PEST Analysis

Marketing Environment

Introduction:
An organisation’s success is influenced by factors operating in it’s internal and external environment; an organisation can increase it’s success by adopting strategies which manipulate these factors to it’s advantage. A successful organisation will not only understand existing factors but also forecast change, so that it can take advantage of change within the environments in which it operates.

PEST & Micro environmental Factors:

The following type of forces influence an organisation’s operating environment:

• Pest Factors – These are external forces which the organisation does not have
direct control over these factors. PEST is an acronym and each letter represents a
type of factor (Political, Economical Social and Technological).
• Micro environmental factors – These are internal factors, which the organisation
can control.

PEST & PESTLE analysis:

A PEST analysis is used to identify the external forces affecting an organisation.This is a simple analysis of an organisation’s Political, Economical, Social and Technological environment. A PEST analysis incorporating legal and environmental factors is called a PESTLE analysis.

Political:

The first element of a PEST analysis is a study of political factors. Political factors influence organisations in many ways. Political factors can create advantages and opportunities for organisations. Conversely they can place obligations and duties on organisations. Political factors include the following types of instrument:

- Legislation such as the minimum wage or anti discrimination laws.
- Voluntary codes and practices
- Market regulations
- Trade agreements, tariffs or restrictions
- Tax levies and tax breaks
- Type of government regime eg communist, democratic, dictatorship

Non conformance with legislative obligations can lead to sanctions such as fines, adverse publicity and imprisonment. Ineffective voluntary codes and practices will often lead to governments introducing legislation to regulate the activities covered by the codes and practices.

Economical:

The second element of a PEST analysis involves a study of economic factors.
All businesses are affected by national and global economic factors. National and global interest rate and fiscal policy will be set around economic conditions. The climate of the economy dictates how consumers, suppliers and other organisational stakeholders such as suppliers and creditors behave within society.

An economy undergoing recession will have high unemployment, low spending power and low stakeholder confidence. Conversely a booming or growing economy will have low unemployment, high spending power and high stakeholder confidence.

A successful organisation will respond to economic conditions and stakeholder behaviour. Furthermore organisations will need to review the impact economic conditions are having on their competitors and respond accordingly.

In this global business world organisations are affected by economies throughout the world and not just the countries in which they are based or operate from. For example: a global credit crunch originating in the USA contributed towards the credit crunch in the UK in 2007/08.

Cheaper labour in developing countries affects the competitiveness of products from developed countries. An increase in interest rates in the USA will affect the share price of UK stocks or adverse weather conditions in India may affect the price of tea bought in an English café.

A truly global player has to be aware of economic conditions across all borders and needs to ensure that it employs strategies that protect and promote its business through economic conditions throughout the world.

Social:

The third aspect of PEST focuses its attention on forces within society such as family, friends, colleagues, neighbours and the media. Social forces affect our attitudes, interest s and opinions. These forces shape who we are as people, the way we behave and ultimately what we purchase. For example within the UK peoples attitudes are changing towards their diet and health. As a result the UK is seeing an increase in the number of people joining fitness clubs and a massive growth for the demand of organic food. Products such as Wii Fit attempt to deal with society’s concern, about children’s lack of exercise.

Population changes also have a direct impact on organisations. Changes in the structure of a population will affect the supply and demand of goods and services within an economy. Falling birth rates will result in decreased demand and greater competition as the number of consumers fall. Conversely an increase in the global population and world food shortage predictions are currently leading to calls for greater investment in food production. Due to food shortages African countries such as Uganda are now reconsidering their rejection of genetically modified foods.

In summary organisations must be able to offer products and services that aim to complement and benefit people’s lifestyle and behaviour. If organisations do not respond to changes in society they will lose market share and demand for their product or service.

Technological:

Unsurprisingly the fourth element of PEST is technology, as you are probably aware technological advances have greatly changed the manner in which businesses operate.
Organisations use technology in many ways, they have

1. Technology infrastructure such as the internet and other information exchange
systems including telephone
2. Technology systems incorporating a multitude of software which help them manage
their business.
3. Technology hardware such as mobile phones, Blackberrys, laptops, desktops,
Bluetooth devices, photocopiers and fax machines which transmit and record
information.

Technology has created a society which expects instant results. This technological revolution has increased the rate at which information is exchanged between stakeholders. A faster exchange of information can benefit businesses as they are able to react quickly to changes within their operating environment.
However an ability to react quickly also creates extra pressure as businesses are expected to deliver on their promises within ever decreasing timescales..
For example the Internet is having a profound impact on the marketing mix strategy of organisations. Consumers can now shop 24 hours a day from their homes, work, Internet café’s and via 3G phones and 3G cards. Some employees have instant access to e-mails through Blackberrys but this can be a double edged sword, as studies have shown that this access can cause work to encroach on their personal time outside work.
The pace of technological change is so fast that the average life of a computer chip is approximately 6 months. Technology is utilised by all age groups, children are exposed to technology from birth and a new generation of technology savvy pensioners known as “silver surfers” have emerged. Technology will continue to evolve and impact on consumer habits and expectations, organisations that ignore this fact face extinction.

PESTLE:
A PEST analysis is sometimes expanded to incorporate legal and environmental factors; this is known as a pestle analysis. There are many statutes books containing company law as almost every aspect of an organisation’s operation is controlled through legislation from treatment of employees through to health and safety. Legal factors are important as organisations have to work within legislative frameworks. Legislation can hinder business by placing onerous obligations on organisations. On the other hand legislation can create market conditions that benefit business.

What is Marketing

The term marketing has changed and evolved over a period of time, today marketing is based around providing continual benefits to the customer, these benefits will be provided and a transactional exchange will take place.

The Chartered Institute of Marketing define marketing as 'The management process responsible for identifying , anticipating and satisfying customer requirements profitably'

If we look at this definition in more detail Marketing is a management responsibility and should not be solely left to junior members of staff. Marketing requires co-ordination, planning, implementation of campaigns and a competent manager with the appropriate skills to ensure success.

Marketing objectives, goals and targets have to be monitored and met, competitor strategies analysed, anticipated and exceeded. Through effective use of market and marketing research an organisation should be able to identify the needs and wants of the customer and try to delivers benefits that will enhance or add to the customers lifestyle, while at the same time ensuring that the satisfaction of these needs results in a healthy turnover for the organisation.

Philip Kotler defines marketing as 'satisfying needs and wants through an exchange process'

Within this exchange transaction customers will only exchange what they value (money) if they feel that their needs are being fully satisfied, clearly the greater the benefit provided the higher transactional value an organisation can charge.

Real-life marketing

Real-life marketing primarily revolves around the application of a great deal of common-sense; dealing with a limited number of factors, in an environment of imperfect information and limited resources complicated by uncertainty and tight timescales. Use of classical marketing techniques, in these circumstances, is inevitably partial and uneven.

Thus, for example, many new products will emerge from irrational processes and the rational development process may be used (if at all) to screen out the worst non-runners. The design of the advertising, and the packaging, will be the output of the creative minds employed; which management will then screen, often by 'gut-reaction', to ensure that it is reasonable.

For most of their time, marketing managers use intuition and experience to analyze and handle the complex, and unique, situations being faced; without easy reference to theory. This will often be 'flying by the seat of the pants', or 'gut-reaction' where the overall strategy, coupled with the knowledge of the customer which has been absorbed almost by a process of osmosis, will determine the quality of the marketing employed. This, almost instinctive management, is what is sometimes called 'coarse marketing' to distinguish it from the refined, aesthetically pleasing, form favored by the theorists.

Types of strategies

Marketing strategies may differ depending on the unique situation of the individual business. However there are a number of ways of categorizing some generic strategies. A brief description of the most common categorizing schemes is presented below:

* Strategies based on market dominance - In this scheme, firms are classified based on their market share or dominance of an industry. Typically there are four types of market dominance strategies:
* Leader
* Challenger
* Follower
* Nicher
* Porter generic strategies - strategy on the dimensions of strategic scope and strategic strength. Strategic scope refers to the market penetration while strategic strength refers to the firm’s sustainable competitive advantage. The generic strategy framework (porter 1984) comprises two alternatives each with two alternative scopes. These are Differentiation and low-cost leadership each with a dimension of Focus-broad or narrow.
* Product differentiation (broad)
* Cost leadership (broad)
* Market segmentation (narrow)
* Innovation strategies - This deals with the firm's rate of the new product development and business model innovation. It asks whether the company is on the cutting edge of technology and business innovation. There are three types:
* Pioneers
* Close followers
* Late followers
* Growth strategies - In this scheme we ask the question, “How should the firm grow?”. There are a number of different ways of answering that question, but the most common gives four answers:
* Horizontal integration
* Vertical integration
* Diversification
* Intensification

A more detailed scheme uses the categories:

* Prospector
* Analyzer
* Defender
* Reactor
* Marketing warfare strategies - This scheme draws parallels between marketing strategies and military strategies.

Tactics and actions

A marketing strategy can serve as the foundation of a marketing plan. A marketing plan contains a set of specific actions required to successfully implement a marketing strategy. For example: "Use a low cost product to attract consumers. Once our organization, via our low cost product, has established a relationship with consumers, our organization will sell additional, higher-margin products and services that enhance the consumer's interaction with the low-cost product or service.

A strategy consists of a well thought out series of tactics to make a marketing plan more effective. Marketing strategies serve as the fundamental underpinning of marketing plans designed to fill market needs and reach marketing objectives. Plans and objectives are generally tested for measurable results.

A marketing strategy often integrates an organization's marketing goals, policies, and action sequences (tactics) into a cohesive whole. Similarly, the various strands of the strategy , which might include advertising, channel marketing, internet marketing, promotion and public relations can be orchestrated. Many companies cascade a strategy throughout an organization, by creating strategy tactics that then become strategy goals for the next level or group. Each one group is expected to take that strategy goal and develop a set of tactics to achieve that goal. This is why it is important to make each strategy goal measurable.

Marketing strategies are dynamic and interactive. They are partially planned and partially unplanned. See strategy dynamics.

Marketing strategy

Marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage. A marketing strategy should be centered around the key concept that customer satisfaction is the main goal.Marketing strategy is a method of focusing an organization's energies and resources on a course of action which can lead to increased sales and dominance of a targeted market niche. A marketing strategy combines product development, promotion, distribution, pricing, relationship management and other elements; identifies the firm's marketing goals, and explains how they will be achieved, ideally within a stated timeframe. Marketing strategy determines the choice of target market segments, positioning, marketing mix, and allocation of resources. It is most effective when it is an integral component of overall firm strategy, defining how the organization will successfully engage customers, prospects, and competitors in the market arena. Corporate strategies, corporate missions, and corporate goals. As the customer constitutes the source of a company's revenue, marketing strategy is closely linked with sales. A key component of marketing strategy is often to keep marketing in line with a company's overarching mission statement

Marketing planning aims and objectives

Behind the corporate objectives, which in themselves offer the main context for the marketing plan, will lie the "corporate mission," which in turn provides the context for these corporate objectives. In a sales-oriented organization, the marketing planning function designs incentive pay plans to not only motivate and reward front line staff fairly but also to align marketing activities with corporate mission.

This "corporate mission" can be thought of as a definition of what the organization is, of what it does: "Our business is This definition should not be too narrow, or it will constrict the development of the organization; a too rigorous concentration on the view that "We are in the business of making meat-scales," as IBM was during the early 1900s, might have limited its subsequent development into other areas. On the other hand, it should not be too wide or it will become meaningless; "We want to make a profit" is not too helpful in developing specific plans.

A bell suggested that the definition should cover three dimensions: "customer groups" to be served, "customer needs" to be served, and "technologies" to be utilized . Thus, the definition of IBM's "corporate mission" in the 1940s might well have been: "We are in the business of handling accounting information [customer need] for the larger US organizations [customer group] by means of punched cards [technology].

Perhaps the most important factor in successful marketing is the "corporate vision." Surprisingly, it is largely neglected by marketing textbooks, although not by the popular exponents of corporate strategy indeed, it was perhaps the main theme of the book by Peters and Waterman, in the form of their "Superordinate Goals." "In Search of Excellence" said: "Nothing drives progress like the imagination. The idea precedes the deed." If the organization in general, and its chief executive in particular, has a strong vision of where its future lies, then there is a good chance that the organization will achieve a strong position in its markets (and attain that future). This will be not least because its strategies will be consistent and will be supported by its staff at all levels. In this context, all of IBM's marketing activities were underpinned by its philosophy of "customer service," a vision originally promoted by the charismatic Watson dynasty. The emphasis at this stage is on obtaining a complete and accurate picture.

The marketing planning process

Marketing process can be realized by the marketing mix . The last step in the process is the marketing controlling. In most organizations, "strategic planning" is an annual process, typically covering just the year ahead. Occasionally, a few organizations may look at a practical plan which stretches three or more years ahead.

To be most effective, the plan has to be formalized, usually in written form, as a formal "marketing plan." The essence of the process is that it moves from the general to the specific, from the overall objectives of the organization down to the individual action plan for a part of one marketing program. It is also an interactive process, so that the draft output of each stage is checked to see what impact it has on the earlier stages, and is amended.

"Marketing" -- A Commonly Misunderstood Term

Before you learn more about marketing, you should get a basic impression of what marketing is. See What's "Advertising, Marketing, Promotion, Public Relations and Publicity, and Sales?". Basically, you might look at marketing as the wide range of activities involved in making sure that you're continuing to meet the needs of your customers and are getting appropriate value in return. Think about marketing as "inbound" and "outbound" marketing. (In the following, consider "product" to be either a tangible product or a service -- nonprofits often refer to these as "programs".)

Inbound Marketing Includes Market Research to Find Out:

1. What specific groups of potential customers/clients (markets) might have which
specific needs (nonprofits often already have a very clear community need in
mind when starting out with a new program -- however, the emerging practice of
nonprofit business development, or earned income development, often starts by
researching a broad group of clients to identify new opportunities for
programs)
2. How those needs might be met for each group (or target market), which suggests
how a product might be designed tomeet the need (nonprofits might think in
terms of outcomes, or changes, to accomplish among the groups of clients in
order to meet the needs)
3. How each of the target markets might choose to access the product, etc. (its
"packaging")
4. How much the customers/clients might be willing pay and how (pricing analysis)
5. Who the competitors are (competitor analysis)
6. How to design and describe the product such that customers/clients will buy
from the organization, rather than from its competitors (its unique value
proposition)
7. How the product should be identified -- its personality -- to be most
identifiable (its naming and branding)

Outbound Marketing Includes:

1. Advertising and promotions (focused on the product)
2. Sales
3. Public and media relations (focused on the entire organization)
4. Customer service
5. Customer satisfaction

Too often, people jump right to the outbound marketing. As a result, they often end up trying to push products onto people who really don't want the products at all. Effective inbound marketing often results in much more effective -- and less difficult -- outbound marketing and sales.

Positive - Market Segmentation

Market segmenting is dividing the market into groups of individual markets with similar wants or needs that a company divides the market into distinct groups who have distinct needs, wants, behavior or who might want different products & services. Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private although industrial market segmentation is quite different from consumer market segmentation, both have similar objectives. All of these methods of segmentation are merely proxies for true segments, which don't always fit into convenient demographic boundaries.

Consumer-based market segmentation can be performed on a product specific basis, to provide a close match between specific products and individuals. However, a number of generic market segment systems also exist, e.g. the Nielsen Claritas PRIZM system provides a broad segmentation of the population of the United States based on the statistical analysis of household and geo-demographic data.

The process of segmentation is distinct from targeting (choosing which segments to address) and positioning (designing an appropriate marketing mix for each segment). The overall intent is to identify groups of similar customers and potential customers; to prioritize the groups to address; to understand their behavior; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Revenues are thus improved.

Improved segmentation can lead to significantly improved marketing effectiveness. Distinct segments can have different industry structures and thus have higher or lower attractiveness (Michael Porter). With the right segmentation, the right lists can be purchased, advertising results can be improved and customer satisfaction can be increased leading to better reputation.

Market segmentation

Market segmentation is a concept in economics and marketing. A market segment is a sub-set of a market made up of people or organizations sharing with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function. A true market segment meets all of the following criteria: it is distinct from other segments (different segments have different needs), it is homogeneous within the segment (exhibits common needs); it responds similarly to a market stimulus, and it can be reached by a market intervention. The term is also used when consumers with identical product and/or service needs are divided up into groups so they can be charged different amounts. These can broadly be viewed as 'positive' and 'negative' applications of the same idea, splitting up the market into smaller groups.
Examples:
* Age
* Gender
* Price
* Interests
While there may be theoretically 'ideal' market segments, in reality every organization engaged in a market will develop different ways of imagining market segments, and create Product differentiation strategies to exploit these segments. The market segmentation and corresponding product differentiation strategy can give a firm a temporary commercial advantage.

Promotion (marketing)

Promotion is one of the four elements of marketing mix (product, price, promotion, distribution). It is the communication link between sellers and buyers for the purpose of influencing, informing, or persuading a potential buyer's purchasing decision.

The following are two types of Promotion:

* Above the line promotion: Promotion in the media (e.g. TV, radio, newspapers, Internet, Mobile Phones, and, historically, illustrated songs) in which the advertiser pays an advertising agency to place the ad
* Below the line promotion: All other promotion. Much of this is intended to be subtle enough for the consumer to be unaware that promotion is taking place. E.g. sponsorship, product placement, endorsements, sales promotion, merchandising, direct mail, personal selling, public relations, trade shows

The specification of five elements creates a promotional mix or promotional plan. These elements are personal selling, advertising, sales promotion, direct marketing, and publicity. A promotional mix specifies how much attention to pay to each of the five subcategories, and how much money to budget for each. A promotional plan can have a wide range of objectives, including: sales increases, new product acceptance, creation of brand equity, positioning, competitive retaliations, or creation of a corporate image. Fundamentally, however there are three basic objectives of promotion. These are: 1.) To present information to consumers as well as others 2.)To increase demand 3.)To differentiate a product.

There are different ways to promote a product in different areas of media. Promoters use internet advertisement, special events, endorsements, and newspapers to advertise their product. Many times with the purchase of a product there is an incentive like discounts, free items, or a contest. This is to increase the sales of a given product.

The term "promotion" is usually an in expression used internally by the marketing company, but not normally to the public or the market - phrases like "special offer" are more common. An example of a fully integrated, long-term, large-scale promotion are My Coke Rewards and Pepsi Stuff.

Services marketing

Services marketing, as the label suggests, relates to the marketing of services, as opposed to tangible products (in standard economic terminology, a tangible product is called a good).

A typical definition of a service (as opposed to a good) is thus:

* The use of it is inseparable from its purchase (,i.e. a service is used and
consumed simultaneously)
* It does not possess material form, and thus cannot be smelt, heard, tasted, or
felt.
* The use of a service is inherently subjective, in that due to the human
condition, all persons experiencing a service would experience it uniquely.

As examples of the above points, a train ride can be deemed as a service. If one buys a train ticket, the use of the train is typically experienced concurrently with the purchase of the ticket. Moreover, a train ride cannot be smelt, heard, tasted or felt as such. Granted, a seat can be felt, and the train can be evidently heard, nonetheless one is not paying for the permanent ownership of the tangible components of the train.

Services (by comparison with goods) can also be viewed as a spectrum. Not all products are pure goods, nor are all pure services. The aforementioned example of a train ride can be deemed a pure service, whilst a packet of potato chips can be deemed a pure good. An intermediary example may be a restaurant (as the waiter service is intangible, and the food evidently is tangible in form).

Use of technologies Marketing

Marketing management can also note the importance of technology, within the scope of its marketing efforts. Computer-based information systems can be employed, aiding in a better processing and storage of data. Marketing researchers can use such systems to devise better methods of converting data into information, and for the creation of enhanced data gathering methods. Information technology can aid in improving an MKIS' software and hardware components, to improve a company's marketing decision-making process.

In recent years, the netbook personal computer has gained significant market share among laptops, largely due to its more user-friendly size and portability. Information technology typically progress at a fast rate, leading to marketing managers being cognizant of the latest technological developments. Moreover, the launch of smartphones into the cellphone market is commonly derived from a demand among consumers for more technologically advanced products. A firm can lose out to competitors, should it refrain from noting the latest technological occurrences in its industry.

Technological advancements can facilitate lesser barriers between countries and regions. Via using the World Wide Web, firms can quickly dispatch information from one country to another, without much restriction. Prior to the mass usage of the Internet, such transfers of information would have taken longer to send, especially if via snail mail, telex, etc.

B2C buying behaviour

This mode of behaviour concerns consumers, in the purchase of a given product. As an example, if one pictures a pair of sneakers, the desire for a pair of sneakers would be followed by an information search on available types/brands. This may include perusing media outlets, but most commonly consists of information gathered from family and friends.If the information search is insufficient, the consumer may search for alternative means to satisfy the need/want. In this case, this may be buying leather shoes, sandals, etc. The purchase decision is then made, in which the consumer actually buys the product. Following this stage, a post-purchase evaluation is often conducted, comprising an appraisal of the value/utility brought by the purchase of the sneakers. If the value/utility is high, then a repeat purchase may be bought. This could then develop into consumer loyalty, for the firm producing the pair of sneakers.

Marketing strategy

The field of marketing strategy encompasses the strategy involved in the management of a given product.

A given firm may hold numerous products in the marketplace, spanning numerous and sometimes wholly unrelated industries. Accordingly, a plan is required in order to manage effectively such products. Evidently, a company needs to weigh up and ascertain how to utilize effectively its finite resources. As an example, a start-up car manufacturing firm would face little success, should it attempt to rival immediately Toyota, Ford, Nissan or any other large global car maker. Moreover, a product may be reaching the end of its life-cycle. Thus, the issue of divest, or a ceasing of production may be made. With regard to the aforesaid questions, each scenario requires a unique marketing strategy to be employed. Below are listed some prominent marketing strategy models, which seek to propose means to answer the preceding questions.

Marketing planning

The area of marketing planning involves forging a plan for a firm's marketing activities. A marketing plan can also pertain to a specific product, as well as to an organization's overall marketing strategy. Generally speaking, an organization's marketing planning process is derived from its overall business strategy. Thus, when top management are devising the firm's strategic direction or mission, the intended marketing activities are incorporated into this plan. There are several levels of marketing objectives within an organization. The senior management of a firm would formulate a general business strategy for a firm. However, this general business strategy would be interpreted and implemented in different contexts throughout the firm.

MARKETING-1

In recent years, attention to social and environmental issues in product marketing has become a mainstream practice and offers opportunities for firms to differentiate themselves in the market. Popular examples abound: organic produce, hybrid cars, and fair trade coffee, to name just a few. While business coursework is quickly following practice in the field, our data show that a critical examination of the social impact of marketing is limited in some instances to issues of legality and ethics. When ethical concerns are raised, they are commonly discussed in the context of avoiding harmful marketing practices, especially prohibitive product pricing and deceptive advertising. On the other hand, international marketing classes do a good job of discussing socio-cultural considerations in the analysis of new target
markets.

It is noteworthy that a handful of MBA programs offer courses specifically addressing “social marketing”; that is, using concepts from commercial marketing, such as the traditional “four P’s” marketing mix (i.e., Product, Place, Promotion, and Pricing), to bring about social change. Also, academic research has highlighted the use of, and further potential for, social marketing for environmental causes.1 A few of these forward-looking strategic marketing courses are highlighted in the “notable coursework” section below.

Marketing Plan Manual

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Marketing Frame of Reference and Points of Parity

A Marketing Practice reader asks this very pertinent question " What is frame of reference and points of parity and their role in branding ?"

Frame of reference is the framework used by the consumers to make sense of the product in question. Humans understand and remember new things by linking it to existing (known) objects. Frame of reference is that evaluative criterion which is used by consumers to make a better understanding of the product/services. Frame of reference also explains the context in which consumers tend to evaluate /place the product. For example , the frame of reference used to evaluate Frooti is that it is a mango drink. Coca Cola Cola, Ace Mini Truck, Dettol Antiseptic etc. If Frooti launches an Apple Drink, the consumers will find it difficult to accept the product since it is out of the frame of reference used to evaluate/understand Frooti

Since consumers use a frame of reference in understanding a product, the concept has a very important place in the positioning of the product. Positioning is defined as the act of designing the company's offering and image to occupy a distinctive place in the mind of the target market ( Kotler). The first task of the marketer is to identify the frame of reference used by the target market in evaluating the product/service. Once the frame of reference is identified, the marketer will position the product in line with the frame of reference. In case of products that lack a frame of reference, marketers should create a frame of reference for the consumers.

The concept of Points of Parity helps marketers to place the product in line with the consumer's frame of reference. Points of parity are those associations that are not necessarily unique to the brand but may in fact be shared with other brands. There are two forms of Points of Parity - Category POP and Competitive POP. Category POP are those associations that consumers view as being necessary to be a legitimate and credible offering with a certain product or service category.Competitive POP are those associations designed to negate competitor's Points of Parity ( Kevin Keller).

In simple terms , when a product is launched, the marketer should tell the customer about the category in which the product belongs ( category POP). This task is important for products which belong to a new category. For example , hand sanitizer is a new category and consumers are not aware of such a category. So when a brand is being launched in such a new category, brand managers should first establish a category POP. For that , the consumers should be made aware of such a category. Right now marketers are using infomercials to educate the consumers about hand sanitizer, its advantages and uses. Once the frame of reference is established ,then the brand should be placed in the category. Usually marketers use packaging, product form and labels to establish category points of parity.

Competitor POP is where marketers tell the consumers that their brand have all the properties/qualities of their competing brands. For example Lifebuoy soap will establish competitive POP with Dettol soap by claiming that it has germ killing qualities and vice versa.

These strategies will fail if the marketers did not understand the frame of reference used by consumers in evaluating the product. This lack of understanding can lead to positioning failures that eventually lead to product failure.