Business Marketing - Contemporary Business Issues
Autor: KaiLi Chen • July 24, 2018 • Course Note • 19,930 Words (80 Pages) • 616 Views
Page 1 of 80
Examine contemporary business issues to:
- Explain why goods and services are central to both marketing and operations
- Operations manager needs to determine how to make the product or provide service
- Marketing determines the appearance of the product and its functions + communicates with the market
- Operations function produces the goods and/or service
- Operations relies on marketing to market research so they can produce a product that will satisfy the customers’ needs
- Ops also relies in marketing to inform market, distribute products, determine price and persuade consumers to buy
- Examine why ethical behaviour and government regulations are important in marketing
- Ethical behaviour – benefits:
- Can lead to significant marketing and business opportunities – businesses enjoy publicity which creates a positive image
- Can attract customers and increase customer loyalty – they will reward businesses with purchasing more products = increasing sales and profits
- Positive effect on employment relations – improve productivity, staff retention and absenteeism rate = attracts most talented employees
- Attract more investors and appeal to stakeholders
- Improve business reputation
- If a business is not being ethical then:
- Damage business reputation
- Customers react and boycott certain products
- Negative publicity
- Customer refusal to purchase products
- Less appealing to stakeholders
- Government regulations:
- Protect consumers and businesses
- Increase in consumer trust and confidence in business = increase buying = stimulates economy
- Promotes and stimulates competition and fair trade
- Encourages businesses to do the right thing
- Promotes competition and creates equal playing field
- Assess why a mix of promotional strategies is important in the marketing of goods and services
- To cater to the needs of everyone in their target market
- Attract as many potential customers as possible
- Different elements of promotion mix will appeal to different types of customers = businesses need a combination of to engage all
- Different elements in promo mix may play a part in influencing customers in a different way and assist them with their decision making
- To get better response form a target market businesses need to adopt different components of promo mix
Investigate aspects of business using hypothetical situations and actual business case studies to:
- Explain how globalisation has affected marketing management
- TNCs adopt a global marketing approach thus developing marketing strategies as if entire globe were one large market
- some businesses believe marketing mix should be customised among countries different cultures, religion and tastes
- businesses view overseas markets as differently to domestic = degree of uncertainty and increased risk in developing global marketing strategies
- businesses need to rely on market research and understand complexities of the global marketing environment
- analyse overseas markets and gather info about the country’s economic, political, social and cultural features
- Evaluate the marketing strategies for a good or service
- Market segmentation
- Product/service differentiation and positioning
- Product
- Place
- Promotion
- Place
- People, processes and physical evidence
Role of marketing
- Strategic role of marketing goods and services
- Marketing: 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
OR
- Marketing: total system of interacting activities designed to plan, price promote and distribute products to present and potential customers
- Strategic: long term broad aims affecting all key business areas
- Common business goal is profit maximisation
- Profit maximisation: when there is a maximum difference between total revenue into the business and total costs going out
- Strategic role of marketing goods and services: find out what the customers ant and try to satisfy their needs/wants
- The Marketing Plan
- To achieve to goal profit maximisation marketing plans must be prepared
- Marketing plan: document listing activities aimed at achieving particular marketing outcomes in relation to a good or service
- Customers should always be the central focus of the marketing plan
- To achieve profit maximisation, marketing plan should focus on both short-term and long-term planning because:
- Outlines strategies used to bring the buyer and seller together
- Core of marketing is satisfying existing customer wants = increase sales
- Revenue-generating activity
- Production, selling, marketing approaches
- The production approach – 1820s to 1920s
- Focuses on production of g&s
- Best explained by a catchphrase (‘If we make it, they will buy it’)
- Marketing consisted of taking orders and delivering products
- The selling approach – 1920s to 1960s
- Emphasised selling because of increased competition
- Businesses increased advertising using electronic communication devices to stimulate demand
- Most businesses still neglected the needs of customers
- The marketing approach: stage one – 1960s to 1980s
- Focuses on consumers wants through market research then satisfying them
- Discretionary income: disposable income that is available for spending and waving after an individual has purchased the basic necessities/needs
- Developed a marketing concept based on four principles:
- Customer-oriented
- Supported by integrated marketing strategies
- Aimed at satisfying customers
- Integrated into the business plan to achieve business’s goals
- Characterised by the importance placed on identifying and satisfying the needs and wants of customers
- The marketing approach: stage two – 1980s to present
- Changes in economic and social conditions have modified the marketing approach including:
- Corporate social responsibility (CSR): especially in regards to ecological sustainability
- External pressure from customers, environmental organisations, political forces
- A major change is demand for ecologically sustainable products
- Customer orientation: the process of collecting information from customers and basing marketing decisions and practices on customers’ wants and interests
- Companies should not end customer relationship at sales but strive continuously to exceed expectations
- Achieving and maintaining high levels of customer satisfaction
- Customer satisfaction: measures how goods and services supplied by ta business meet or exceed customer expectation
- Relationship marketing: the development of long-term and cost-effective relationships with individual customers
- Customer loyalty – achieved through reward programs , customer care or good after-sales service
- Types of markets
- Market: group of individuals, organisations or both that:
- Need or want product
- Purchasing power
- Willing to spend
- Socially and legally authorised to purchase the product
- Group that doesn’t have these 4 are not considered a market
- Market in business refers to individuals or groups who wish to buy specific products [pic 1]
- Resource market
- Individuals or groups that are engaged in all forms of primary production (mining, agriculture, forestry and fishing)
- Large purchasing power
- Eg. Farmers – machinery, seeds and fertiliser
- Industrial market
- Industries and businesses that purchase products to use in the production of other products
- Secondary or tertiary businesses
- Eg. Sony – plastics and metal
- Intermediate market
- Wholesalers and retailers who purchase finished products and resell them to make profit
- Resellers
- Eg. Subway – goods to make sandwiches and salads
- Consumer market
- Local supermarkets, those that are most familiar
- Individuals (members of a household who use or consume products bought)
- Managers try influence consumer buying behaviour by developing a mix of marketing strategies
- Mass market
- Seller mass produces, mass-distributes and mass-promotes one product to all buyers
- Large demand for a standard product
- Business does not target to specific group
- Eg. Food, electricity and water
- Replaced by segmented or niche markets
- Niche markets
- Narrowly selected target market segment
- Consists of buyers who have specific needs and lifestyles
- Eg. Magazines
Influences in marketing [pic 2]
- Factors influencing customer choice
- Customer choice (buying behaviour): decisions and actions of customers when they search for, evaluate , select and purchase g&s
- Businesses try to influence customer choice by modifying their marketing strategies
- Can predict customers trends and how thy will react to particular marketing strategies
- Psychological influences [pic 3]
- Influences within an individual that affect his or her buying behaviour
- 5 main psychological factors influence customer choice:
- Perception
- Process which people select, organise and interpret information to create meaning
- Managers need to create positive or favourable perception about their product in the mind of customers
- Advertising attempts to create a certain ‘image’ of the product (luxury, trendy, classy, fun etc.)
- In reality the product may not necessarily have such qualities, it is based on how the consumer perceives the product
- Motives
- Reason that makes an individual do something
- Main motives include comfort, health, safety, ambition, taste, pleasure, fear, amusement , cleanliness and the approval of others
- Advertising attempts to motivate customers to purchase the product
- Attitudes
- Person’s overall feeling about an object or activity
- Customer attitude generally influences success or failure of business’s marketing strategies
- Negative attitude = change marketing strategy
- Personality and self-image
- Personality: collection of all the behaviours and characteristics that make up that person
- Will influence the types and brands of product one buys
- Self-image: how person views himself or herself
- Major determinant of what products we buy
- Marketers use celebrities and sportspeople to promote a product; people want their self-image to be a reflection of their influence
- Learning
- Changes in an individual’s behaviour caused by information and experiences
- Customers have a direct experience with products, thus they are also learning
- Successful marketing strategies may assist customer learning that encourage brand loyalty
- Brand loyalty: occurs when a favourable attitude towards a single brand results in repeat sales over time
- Sociocultural influences
- Forces exerted by other people and groups that affect an individual’s buying behaviour
- 4 main sociocultural factors;
- Social class
- Person’s relative rank in society, based on his or her education, income or occupation
- Influences the type, quality and quantity of products a customer’s buys
- High socioeconomic status background or higher income earners may purchase luxury cars as a symbol of status or other expensive products
- Culture and subculture
- Learned values, beliefs, behaviours and traditions shared by a society
- Influences because it infiltrates all that we do in our everyday life
- ^ determines what people wear, what and how they eat, and where and how they live
- Family and roles
- Different roles within the family and group influence buying behaviour
- Woman’s roles are changing but market research still show that most buy based on decisions related to healthcare products, food and laundry supplies
- References (peer) group
- Group of people with whom a person closely identifies, adopting their attitudes, values and beliefs
- Customer’s buying behaviour may change to match the rest of the group’s beliefs and attitudes’
- Economic influences [pic 4]
- Influence business’ capacity to compete and customer’s willingness and ability to spend
- Boom
- Marketing potential is large with sale responding to all forms of promotion
- Recession
- Customers become more price-conscious
- Looks for value and products that are functional and long-lasting
- Marketing plans should focus on maintaining existing market share
- Survival becomes main business goal
- Government influences
- Uses economic policy measures to influence level of economic activity
- Depending on economic conditions the gov place policies that expand or contract level of economic activity
- These policies can directly or indirectly influence business activity and customers’ spending therefore influencing marketing plan
- Gov influence has a more direct and immediate impact on marketing plans
- Regulatory forces (statues) and regulatory bodies
- Laws include:
- Competition and Consumer Act 2010 (Cwlth)
- Sales of Goods Act 1923 (NSW)
- Fair Trading Act 1987 (NSW)
- Other influences include:
- Interest rates
- Taxation types and levels
- Changes in overseas trade
- Technological change and competition
- Consumer laws
- Laws relating related to dealings have radically and fairly changes businesses
- State and federal gov’s have introduced laws to improve protection and rights of consumers and clarify rights and responsibilities of businesses
- The Australian Consumer Law (ACL)
- Introduced in 2011
- Competition and Consumer Act 2010 (CCA)
- Two major purposes
- Protect consumers against unfair practices
- Regulate certain trade practices that restrict competition
- Applies to all businesses
- Breaches of the act
- Results in Australian Competition and Consumer Commission (ACCC) taking civil proceedings against the business or individual engaged in unconscionable conduct
- Deceptive and misleading advertising
- Creating a false impression in an attempt to influence customers
- Examples include:
- Fine print – important condition written in small size -> difficult to read
- Before and after advertising – comparisons is distorted, ‘before’ is worsened and ‘after’ enhanced (skin care products)
- Tests and surveys – unsubstantiated claims (saying 9 out of 10 ppl prefer the product when no actual surveys have been conducted)
- Country of origin – accuracy in labelling
- Packaging – size and shape of package may give a misleading impression of content
- Special offer – if special offers is available for a limited period when in fact continuously available
- Two most common deceptive and misleading methods are:
- Bait and switch advertising
- Advertising few products at reduced and therefore enticing prices to customers
- When reduced price products are sold out, customers are directed to higher price items
- Dishonest advertising
- Advertisements uses words that are deceptive or claims that a product has some specific quality when it does not
- Conveys false impression of exact nature of the product
- Price reductions, special or free-gift offers must be genuine
- Price discrimination
- Setting of different prices for a product in separate markets
- Difference in price is possible because:
- Markets are geographically separated
- Product differentiation within one market
- CCA prohibits price discrimination id the discrimination could substantially reduce competition
- Businesses can’t give favoured treatments to some customers while denying it to others
- Implied conditions – consumer guarantees
- Comprehensive rights and remedies for defective g&s
- Implied conditions: unspoken and unwritten terms of a contract
- Acceptable quality: product is fit for purpose, acceptable in appearance and finish, free from defects, safe and durable
- Goods must meet basic expectations and quality
- Warranties
- Promise made by a business to correct any defects in the g&s
- Can be used as an aggressive marketing tool if it includes superior options to those of a competitive product
- Refunds and exchanges (returns)
- Business required to refund if:
- Product is faulty
- Does not match description or sample
- Fail to meet the standards for what it was made for
- Ethical influences
- Ethical behaviour refers to conduct that goes beyond legal requirements
- Ethical criticisms of marketing
- Main ethical criticisms of marketing include:
- Creation of needs –materialism
- Materialism: individuals desire to constantly acquire possessions
- Critics feel that esp. large businesses use sophisticated and powerful promotional strategies to persuade and manipulate customers to buy
- Stereotypical images of males and females
- Male using powerful tools and watching sports
- Female preparing meals, cleaning and caring
- Use of sex to sell products
- Sexual themes and connotations to sell products
- Sex appeal to suggest that this product will increase attractiveness or charm
- Have a subtle and persuasive impact
- Product placement
- Inclusion of advertising in entertainment
- Invasion of privacy
- Tracking of web users and using this info to target them with advertisements
- Breached customer privacy
- Data is collected and resold to businesses which use it for target advertising purposes
- Truth and accuracy in advertising
- Advertising: paid, non-personal message communicated through a mass medium
- Advertisements can be exaggerated
- Ethical businesses should ensure that their ads are truthful or be held morally responsible of misleading the public
- Main unethical marketing practices include:
- Untruths due to concealed facts
- Many customers don’t perceive ads to be believable or honest
- Pieces of info purposefully omitted form an advertisement can harm the trust of customers have in the product or business
- Exaggerated claims
- Puffery: exaggerated praise or flatter (cannot be proved)
- Eg. Shampoo
- Vague statements
- Statements using ambiguous words that consumers will assume the advertiser’s intended message
- These ‘weasel’ words – vague and allow marketer to deny any intention to mislead or deceive
- Eg. Help
- Good taste in advertising
- Marketer should ensure that their advertisement are not offensive and are in good taste
- ‘united colours o Benetton’ is a leading fashion house across the world which uses controversial ads to promote social issues while at the same time selling its products
- Products that may damage health
- Marketers have been heavily criticised by consumer and health groups for promotion products that damages health, especially junk food
- Nutritionists argue that self-regulatory advertising codes are not working
- Digital advertising of junk food for children:
- Social networking sites and smartphone apps provide marketers with new and largely unregulated ways of advertising junk food
- The raises new ethical issues
- Engaging in fair competition
- Businesses that compete successfully will usually increase their sale revenue and profit
- Competition in market place can be intense thus businesses are tempted to engage in unfair marketing strategies
- Some eg. Of anti-competitive conduct that is prohibited include:
- Cartel conduct
- Cartel exists when businesses agree to act together instead of competing
- Designed to increase profits of the cartel members
- Illegal for competitors to agree to fix, control or maintain prices
- Anti-competitive agreements
- Contracts or provisions that could lessen competition in a market are prohibited
- Misuse of market power
- Prohibits corps who have a large degree of market power from taking advantage of this to damage competitors or prevent businesses from entering the market
- Exclusive dealing
- One person/business trades with another and then imposes restrictions on them
- Resale price maintenance
- Suppliers recommend that resellers charge a certain price for particular products
- It is illegal for suppliers to pressure businesses to charge their rrp or stop them from selling at a lower price
- Mergers
- Prohibited if it can be demonstrated that they will lessen competition in a market
- Sugging
- Selling under the guise of a survey: sales techniques disguised as marketing research
- Raises several ethical issues (invasion of privacy and deception)
- Long-term consequences, decline in participants
- A marketing code of ethics
- The Australian Association of National Advertisers (AANA) Code of Ethics 2012 developed to regulate marketing
- Role of Advertising Standards Bureau (ASB) is receive complaints relating to the Code and to ensure acceptable advertising standards are followed [pic 5]
Marketing process
- All marketing plans should be:
- Realistic (situational analysis)
- Achievable (resources and budget)
- Situational analysis
- Most important step of marketing plan is management has precise understanding of where the business is at and where it is heading
- Two methods of analysis include:
- SWOT analysis
- Product life cycle
- SWOT analysis
- Changes in external environment can affect the course of a business
- Involves identification and analysis of the internal strengths and weaknesses of the business and the opportunities and threats of external environment
- Once SWOT analysis is conducted product’s position on product life cycle should carry out [pic 6]
[pic 7]
- Product life cycle
- Stages a product passes through: introduction, growth , maturity and decline
- At each stage of product’s life cycle a different marketing strategy is required
- Why do some products decline?
- Changing public perception
- New technologies and replacing old ones
- New products sometimes reduce demand for old ones
- Fluctuations in level of economic activity result in shifts in spending
- Consumer behaviour
- Market research
- Process of systematically collecting, recording and analysing info concerning a specific marketing problem
- Research could include:
- Reading books and magazines
- Conducting surveys
- Assessing the media
- Experiments and talking to people
- Marketing strategies perform best when based on accurate, up-to-date, detailed and relevant info
- To obtain reliable and accurate info, marketers follow a three-step approach:
- Determining financial needs. Determine what needs to be measured and the issues involved
- Collecting data from primary and secondary sources. Data collected by mail, telephone and personal surveys, personal observation or private data sources
- Primary data: facts and figures from original sources for the purpose of the specific research problem
- Process may be time consuming and expensive = outsourcing
- Three main methods used to gather primary data:
- The survey method – gathering data by asking or interviewing people
- The observation method – recording behaviour of customers
- The experiment method – gathering data by altering factors under tightly controlled conditions to evaluate cause and effect
- Secondary data: info collected by other organisations
- Internal data: info already collected from inside the business
- External data: published data from outside
- Data analysis and interpretation. Determine meaning of data
- Statistics are processed to determine if responses show trends or patterns
- Establishing market objectives
- Marketing objectives: realistic and measurable goals to be achieved through the marketing plan
- Considered most important plan in marketing planning process
- Three common marketing objectives include:
- Increasing market share
- Expanding the product range
- Maximising customer service
- ^ can be measured and should include specific targets
- Increasing market share
- Business’s shares of the total industry sales for a particular product
- Develop extensive product range, using different brand names to gain extra percentage points of market share
- Increasing market is important for businesses that dominate the market, because small market gains translate into large profits
- Expanding the product range
- Product mix: total range of products offered by a business
- Expanding product mix = increase in profits in long term
- Customers’ tastes and preferences change over time and demand for a particular product may decrease
- Items in a product line should satisfy the needs of different target markets
- Maximising customer service
- Customer service: responding to the needs and problems of the customer
- High levels of cs = improved customer satisfaction and a positive reaction from the customers towards products
- Establishes sound customer base
- Talk and listen to customers to keep them purchasing from the business
- Strategies to maximise customer service:
- Asking customers what they want
- Training employees and rewarding them
- Anticipating marketing trends by research
- Spying on competitors
- Encouraging employees to focus their attention on customer needs
- Identifying target markets
- Target market: group of present and potential customers to which a business intends to sell its product
- They share similar characteristics
- Primary target market: market segment at which most of the marketing resources are directed
- Secondary target market: usually a smaller and less important market segment
- Why identify and select a target market?
- To direct its marketing to that group of customers
- allows business to better satisfy the wants and needs of the targeted group
- occurs because:
- marketing resources are used more efficiently
- promotion material are more relevant to customer needs’
- better understanding of customer’s buying behaviour
- effective data collection and comparisons within target market
- marketing strategies are refined used to influence customer choice
- businesses can choose one of three approaches to identify and select a consumer target market:
- mass marketing approach
- market segmentation approach
- niche market approach
- Mass marketing approach
- Seller mass-produces, mass distributes and mass-promotes one product to all buyers
- Mass marketing approach: seeks a large range of customers
- Assumes the individual customers in target market have similar needs
- ^ therefore develops a single marketing mix and directs it at the entire market
- Market segmentation approach
- Dividing the market into distinct segments, thus direct its effort towards a particular segment of the total market
- Market segmentation: total market is subdivided into groups of people who share one or more common characteristics
- Once segmented, business selects one of these segments to become the target market
- This enables a business to design a marketing plan that meets needs of the group
- Niche market approach
- Narrowly selected target market segment
- A segment within a segment or ‘micro-market’
- Needs of customers in these markets are usually neglected by large businesses because rarely profitable
- Developing marketing strategies
- Marketing strategies: actions undertaken to achieve the business’s marketing objectives through the marketing mix
- Marketing mix – the four Ps
- 4 P’s
- Product
- Price
- Promotion
- Place/distribution
- The business also has control over other business resources – information, finances and employees – may also be used to achieve marketing strategies
- Once 4 P’s are establish business must determine amount of emphasis placed on each variable
- Largely determined by where the product is positioned or its product life cycle
- Products (goods and/or services)
- Business’s need to determine features such as product quality, packaging/labelling, design, brand name, and guarantee
- Customers buy products that also provide intangible benefits (feeling of security, prestige, satisfaction or influence)
- Price
- Major pricing decision is whether to set it above, below or about even with competitors price
- Business must also consider the cost of production and level of consumer demand
- Also refers to the method or strategy a business uses to determine pricing
- Promotion
- Methods used by business to inform, persuade and remind customers of their products
- Main forms of promotion include:
- Advertising
- Personal selling and relationship marketing
- Sales promotion
- Publicity
- Public relations
- Technological changes have a significant impact on how a business promote
- Media has become an effective method to deliver specific messages and advertise a product
- Place/distribution
- Deals with the ways of getting the product to the customer
- Usually involved intermediaries (wholesalers and retailers)
- Implementation, monitoring and controlling
- Implementation: process of putting the marketing strategies into operation
- ^ involves daily, weekly and monthly decisions to ensure plan is effective
- Implementation stage is the how, where and when it is to be done
- After implementation marketing plan is careful monitored and controlled
- Monitoring: checking and observing the actual progress of the marketing plan
- Marketing personnel and employees gather info and report any important changes, problems or opportunities that arise during life of marketing plan
- Info collected is then used to control the plan
- Controlling: comparison of planned performance against actual performance and taking corrective actions to make sure the objectives are achieved
- establish KPI (forecast level of performance against actual performance)
- compare and evaluate actual performance against the KPI
- Developing a financial forecast
- Financial forecast: business’s predictions about the future
- ^ details the costs and revenues for each strategy
- Helps a business decide how to allocate marketing resources and determines the most appropriate course of action using a cost- benefit analysis
- Developing a financial report requires two steps:
- Cost estimate
- Revenue estimate
- Marketing cost is easier to forecast then revenue, because largely controlled by the business
- Campaign actual and planned results
- 3 KPIs used to measure success of the marketing plan are:
- Sales analysis
- Comparing actual sales with forecast sales to determine the effectiveness of the marketing strategies
- More sales figures are broken down = clearer picture
- To calculate difference: Actual sales – Sales quota
- To calculate % change: x 100[pic 8]
- Strength: Sales figures are relatively inexpensive to collect and process
- Weakness: data for sales revenue of not reveal the exact profit level
- Market share analysis
- Business can evaluate its marketing strategies as compared with those of its competitors
- Reveals whether changes in total sales, either increases or decreases, have resulted from marketing strategies or uncontrollable external factor
- It business’ total sale revenue and market share have declined then marketing strategies need to be reviewed
- Marketing profitability analysis
- Method which business breaks down total marketing cost into specific marketing activities
- Comparing costs of specific marketing activities with the results achieved a marketing manager can assess the effectiveness of each activity
- Helps in deciding how best to allocate marketing resources in the future
- Revising the marketing strategy
- Based on the sales, market share and profitability analysis, the marketing plan can be revised (modified)
- Changes in the marketing mix
- Changes that can be introduced include:
- Production modifications – continuous upgrading of products will maintain a competitive advantage
- Price modifications – price fluctuation due to many reasons, price components need to be revised in response to changes in the external business environment
- Promotion modifications – promotion costs high when new product is launched into the market, during later stages promotion cost may stabilise and even fall
- Place modifications – product’s success increases = distribution channels need to expand to cater growing market
- New product development
- If a business wants to achieve long-term growth, it must continually introduce new products
- Product deletion
- Maintain effective product mix, the business will have to eliminate some lines of products
- Out-dated products may create unfavourable image and negatively rub off on other products
Marketing strategies
- 3Ps + 4Ps = extended marketing mix
- Extended marketing mix: combination of people, processes and physical evidence with the 4 main elements of marketing mix
- Market segmentation
- When total market is subdivided into groups of people who share one or more common characteristics
- After market is segmented, manger selects one segment to become the target market
- Ultimate aim of market segmentation is to increase sales, market share and profits by understanding and responding to desires of targeted customers
- Segmenting consumer markets
- Segmentation variable: characteristics of individuals or groups that are used by marketing managers to divide a total market into segments
- Consumer market can be segmented in 4 main variables:
- Demographic
- Geographic
- Psychographic
- Behavioural
- Demographic segmentation:
- Dividing the total market according to particular features of a population (size of population, age, sex, income, cultural background and family size)
- Age and gender two of the most commonly used for segmentation purposes
- Geographic segmentation
- Dividing the total market according to geographic locations
- Businesses may divide in regions as consumer sin different geographical areas have different needs, tastes, and preferences
- Climate also has an impact on segmenting markets (heating and cooling systems and clothing)
- Psychographic segmentation
- Process of dividing the total market according to personality characteristics, motives, opinions, socioeconomic groups and lifestyles
- Businesses would research a consumers’ brand reference, favourite music, radio and television programs, reading habits, personal interests and hobbies, and values
- Focus on why people behave the way they do
- Can be difficult to accurately measure
- Behavioural segmentation
- Dividing the total market according to the customers’ relation to the product
- Total market can be divided into users (heavy, moderate or light) and nonusers
- To encourage consumers to purchase more products, business may redesign, setting special prices and implement special promotions
- Product/service differentiation and positioning
- Developing and promoting differences between the business’s product or services and those of its competitors
- Occurs when products are the same or similar and by doing this businesses can gain more control in the marketplace
- Points of differentiation
- Value for money: desire to obtain the best quality, features and performance for a given price of a product
- Persuades consumers to perceive the product or service as being superior to all similar products or services, influencing them to buy
- 4 main points of differentiation:
- customer service
- consumers desire ‘personalised’ service, required ‘caring’ service and want high quality and value
- powerful marketing tool for differentiation
- customers expect high level of customer service
- pre-sales and after-sales are important
- may also include the presentation of the premises, the atmosphere, or range of products
- environmental concerns
- businesses creating pollution will lose customers
- those that adopt ‘green’ philosophy and produce environmentally friendly products = increase customers = increased sales
- convenience and social
- Consumers are busy and sought to buy products for convenience eg. Food
- ethical issues
- consumers are becoming more ethically aware and will not purchase products that exploit workers, producers or the environment
- ethical consumerism: involves buying products that are not harmful to the environment, animals and society
- genetically modified (GM) foods are disliked thus producers are labelling their products GM-free
- Fair Trade movement gaining influence with consumers paying more for guarantees of fair labour and sustainable organic products
- Cosmetic industry is delivery natural products that are cruelty free
- Product/service positioning
- Technique in which marketers try to create an image or identity for a product compared with the image of competing product
- Create an image that differentiates it products/services from others
- Products – goods and/or services
- Good or service that can be offered in an exchange for the purpose of satisfying a need or want
- Tangible and intangible products –total product concept
- Total product concept: tangible and intangible benefits (attributes) a product possesses (dinner)
- Mass-produced products are on the difference in the intangible benefits that product competition is based eg. Cars
- Branding
- Brand: name, term, symbol, design or any combination of these that identifies a specific product and distinguishes it from its competition
- Brand name: part of the bran that can be spoken
- Benefits of branding – helps consumers:
- Identify specific product they like
- Evaluate quality of products
- Reduce level of perceived risk of purchase
- Gain a psychological reward from purchasing brand that symbolises status and prestige
- Branding helps businesses:
- Increase sales because consumers recognise their products
- Introduce new products
- Promotional activities
- Encourage customer loyalty
- Branding symbol or logo: graphic representation that identifies a business or product
- Businesses encourage the instant recognition of their brand symbol
- Some ads only use the symbol and not the name, this is a clever and subtle method to reinforce the symbol and associate it with a brand name
- Branding strategies
- Manufacture’s brand or national brand: brand owned by the manufacturer
^ High appeal as they are recognised across the country and widely available and offer reliability with constant quality
- Private or house brand: owned by retailers or owner
- Often cheaper (Woolworths and Coles)
- Generic brands: products with no brand name
- Packaging
- Development of a container and the graphic design for a product
- Well-designed packaging will give a positive impression of the product and encourage buyers
- Packaging:
- Preserves product
- Protects product
- Attracts consumer attention
- Divides product into convenient units
- Assists with the display of the product
- Makes transportation and storage easier
- Certain colours can draw conclusions about the product before even reading the label
- Shape of packaging can become part of the product itself
- Labelling
- presentation of information on a product or package
- Label: part of the package that contains information
- Use labels to promote other products and encourages proper use of products = greater consumer satisfaction
- Provides info about ingredients, operating procedures, shelf life, package size or country of origin
- must be truthful, there are a number of statues and government regulations specifying info that must be included in labelling
- Price and pricing methods
- Price: amount of money a customer’s prepared to offer in exchange for a product
- Difficult to select price, too high = lost sales unless superior benefits are offered, too low = impression that product is cheap
- Businesses will gain some control over the price by differentiating the product
- Pricing methods
- Influence by external and internal factors
- Internal = business’s marketing objectives and cost of production]
- External = amount of competition in marketplace, government regulations, location of product on life cycle and level of economic activity
- 3 main pricing methods:
- Cost based pricing
- Simplest method
- Determines total production cost of one unit
- Then adds an amount to cover additional costs (interest, insurance, transport) + also to provide adequate profit margin
- Mark-up: predetermined amount (%) that a business adds to cost of a product to determine basic price
- Cost + (Cost x Mark-up percentage) = Price
- Used mainly by wholesalers and retailers
- Has two major drawbacks:
- Difficult to accurately determine an appropriate mark-up percentage ( % high = overpriced and not sell, % low = less profitable)
- Product is priced after production and associated costs are incurred without taking into account other element of the marketing mix
- Market-based pricing
- Pricing according to level of supply and demand
- Supply: quantity of a product businesses are willing to offer for sale at a particular price
- Demand: quantity of a product consumers are willing to purchase at a particular price
- Competition-based pricing
- Price covers cost (raw materials and operating) and is comparable to the competitor’s price
- Business selects a price that is below, equal or above that of competitors
- Price leader: major business in an industry whose pricing decision heavily influence the pricing decision of its competitors
- Pricing strategies
- 4 pricing strategies:
- Price skimming – when a business charge highest possible price for the product during the introduction stage of its life cycle
- Aims to recover the costs of research and development ASAP before competition enters the market
- Price penetration – when a business charges the lowest price possible to achieve a large market share
- Quickly achieve a large market share for a product (mass-marketing pricing)
- Aims to sell large quantity of product during early stage of life cycle thus discouraging competitors
- Disadvantage is it’s more difficult to raise prices significantly than it is to lower them
- Loss leader – product sold at or below cost price (loss for business), it hopes that extra customer will buy other products as well
- Successful when the business is overstocked or a product to slow to sell, want to increase the traffic flow and want to build a reputation of having low prices
- Price points – selling products only at certain predetermined prices
- Easier for the customer to find the type of product they need
- Price and quality interaction
- Prestige or premium pricing: pricing strategy where a high price is charges to give the product an aura of quality and status
- Based on tendency for consumers to assume that expensive products are superior in quality and distinction
- If business uses premium pricing lower their prices it would damage their reputation
- Promotion
- Methods used by a business to inform, persuade and remind a target market about its product
- Promotion attempts to:
- Attract new customer by heighten awareness of a particular product
- Increase brand loyalty (reinforcing image of product)
- Encourage existing customers to purchase more
- Provide info so customers can make informed decisions
- Encourage new and existing customers to purchase new products
- Elements of the promotion mix
- Various promotion methods a business uses to campaign
- Advertising is one of the four elements of promo mix
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- Advertising
- Essential tool for successful marketing
- If successful can result in increased sales and profit
- Main advantage of advertising is that it provides businesses with the flexibility to reach an extremely large audience or to focus on a small, distinct target market segment
- Advertising media:
- Businesses need to develop a cost effective means to advertise their products
- Advertising media: many forms of communication used to reach an audience
- 6 man advertising media:
- Mass marketing
- Direct marketing catalogues
- Telemarketing
- E-marketing
- Social media advertising
- Billboards
- Business selects a type of advertising based on:
- Type of product and its positioning
- Size of target market and characteristics
- Marketing budget
- Cost of advertising medium
- Product’s position on product life cycle
- Personal selling
- Activities of a sales consultant directed to a customer in an attempt to make a sale
- Expensive promotional method but had 3 unique advantages
- Message can be modified to suit individual customers circumstances
- Individualised assistance to a customer can create a long-term relationship resulting in repeat of sales
- Sales consultant can provide after-sales customer service in relation to product features, installation, warranties and servicing
- Relationship marketing
- Development of long-term, cost effective and strong relationships with individual customers
- Aim is to create customer loyalty by meeting needs of customers on individual basis
- Loyalty program: rewards –based program offered to customer who frequently make purchases
- Relationship marketing can provide business with a competitive advantage
- Sales promotion
- Use of activities or materials as direct inducements to customers
- Aims to:
- Entice new customers
- Encourage trial purchase of new products
- Increase sales to existing customer and repeat purchases
- Increase effectiveness of other promo activities ]
- Special promotions include:
- Coupons
- Premiums
- Refunds
- Samples
- Point-of-purchase displays
- Publicity and public relations
- Publicity: free news story about a business’s products
- Businesses use publicity to increase sales = increase profits
- Aims included:
- Enhance image of product
- Raise awareness of product
- Highlight business’s favourable features
- Reduce any negative images
- Public relations (PR): activities aimed at creating and maintain favourable realties between a business and its customers
- Exposes a business or idea to public by often using unpaid third parties as outlets (media, speeches, donations etc.)
- Often more effective than paid advertising and be cheaper
- 4 main ways which public relations can assist:
- Promoting a positive image
- Effective communication of messages
- Issues monitoring
- Crisis management
- The communication process
- Marketing managers must communicate clearly, efficiently and succinctly to target market, if miscommunication occurs = lost sales and wasted promotion
- Channel: method used for carrying a message (print and electronic media advertising)
- Noise: any interference or distraction that affects any or all stages in the communication process (competing messages, inappropriate language or images, jargon, misinterpretation)
- Customers are m=often more willing to purchase if message is communicated via a respected and trusted channel (opinion leader or by word of mouth)
- Opinion leaders
- Person who influences others, opinions are respected and often sought for advice
- Used as info outlets for new product or to endorse existing ones
- Businesses use celebrity endorsement as part of marketing strategy
- Word of mouth
- Occurs when people influence each other during conversations
- Receivers place more trust in people they know rather than advertisements
- Increase use of social media platforms to engage in a form of word-of=mouth communication
- Place/distribution
- 4th P is place or distribution
- Efficient distribution system is necessary as most products are not used by the same business that makes them
- Distribution channels
- Routes taken to get the product from the factory to the customer
- Usually involves a number of intermediaries
- Traditional distribution channels
- Producer -> customer
- Producer -> retailer -> customer
- Producer -> wholesaler -> retailer -> customer
- Producer -> agent -> wholesaler -> retailer -> customer
- Innovative distribution methods – non-store retailing
- Non-store retailing: retailing activity conducted away from the traditional store
- Methods of door-to-door selling, mail-order catalogues, party-plan merchandising and vending machines
- With rapid change in electronic communication, nosiness are exploiting e-marketing
- 2 methods are:
- Telemarketing – interactive technology, which allows customers to purchase via their television or personal computer
- Internet marketing – marketing its products via the internet using website and domain name
- Channel choice – including intensive, selective and exclusive
- Market coverage: number of outlets a firm chooses for its product
- 3 ways to cover the market, difference being the intensity of coverage:
- Intensive distribution – when business wishes to saturate the market with its product, customers can purchase products at local outlets eg. Milk
- Selective distribution – moderate proportion of all possible outlets eg. Clothing
- Exclusive distribution – use of only one retail outlet for a product in large geographic area eg. Exclusive and expensive products
- Physical distribution issues
- Activities concerned with the efficient movement of the products from the producer to the customer through distribution channels
- Transport
- Method of transportation depends on type of product and the degree of service business wishes to provide
- 4 common methods of transportation:
- Rail
- Road
- Sea
- Air
- Warehousing
- Receiving, storing and dispatching goods
- Central organising point for efficient delivery
- Inventory
- If a product out of stock and continues = loss sales and market share
- Inventory control: system that maintains quantities and varieties of products appropriate for the target market
- Too much stock = high storage costs
- Too little stock = lost sales or ‘Stock-out costs’
- Goal of inventory is to find the correct balance between the two
- People, processes and physical evidence
- 4 Ps are considered appropriate for tangible products so 3 more Ps are added as the service sector is expanding
- People
- Quality of interaction between the customer and those within the business who deliver the service
- Important to select right workers and train them appropriately to perform the service and leave a good impression
- Consumers base perception and judgement on the way employees treat them
- All businesses should develop culture of customer focus and put it into practice
- Processes
- Flow of activates that a business will follow in its delivery of a service
- These need to be customer friendly and satisfy their needs
- Without tangible product, process must be highly efficient to achieve customer satisfaction
- Inefficient processes loss of customers and damage to reputation
- Physical evidence
- Environment in which the service will be delivered
- Business should provide high-quality evidence to create an image of value and excellence
- E-marketing
- Practice of using the internet to perform marketing activities
- Businesses have access to global market by websites that can promote and dispatch products
- Customers seeking convenience of online shopping will purchase globally
- Technology provides a faster and more efficient way of doing business + very effective way of attracting new customers
- E-marketing technologies
- Main technologies include:
- Web pages
- Display of information accessible on the web through a web browser
- Website: collection of related web pages, usually associated with a particular business or organisation
- Well-designed homepage is a powerful marketing tool as it easily directs customers to where they want to go
- Podcast
- Distribution of digital audio or video files over the internet
- Directed to subscribers
- Used for marketing and advertising purposes – if a podcast is aimed at the same audience as the target customers of a business, this method can be very effective in reaching to its customers
- SMS
- Messages are delivered automatically to one or more recipients and can be used to alert regular customers of special deals and offers
- Notifies suppliers of the arrival of goods
- Blogs
- Online journal that can be added to by readers
- Comments, questions, feedback and opinions are available
- Businesses set up external blogs to communicate with potential customers
- Can be used to announce new products or changes in trading hours
- Businesses are able to gather feedback and comments and improve on their products
- Advantages of a blog:
- Establish reputation for expertise by providing detailed info on products and services
- New ideas for products and services can be put to the public to gain comment and feedback
- Present a human face to public and build trust with customers
- Web 2.0
- Transformation of web into more creative and interactive platform for info sharing
- Social networking, video sharing and info sharing sites have made it easier for customers and businesses to create and share many different types of content
- Low costing and provides a powerful public relations tool
- Social media advertising (SMA)
- Positive results when in use with traditional marketing methods
- Main advantage:
- Inexpensive compared to traditional methods
- Easy to use and monitor
- Effective method to gain exposure
- Main disadvantages:
- No control over what consumers write about
- Difficult to accurately measure the reach (number of people exposed to the message) and frequency ( average number of times someone is exposed) of SMA
- SMA enables businesses to constantly build relationships with their customers
- Raises concerns including issues of privacy, accuracy, honesty and consumer trust
- Global marketing
- Business must modify and adapt their marketing plan to suit overseas markets
- Global branding
- Worldwide use of a name, term, symbol or logo to identify the seller’s products
- Business use global branding because:
- Cost effective (one advertisement can be used in multiple countries)
- Provides uniform worldwide image
- Successful brand name can be linked to new products being introduced
- Successful brand = most valuable resource
- Standardisation
- Difficult decision whether to uses standardised or customised marketing strategy
- Standardised approach: assumes the way the product is used and the needs it satisfies are the same over the world
- Cost saving for businesses
- Production runs can be longer =
- achieving economies of scale
- reduction in R&D
- simplified spare parts and after-sales service
- standardised promo strategies
- evaluation and modification of plan is simpler and easier
- Customisation
- Many business find it necessary to modify existing marketing mix or develop a new one
- Customised approach: global marketing strategy that assumes the way the product is used and the needs it satisfies are different between countries
- Customised marketing plans according to economic, political and sociocultural characteristics of the target country
- It is possible for businesses to adopt a middle path –combination of two approaches
- Global pricing
- How businesses coordinate their pricing policy across different countries
- Most critical and complex issue as pricing generates revenue therefore a determinant of profits
- Accurate pricing decisions need to be made to successfully expand globally
- Customised pricing
- Whenever consumers in different countries are charged different prices for the same product
- To determine prices for overseas market, business practise the ‘cost-plus method’ to cover added costs for exportation (transportation, taxes, warehousing and tariffs)
- Tariff: tax on imported products
- Market-customise pricing
- More flexible then customised pricing
- Market-customised pricing: sets prices according to local market conditions
- Marketers can vary the price depending on the level of demand and competition within the overseas market
- Priced charge overseas in also influenced by foreign exchange rates
- Fluctuations can change prices and is a major risk for global businesses
- Standard worldwide price
- Practice of charging customers the same price for a product anywhere in the world
- Succeed if foreign marketing cost are low enough not to affect overall costs
- Two major risks:
- Domestic business may undercut standardised price
- Fluctuations in exchange rate may negatively impact on the exported price
- 4P’s Global Marketing
Product – a products features will vary from market to market to suit customers in different countries
- Labels need to be printed in the correct language and may require additional information, according to legal an cultural issues
- The business may have to change the packaging using pictures and diagrams
Promotion – lanauge is a common problem as product names don’t always translate well and may not give the same meaning (eg. Coke in China in 1927)
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