Business Marketing - Contemporary Business Issues

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:

1. Outlines strategies used to bring the buyer and seller together
2. Core of marketing is satisfying existing customer wants = increase sales
3. 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

1. Protect consumers against unfair practices
2. 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:

1. 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

1. Stereotypical images of males and females

• Male using powerful tools and watching sports
• Female preparing meals, cleaning and caring

1. 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

1. Product placement

• Inclusion of advertising in entertainment

1. 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:

1. Determining financial needs. Determine what needs to be measured and the issues involved
2. 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:

1. The survey method – gathering data by asking or interviewing people
2. The observation method – recording behaviour of customers
3. 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

1. 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

1. establish KPI (forecast level of performance against actual performance)
2. 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:

1. Cost estimate
2. 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:

1. 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

1. 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

1. 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:

1. Difficult to accurately determine an appropriate mark-up percentage ( % high = overpriced and not sell, % low = less profitable)
2. 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:

1. Coupons
2. Premiums
3. Refunds
4. Samples
5. 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:

1. Promoting a positive image
2. Effective communication of messages
3. Issues monitoring
4. 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:

1. Intensive distribution – when business wishes to saturate the market with its product, customers can purchase products at local outlets eg. Milk
2. Selective distribution – moderate proportion of all possible outlets eg. Clothing
3. 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:

1. Establish reputation for expertise by providing detailed info on products and services
2. New ideas for products and services can be put to the public to gain comment and feedback
3. 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:

1. Domestic business may undercut standardised price
2. 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)