Emily Pattullo (2003) says that that UK government has had significant influence on the construction industry since 1998. The fact that the UK government has realised that the return from the construction industry is not as expected even though it contributes to a significant percent of the Gross Domestic Product has increased the need for measuring the performance of the companies in the light of key performance indicators like Time, cost, quality, business performance and above all health and safety. The health and safety of the personnel in the construction business wither small business or self-employed is very critical.
This apparently influences the marketing strategy of the company since, the customers in any target market would always consider hiring the company or contractor who adheres to the policies of the health and safety at work. Alongside, the strict laws on the health and safety of the workers and the increased awareness of the customers upon the legal implications on the infringement of the health and safety law has apparently made health and safety related issue as a major element whilst marketing to the target customers.
Product Innovation: Hedley Smyth (2004) says that the product innovation is an essential factor for the growth in the construction industry. Since the small services sector faces competition from similar organizations as well as leading organizations in the market, it is essential to customise the products and provide innovative solutions to the customers in order to increase the revenue and market share by the small and medium enterprises. In the light of the construction industry, the product innovation not only in the form of electronic commerce services but also in the quality of the product itself is essential to achieve sustainable growth in the business. Roger Bennett (2005) further argues that Customer Relationship Marketing can be effectively utilised in the construction industry through customising the products and services to meet the requirements of the customers in the target market.
Since it is clear that the increase in the number of players in the small services sector of the construction industry has increased the product range to the customers, the customers have the choice of choosing form a wide range of products and only through customisation, an organization can effectively distinguish itself from its competitors to the target customers. Hence the marketing strategy of the small services sector is also influenced by product innovation.
Consumer Demand: Frances Brassington and Stephen Pettit (2003) say that the small and medium enterprises in the UK have grown mainly because of the demand from the customers for more customised products and services. Furthermore, the increase in the product range as established in the previous section has increased the demand for customised and specific products among the customers, which is the primary cause for the increase in the product innovation in the UK business sectors as discussed before. It is further interesting to note that the customer demand for more customised products is tremendously increasing in the construction sector especially among the customers purchasing for residential purposes. This is mainly because of the fact that the requirements and taste of every individual family purchasing properties for residential usage are unique and this demand can be effectively harnessed by the small business organizations and the self-employed contractors. Hence the marketing in the small services sector should provide innovative products to the customers to meet the demand in the target market only when the organization can leverage revenue and market share.
Demographic factors: Low Sui Pheng (2003), argues that the demographic factors that influence the customer's choice of property for either residential or commercial purposes directly influence the marketing strategies of the competitors in the construction industry. Also, the fact that the demographic factors not only reflect upon the geographical location but also upon the needs of the customers in the target market further makes the demographic factors as a complex element that influences the business in the small services sector.
Low Sui Pheng (2003) further argues that the growth of small and medium enterprises and the self-employed contractors in the UK construction industry is mainly because of the varied demography of the UK customers and the increased diversity in the demand. Furthermore, Frances Brassington and Stephen Pettit (2003) argue that an organization will be successful in a given target market only when it promotes the products to reflect upon the demography of the target customers justifies that the demographic factors are one of the major influencing factors in the marketing strategy of small business organizations in the UK.
4: Availability of Land and restriction from the government:
Apart from the aforementioned factors that influence the marketing strategies of the small services sectors in the UK including the construction industry, Emily Pattullo (2003) the availability of land for construction as the unique factor tat mainly influences the business of construction industry competitors at all levels including the large players like Tarmac Plc, Aggregate Industries Plc, small business enterprises and also the self-employed contractors. This increase in the demand and the competition in the construction industry have reduced the amount of land available for construction of either residential buildings or commercial infrastructures. This is further intensified by the increase in the demand from the customers in the residential segment of the construction industry who emphasise on the location along with the quality of service and performance of the companies. Richard Pettinger (1998) further argues that an organization in the construction business can achieve competitive advantage mainly through the efficient selection of the location for the building, which is critical for the sale of the end-product (residential or commercial building). This is mainly because of the argument that location plays a critical role in the decision making of the customers in case of purchasing properties (Richard Pettinger, 1998) irrespective of the nature of the use. Since the self-employed building contractors and small business organizations are predominantly focused on selling residential properties in the construction business (Industry Profile, 2004) the location factor has a greater influence in devising the marketing strategy of the company. Since the location forms an integral element of the decision making among the customers in the construction industry, the demand of the customers as well as the product innovation by the competing organization are influenced by the location as argued by Richard Pettinger (1998). Hence location is considered as a critical factor for the effective marketing of the products and services in the construction industry especially among the small business organizations and self-employed contractors since they can leverage the advantage o local knowledge (Richard Pettinger, 1998), which lacks among the big players in the industry.
From the arguments in section 2 it is clear that the small and medium enterprises as well as the self employed contractors form a major segment of the construction industry in the UK. It was also established that innovative marketing strategies are essential for achieving sustainable growth in the highly fluctuating construction industry of the UK. The analyses presented in section 3 have established the critical factors that influence the marketing strategies of the small services sector in the UK industries including the construction industry. The analysis in section 4 has further revealed that location is a unique influencing factor to the marketing strategies of the small services and self-employed contractors in the construction industry. Hence to conclude the literature review, it is established that the small services sector in the UK construction industry must deploy innovative marketing strategies with consideration to the factors that influence the marketing in order to achieve sustainable competitive advantage.
Efraim Turban et al, (2004), Electronic commerce 2004 : a managerial perspective, Upper Saddle River, N.J. : Pearson/Prentice Hall, 2004
Frances Brassington and Stephen Pettitt, (2003), Principles of Marketing, third edition, UK: Prentice Hall Financial Times.
Gerry Johnson and Kevan Scholes, (2001), Exploring corporate Strategy Fourth Edition, Prentice Hall of India Private Limited, India
Hedley Smyth, (2004), Marketing and selling construction services, UK: Oxford : Blackwell Science
Michael E. Porter, (1995), Competitive Advantage and Strategy, US: Harvard Business Review
Philip Kotler, (1988), Marketing Management Analysis, Planning, Implementation and Control, New Jersey: Prentice Hall Inc.
Richard Pettinger, (1998), Construction marketing: strategies for success, UK: Basingstoke : Macmillan, 1998
Journals and White Papers
Emily Pattullo, (2003), Construction Industry - Market Overview 2003, Keynote Plc, UK
Industry Profile, 2004, Construction Industry, Data monitor Plc, UK
Isla Gower, (2004), Small Business Market Overview, Keynote Ltd, UK
Low Sui Pheng, (2003), The extension of construction partnering for relationship marketing, Marketing Intelligence & Planning 17/3  155160
Roger Bennett, (2005), Marketing policies of companies in a cyclical sector: an empirical study of the construction industry in the United Kingdom, UK, Journal of Business and Industrial marketing 20/3 (2005) 118-126
Simon Taylor (2002), Small Businesses & Banks - 2002 Market Assessment, Keynote Ltd, UK