Dr.sc. Neven Šerić, dipl.oecc.

Srećko Favro, dipl. ing :

CREATING OF MARKET FACTORS IN SHIPPING

1. INTRODUCTORY REMARKS

From the customers’ market point of view, shipping services are seen as specific goods. Tangible product has its own shape by means of which it creates certain experiences in the mind of the potential buyer. Every service, as an impalpable product, can by means of presentation and promotion of its characteristics become more or less attractive in the eyes of the potential buyer. Final reaction of the potential buyer, whether he will buy the offered service or not, depends on the realized quality of the perception in his expectations.

Four basic elements of the marketing mix in the maritime affairs - service, price, place (sale method), and promotion require marketing treatment that differs from the one for tangible goods, if one aspires to win the desired share of the market.

Generally, global offer outgrew global demand, regardless of the fact that some shipping services due to the limited capacity of the means of transportation cannot be promptly realized. Considering the fact that the places and methods of the sale of services in maritime affairs are nowadays standardized, it is not necessary to pay as much attention to that element of the marketing mix as it is to the other three elements. In order to achieve competitive advantages it is necessary to head for the quality of service, price and models of promotion.

This way of approaching market problems in maritime affairs represents an efficient way to achieve the leading position. The more so, in this branch of business market manners have always been determined by defined business usances and standards. According to the experience, different market approach is today the fastest way to achieve the leading position on the market. When it comes to shipping service, it means its adjusting to the potential segment of the market. This strategic way of approaching guarantees today survival on the market and the trend growth in the business of the shipping company.

Considering the specialization of both of the authors, the specific quality of maritime affairs made the research in this field a special challenge.

2. ELEMENTS OF THE MARKETING MIX – ELEMENTS OF COMPETITIVENESS IN SHIPPING

2.1. Price of the shipping service

Price is an extremely important element of the marketing mix on the market of shipping services. Approach and working out of this market variable determines market position of the company in the competitive surrounding. Decisions considering prices directly influence the extent of the sale of shipping services and company’s profit. Because of the sensibility of the potential buyer it is recommended to establish the system of price aims and price policy. That system should offer solutions to all business situations in the competitive surrounding.

Shipping company’s system of price aims and price policy determines the flexibility of offer from the aspect of prices, defines price policies in relation to competitive surrounding, policy of discounts and other price benefits, treatment of the depending expenses that are included in the final market price, etc.1

Market price is in the end always a result of offer and demand relation. But in the maritime affairs these problems should be approached from the long-term aspect, too. Strategic planning of the price policy in the shipping company should always be in concordance with its long-term aims. Price aims should be included in marketing and business long-term aims of the company. They should be clearly defined because they directly influence price policies and the methods used to define prices.

2.2. Distribution of the shipping service

Sale of shipping services on the global market is complex because of the fact that these activities are determined by national regulations of the market where service is offered, but also by different traditional standards in maritime affairs. Neglect of this duality can result in special financial losses for the dealer’s company and final loss of the buyer. The terms for sale on different national markets are often diverse. Before bringing the strategic decisions dealing with methods and models of sale of shipping services on the global market, it is recommended to conduct the research of the aimed segments of the global market. Through these activities one can comprehend complexity of the prevalent market relations, as well as the most important differences between market segments. Most of the differences are in the domain of socio-economic terms of doing business, language, culture, usances, prevalent usances in the domain of maritime affairs, structure and width of the existing selling network of shipping services and the strength of the competition. Functional design of the distribution model is a complex thing when done on the well known market, and the whole complexity can be seen on the foreign market that is not that well known.2

Two basic business approaches in use are direct and indirect market approach on the global market. Indirect approach, in distinction from the direct approach, includes doing business by means of representatives that sell shipping services.

Both approaches include detailed previous research and market analysis, upon which in the end depends the choice of specific approach. Decisions connected to distribution in doing business on the global market are very sensitive because they often represent long-term connection with chosen partners on the foreign market. Those decisions are also the reason for developing proper network of licensed agencies, or ceding the right for exclusive representation to the chosen foreign partner. Undertaken activities result in establishing thelong-term business relations that precisely define mutual rights and obligations of the buyer and the service dealer. Business trust is not gained quickly and simply, and frequent change of business partners on the global market leaves the impression of distrust and insecurity of the buyer towards the service dealer. Therefore, it is important that the service dealer’s company chooses from many alternatives for the foreign market and creates a distribution channel that will be cost efficient, suitable with existing standards and with the type of the shipping service offered. Efficient distribution channel on the foreign market can represent long-term competitive advantage for the company. Proper distribution channel should secure good coverage of the aimed foreign market, approaching to the aimed buyer, acceptable promptness of business negotiations and permanent accessibility of the service to the buyer. All those elements contribute to the aimed buyer’s perception whether the service offers appropriate quality and value. 3

Distribution as market variable implies in a wider sense the way of service offer and sale with minimal expenses and acceptable quality level. When two buyers attach equal importance to the same services of the different dealers, the final choice is the result of many variables. 4 Variables that usually affect the decision and final choice when buying are: frequency of display and sale method of the service, competition and its market image, terms of buying, etc. There are many so-called personal characteristics of the service that also affect the buyer’s final choice.

Due to these facts, these problems should be seen through taking into consideration the specific qualities of the particular segment of the global market. Global market has certain specific qualities and sets certain standards that are the result of the achieved phase of the market development and its prevalent social relations. Consumer’s segments on the foreign market, as well as the existing levels of the public, observe new services that are being offered for the first time on the market with certain amount of distrust. It is that typical behaviour of the demand of aimed market segments on the global market that is important in selecting the existent and creating the new distribution channels. It is important to comprehend the way the demand is used to buy certain category of service on the aimed segment of the global market.

The creativity in opening new distribution channels is often convenient for the demand. On the other side, the most important variable in selecting the distribution channel on the chosen segment of the global market is service itself. Complex shipping services can imply technical support before and after the sale.

When it comes to specific shipping categories that are presented and offered on the third countries’ markets, problems of organizationof the optimal distribution model are even more complex because it takes time for the third countries’ markets to get acquainted in details with the concrete services.

Starting point where working out of distribution model of offer and promotion of shipping services should start is specific quality of the aimed segment of the global market, and that is done by establishing concrete legalities that set certain legal limitations. After that, by taking into consideration the gathered information, the formation of the concrete distribution model is approached, that is the sale of such standardized service is approached considering the type and method of the presentation, choice of the partner, location and model of distribution infrastructure and other variables.

2.3. Promotion of the shipping service

Promotion of the shipping service has been recently accepted as market variable that needs to be integrated by means of series of activities that have a common goal – winning over potential buyers of shipping services. Widely seen, the promotion in maritime affairs includes economic propaganda and publicity.

Economic propaganda is more important. Its goal is for the market to get acquainted with modalities and options of the offered shipping services and their specific qualities. Activities of the economic propaganda directly affect the demand because they shape solution models for the concrete transport problems in maritime affairs. For that purpose different media and means are used, and concrete choice is approached from the aspect of the concrete national market that is being aimed at with the certain service. Standardized media and means are today as follows:

  • advertisement space in chosen magazines and daily newspapers
  • exterior proclamations (posters etc.)
  • direct official letters to the parties who could potentially order these services
  • radio and television
  • address books, business diaries
  • circular letters

The importance of propaganda in the segment of shipping services varies in relation to concrete service that is advertised, dealer’s company and potential buyer’s company, market where it will be offered and special circumstances that determine its realization on the specific market. The role of propaganda in maritime affairs is also its influence on keeping the service prices stabile, sales improvement of the shipping services that are insufficiently demanded for, it has indirect effect on the suppliers of raw material, semi-processed and finished products that are mostly transported by shipping etc.

The fact is that the needs and wishes of the parties ordering shipping services are constantly changing and that they go through different phases of life cycle. Economic propaganda should constantly warn about existence of different services in maritime affairs that can accelerate distribution of goods and lower their final prices on the global market. Even though the economic propaganda is one of the most important factors in the total extent of the sale of the shipping services, it is difficult to establish its direct share in the profit growth of the shipping company. Economic propaganda has direct task to place information that motivate the sale of shipping services by transmitting ideas and suggestions aimed at potential buyers of these services.

Undertaken activities of economic propaganda imply significant investments. Expenses of economic propaganda in terms of continuous growth of the global offer are constantly growing because of the aspiration to influence the public in order to make potential buyers of the shipping services partial to the dealing company – promoter.

When it comes to shipping services, economic propaganda should be calculated economic action based on the results of specific researches that are executed through the following phases:

  • identification of the public that the message should reach
  • establishing and creating a specific propaganda message about concrete shipping service
  • choosing the efficient and economical media by means of which the aimed public can be reached
  • detailed working out of the actions for each chosen medium in order to predict the most appropriate time, frequency and persuasiveness of the propaganda message
  • establishing the allowed expenses of propaganda
  • measuring the results of the undertaken propaganda

Identifying the public that the message should reach is the task of the market research (by methods of segmentation of consumers’ market). In that way we perceive which part of the market is the most interesting for the shipping company.5 The next task of the research is to define the contents of the message. In the end it shouldn’t be forgotten to evaluate the results of the undertaken activities. One of the important problems that economic propaganda should solve for the shipping services in order to achieve its goals is in its correct directing towards the part of public that the message is primarily directed to. Then the medium is chosen or different media are combined in order for the message to reach its aimed public. It is considered that while making a decision about the media, the following elements should be included6:

  • broadcasting frequency in the media
  • importance and intensity of the main rivals’ activities
  • adequacy of the medium for the type of propaganda message
  • relative importance of the breakthrough and broadcasting frequency of the message
  • influence of the distribution channels of the sale of the shipping service
  • degree of flexibility of the shipping service
  • efficiency of the chosen media (in terms of expenses)

Finally, when everything that was previously said is taken into consideration, media are chosen and order and frequency of their use is predicted, taking into consideration total expenses of propaganda activities. The effort should be made that, by means of parallel analysis of the media combination, one combination is chosen that will in the concrete situation with the lowest possible expenses secure adequate market breakthrough and frequency of the information marketing.

When doing that, three variables should be taken care of:

  • different real expenses of the different media
  • different efficiency of the propaganda message
  • different possibilities of the particular media to get through to potential ordering parties of the shipping services

Besides economic propaganda, publicity shouldn’t be forgotten, too. Publicity as promotional activity implies honorary stimulation of demand for concrete shipping service. The same thing is achieved by placing commercially important information in the press, radio, television and other media that can be used for this honorary form of promotion. Publicity is especially important for creating favourable image of the company that offers shipping services and it can significantly exalt its business rating on the market.

3. CONCLUSION

Shipping service can by means of market promotion become more or less attractive in the eyes of the potential buyer. Final reaction of the potential buyer, whether he will buy the offered service from that company or from its rival, depends on the realized quality of the perception in his expectations.

Basic market variables in maritime affairs – service, price, place of sale and sale method, and promotion require marketing treatment that differs from the one for tangible goods, if one aspires to win the desired share of the market, due to the fact that global offer outgrew global demand. Places and methods of the sale of services in maritime affairs are nowadays standardized, so it is not necessary to pay as much attention to that element of the marketing mix as it is to the other elements. In order to achieve competitive advantages it is necessary to head for the quality of service, its price and aimed models of promotion. Only this way of approaching market problems in maritime affairs represents an efficient way to achieve the leading market position.

Price is an important element of the shipping service because it determines position of the company in the competitive surrounding. Decisions considering prices directly influence the extent of the sale of shipping services and company’s profit. Market price of the shipping service is in the end always a result of offer and demand relation. In the maritime affairs it is advisable to approach these problems from the long-term aspect, too. Strategic planning of the price policy in the shipping company should always be in concordance with its long-term aims. Price aims should be included in marketing and business long-term aims of the company.