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Topic : Marketing

Notes for Marketing

Below are the syllabus dot points of Marketing. Click on the dot point to expand relvant information. These notes were written by;Hope Tzannes Click here to donate her

What is marketing?

The 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.

Strategic role of marketing goods and services

Used by a business to:

  • Achieve competitive advantage
  • Increase market share
  • Improve brand awareness
  • Profit Maximisation
  • Use a marketing plan to set out a series of actions and strategies that can be used to gain greater sales and therefore able to achieve this strategic goal

Interdependence with other key business functions

  • Operations: How the product is made in order to be put onto the market
  • Human Resources: Hiring people to promote and market the product
  • Finance: Gathering funds in order to appropriately pay and afford for marketing and advertising

Production, selling, marketing approaches

  • Production Approach:
    • Business focuses on the production process and product itself
    • Invents & develops products in belief there are interested consumers
    • Concentrate their efforts on efficiently producing high quality goods.
  • Selling Approach:
    • Business focus is selling of product
    • Believe they can deal with increasing competition by good sales
    • Persuade customers in advertising that their product is better than competitors
  • Marketing Approach:
    • Focuses on consumer needs and wants
    • Consumer is put first and produce what they need

Types of markets

  • Resource Market: Producers of raw materials E.g. minerals, energy
  • Industrial Market: Producer of manufactured materials E.g. Clothing
  • Intermediate Market: Businesses that purchase finished goods and resell to make a profit E.g. Coles, wholesalers
  • Consumer Market: Businesses and individuals who purchase the finished product
  • Mass Market: Total unsegmented market, every single consumer
  • Niche Market: Small & unique sections of the market

Factors influencing customer choice “why do they buy?”

Psychological: Influences within an individual that affect their buying behaviour

  • Perception – meanings an individual has towards a good/service. Customers will not purchase a product that they perceive as inferior.
  • Motivation – The reason an individual does something – comes from motives such as comfort, health, safety, ambition, taste, pleasure, fear, amusement, cleanliness and approval of others.
  • Attitudes Individuals overall feeling about good/serviced. Negative attitudes towards a business may force the business to change marketing strategies.
  • Personality & Self-Image Personality is the behaviours and characteristics of an individual, which influences the types and brands of goods/services that a consumer purchases. Self-image is the way an individual views themselves, which is a major determinant of what products they purchase as you are able to express yourself through possessions – “you are what you buy”
  • Learning The changes in an individuals behaviour from the gathering of information and experiences, which a business is able to provide if they have the thorough knowledge of the product itself, and is often expressed through marketing

 

Sociocultural: Forces exerted by other people and groups affecting an individual

  • Social Class Also defined by socioeconomic status, by education, occupation and income which defines the lifestyles and availabilities to specific goods and services in relations to type, quality and quantity for the individual. High-income earners are more likely to purchase high quality products.
  • Culture and Subculture All the learned values, beliefs, behaviours and traditions of a society, which determines what we wear, diet and where and how they live.
  • Family and Roles Typical women’s stereotypes of making purchases for the family, may mean that marketing is aimed more often at women than it is at men.
  • Reference (Peer) Groups A person may closely identify and obtain attributes, attitudes, values and beliefs from the people they spend time around meaning that. Also peers share opinions of products, services and stores both negatively and positively which will influence the individual’s decision of purchase.

 

Economic: Impact on businesses and consumers as they influence a business’s capacity

  • Time of Boom High employment, rising incomes, customers optimistic about future, increase consumer spending
  • Time of Recession Unemployment levels rise, income fall, customers pessimistic about the future, decrease in consumer spending

 

Government:

  • Policies directly or indirectly influence business activity with customers willingness and ability to spend
  • Laws influencing marketing decisions

Consumer laws

Deceptive and Misleading Advertising:

Fine Print à important conditions displayed in small print

Before and After Advertisements à Photographs are enhanced for the result or the before photo to be more drastic to mislead the customer

Tests and Surveys à Using false statistics and info from surveys that have not actually been conducted

Country of Origin à “Made in Australia” and “Product of Australia” have two different meanings, but may fools consumers as they may desire to stay loyal to Australian Manufacturers

Packaging à Size and shape of the package may be deceiving to the actual product within the package. E.g. a bag of chips/air

Special Offer à Advertisements stating that a special offer is offered for a limited time, when in fact the offer is continuously offered, or not offered at all

Bait and Switch Advertising à Advertising a few product at sale prices and therefore enticing prices to attract customers

Dishonest Advertising à An advertisement using words that are deceptive or claims that a product has some specific quality when it does not.

 

Price Discrimination:

  • The setting of different prices for a product in separate markets
  • Difference in price:
  • Markets are geographically separated
  • Product differentiation within one market E.g. difference between electricity for domestic and business users
  • Competition and consumer act prohibits price discrimination if it could substantially reduce competition

 

Implied Conditions – consumer guarantees:

  • Comprehensive set of rights and remedies for defective goods and services
  • Purchased goods/services must be of acceptable quality, meaning that it is fit for the purpose, acceptable appearance, safe, durable and has no defects at purchase

 

Warranties:

  • Promise made by a business that they will correct any defects in the goods that they produce or in the services that they deliver
  • Can be used as a marketing tool, E.g. if a business provides a longer warranty than the competitors, then this will give customers the impression that the product is of superior quality
  • Refunds and Exchanges:
  • If the products provided are faulty
  • Do not match the description or a sample
  • Fail to do the job they were supposed to do
  • No obligation to refund if the customer has changed their mind

Ethical influences

Ethical Criticisms of Marketing:

Creation of Needs à persuading/manipulating materialistic consumers to constantly buy

Stereotypical Images of Males and Females à Females/males will be advertised in doing their stereotypical role

Use of Sex to Sell Products à Sexual themes and connotations often appeal to customers as it gives them the feelings that the product will make them sexy too

 

Product Placement à Where a product is seen and advertised

Invasion of Privacy à Collecting data on consumers through the internet and online advertising

Truth and Accuracy in Advertising:

  • Ethical businesses ensure their advertising is truthful as they can be morally responsible for misleading the public by releasing false information

 

Untruths Due to Concealed Facts à hiding the truth in advertisements to mislead the consumers and only view the positives of the products

 

Exaggerated Claims à superior value of other competing products cannot be proved or confirmed by consumers

 

Vague Statements à Using vague language to mislead consumers as to what exactly the product is useful for

 

Good Taste in Advertising:

  • ‘Good Taste’ is highly subjective as some consumers may regard an advertisement as offensive, whilst others might find it entertaining or inoffensive

 

Products that May Damage Health:

  • As obesity rates are increasing, the advertising of junks foods is becoming more and more unethical.
  • Advertising of junk food aimed at children

 

Engaging in Fair Competition:

Cartel Conduct à agreement between businesses to act together instead of competing

 

Anti-Competitive Agreements à Contracts containing provisions, which have the effect of substantially lessening competition in a market are prohibited

 

Misuse of Market Power à Prohibits businesses whom have a substantial degree of power in the market to diminish or damage a competitor

 

Exclusive Dealing à When a business trades with another, & imposes restrictions on them

 

Resale Price Maintenance à Suppliers recommend that resellers charge certain prices for particular products but cannot stop the resellers from charging above or below that price

 

Mergers à

 

Sugging:

  • Selling under the appearance of a survey. It is illegal, but difficult to detect

Marketing process

1. Situational analysis

Advantages:

  • Quick
  • Broad application
  • Requires firms to evaluate their current position
  • Considers both internal and external factors

Limitations:

  • Too Simplistic
  • Static

Product Life Cycle

2. Market research

  • Process of collecting, analysing and presenting information about a given product and market
  • Information about product, consumers, competitors and distributors
  • Limitations:
    • Accuracy of Data – method of collection, sample, source bias
    • Timeliness of Data
    • Cost of Research

 

Step 1. Determining Information Needs

  • Problem is clearly and accurately stated to determine what needs to be measure and the issues involved

Step 2. Collecting Data from Primary and/or Secondary Resources

  • Marketing Data – General facts and figures relevant to the marketing problem
  • Primary Data/Research – Data collected from a new and original source
    • Online Survey
    • Experimentation
    • Observation
    • Questionnaires

Quantitative Data

  • Stats about customers & markets
  • Based on numbers
  • Doesn’t say why, when, or how

Qualitative Data

  • Information customer behaviour
  • More detailed
  • Does tell why, when and how

Step 3. Data Analysis and Interpretation

  • Determine what the data means
  • Statistics are processes to determine if responses show trends or patterns that can be used in the business

3. Establishing market objectives

Aims – States what the company wants (statement of purpose)

Objectives – States what the company needs to achieve to meet the aim

  • Must be aligned with corporate aims and objectives
  • Must be realistic within the market, based on market research
  • Must have sufficient marketing budget
  • Specific, Measurable, Attainable, Realistic, Time Constraint (SMART)
  • Growth:
    • Higher target markets set for sales or market share
    • May motivate if targets are realistic
    • Need to ensure other aspects do not suffer (e.g. quality, customer service)
  • Continuity:
    • Ensure brands survive the long term
    • Ensure strategies do not damage the image of the brand (e.g. price cuts may increase sales, but damage image of brand)
  • Increase Product Differentiation:
    • Ensure product remains distinctive
    • Looking for alternative distribution channels
    • Displaying products in a distinctive way
    • Promoting the image of the products more
  • Innovation:
    • Developing new ideas
    • Key in fashion and technology industries
  • Constraints:

Internal:

  • Financial
  • Cost of production
  • Personnel
  • Market positions
  • Size of firm

External:

  • Competition
  • The economy
  • Tastes and fashions
  • Political and legal

 

Strategies – States the course of action to meet the objective

4. Identifying target markets

  • Group of present & potential customers which a business intends to sell its products
  • Market Segment – Customers within a target market share similar characters e.g. age, income, lifestyle, location and spending patterns.
  • Market Segmentation
    • Demographic Factors – Age, gender, ethnicity, religion, language, socioeconomic status
    • Geographic Factors – Location, climatePsychological Factors – Lifestyle, status, values, hobbies, interests
  • Primary Target Market – Market segment which most of the marketing resources are directed
  • Secondary Target Market – Usually a smaller and less important market segment of the market
  • Niche Marketing
    • Small, specific and well defined segment
    • Highly specialised good/service
    • Smaller sales volume > higher prices per unity
    • Can be both large and small companies
    • Must Know their market

  • Mass Market
    • Large number of different market segments with the same product/service
    • Maximise sales volume
    • Requires mass production to lower costs
    • g. Coca Cola, PSP, Apple products, McDonalds

  • Differentiated Marketing
    • More than one segment is targeted for a given good/service
    • A marketing mix is created for each segment, which could include new products
    • g. QANTAS – First class, business class, economy class

5. Developing marketing strategies

  • Helps achieve the businesses’ marketing objectives
  • The business needs to determine the emphasis it will place on each of the variables

 

Marketing Mix – Price

  • The amount of money a customer is prepared to pay
  • Either a price set above, below or the same as a competitors
  • Factors such as the cost of production and level of customer demand influence the price of a product

 

Marketing Mix – Product

  • Goods/Services
  • Product quality, quantity, packaging, labelling, design, brand name, guarantee

 

Marketing Mix – Place/Distribution

  • How the consumer receives the good/service/product
  • Process often includes intermediaries such as wholesalers or retailers

 

Marketing Mix – Promotion

  • The methods a business uses to inform, persuade, and remind customers of its products
  • Includes advertising, personal selling, relationship marketing, sales promotion, publicity and public relations
  • Changes in technology impact the way a business promotes its products

6. Implementation, monitoring and controlling

  1. Implementation
    • The process of putting marketing strategies into operation
    • Daily, weekly and monthly decisions that are made to ensure the plan is effective
    • How, where and when it has to be done
  2. Monitoring
    • Checking and observing the actual process of the marketing plan
    • Gathering information and reporting on important changes, problems or opportunities that arise
  3. Controlling
    • Comparison of planned performance against actual performance and taking corrective action to make sure the objective are attained
    • Step 1 – Outline what needs to be achieved/accomplished
  • Establish a KPI – E.g. increase monthly sales by 5%
  • Step 2 – Compare or evaluate actual performance against the KPI
  • Budgets, sales statistics and cost analyses can be used to evaluate results

Developing a Financial Forecast

  • Financial Forecast = the business’s predictions about the future
  • Measure the potential sales and revenue forecasts (benefits) for each strategy, and compare with anticipated expenditures (costs)
  • Best position for a business as it helps it decide how to allocate its marketing resources
  • Allows the marketing manager to undertake a cost-benefit analysis – results are open to individual interpretation

 

  1. Cost Estimate – Step 1 in Developing a Financial Forecast
    • How much is the marketing plan expected to cost?
    • Costs of marketing plan in four major components;
      • Market Research
      • Product Development
      • Promotion
      • Distribution

 

  1. Revenue Estimate – Step 2 in Developing a Financial Forecast
  • How much revenue (sales) is the marketing plan expected to generate?
  • Bases on two major components;
  • How much customers are expected to buy and for what price
  • What sales staff predict they will sell
  • Actual revenue can be compared to the forecast revenue data to determine the effectiveness of the marketing strategy

 

Comparing Actual and Planned Results

  • Sales Analysis – the comparing of actual sales with forecast sales to determine the effectiveness of the marketing strategy
    • Evaluates a businesses current performance
    • Evaluates the effectiveness of the marketing strategy
    • Main strength – is that sales figures are relatively inexpensive to collect and process
    • Main weakness – is that sales revenue do not reveal the exact profit level
  • Market Share Analysis
    • Businesses market share is analysed
    • Business is able to evaluate its marketing strategies as compared to those of the competitors
    • Evaluation reveals whether changes in total sales, increases or decreases, have resulted from the business’s marketing strategies or have been due to an uncontrollable external factor
  • Marketing Profitability Analysis
    • Useful sales and market share analysis, but does not present the full picture
    • Can be done only by analysing the marketing costs involved with each marketing strategy
    • Using a market profitability analysis the business breaks down the total marketing costs into specific marketing activities, such as advertising, transport, administration, order processing
    • By comparing the costs of specific marketing activities with the results achieved, a marketing manager can assess the effectiveness of each activity

 

Revising the Marketing Strategy

  • Marketing plan can be revised by changes in the new marketing mix, new product development and product deletion

Market segmentation, product/service differentiation and positioning

Market Segmentation

  • Market Segment à Distinct group of customer with similar characteristics
  • Market Segmentation à The process of splitting the market into groups based on demographic, geographic, psychographic and behavioural factors

  • Advantages
    • Better understanding of customers
    • Increase Sales
    • Growth Opportunity
    • New Product Opportunities

Product Differentiation and Positioning

  • Product/service differentiation is the process of developing and promoting differences between the business’s products or services and those of its competitors

 

Points of Differentiation – “Better value for money”

  • Ways to persuade a customer to perceive the product or service as being superior to all similar products or services to influence them to buy it.
  • Customer Service à
    • Desire ‘personalised’ service – products tailored to an individuals needs
    • Require ‘caring’ service – to be treated honestly, courteously and efficiently
    • Want high quality and value – Favourable conditions for service by offering fair prices and high-quality products
  • Environmental Concerns à
    • More concerns with quality of life issues regarding the physical environment
    • Businesses that create more pollution risks losing customers
    • Businesses that are “green” may see increase in sales
  • Convenience à
    • Products that are more convenient and more accessible to use and purchase will generally be bought over similar products
    • Fast food companies offer delivery service for people who have little time for meal preparation making it convenient for them.
  • Social and Ethical Issues à
    • Consumers often prefer to purchase products that they believe to not exploit workers, producers or the environment
    • g. not testing on animals, Fair Trade Agreement, genetic modifications on food
  • Other Points of Differentiation à
  • After sales service
  • Loyalty Program
  • Availability
  • Quality
  • Design
  • Packaging
  • Appearance

Product/Service Positioning

  • Refers to the technique marketers use to try to create an image or identify for a product compared with the image of competing products
  • In minds of target market à how potential buyers perceive a product
  • Using other elements of the marketing mix to shape and maintain the business image

Product differentiation and positioning

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Products – goods/services

Brandings

  • A key product differentiator
  • Refers to a name (or symbol) identifiable with a product or business
  • Trademarks are legal protection for the brand
  • Intangible asset

 

Why Develop the Brand?

  • Differentiation
  • Recognition
  • Reduce Risk
  • Premium Price
  • Competitors
  • Reduce Price Elasticity
  • Distribution advantage
  • Barriers to new

Brand Development

  • Build and strengthen the awareness and image of the brand
  • Long term marketing strategy
  • Expensive
  • Marathon vs. Sprint

 

Brand Loyalty

  • Objective of every marketing department
  • Consumer purchase based on the brand, not the product
  • g. some customers are loyal to Coca Cola rather than Pepsi

Symbols and Logos

  • Brand symbol/logo à graphic representation that identifies a business or product
  • Brand recognition because of symbol/logo
  • g. Nike’s “Swoosh” symbol

Packaging

  • Involves the development of a container and the graphic design for a product
  • Preserves the product
  • Protects the product from damage or tampering
  • Attracts consumers’ attention
  • Makes transportation and storage easier.
  • Assists with the display of the product

Price including pricing methods – cost, market, competition based

Pricing Methods

Cost Based

  • Method derived from the cost of producing or purchasing a product and then adding a mark-up

Competition Based

  • Where the price covers costs and is comparable to competitors prices
  • Market leaders set the price
  • Reducing Price to remove competition
  • Price wars
  • Set around the same as competitors

Market-Led

  • Method of setting prices dependant on the levels of supply and demand, whatever the market is willing to pay
  • Lower price for new product
  • Skimming
  • Prestige Pricing

 

Pricing Strategies – Skimming, Penetration, Loss Leaders, Price Points

Skimming à Business charges the highest possible price for the product during the introduction of its life cycle

 

Penetration à When a business charges the lowest price possible for a product/service to achieve a large market share

 

Loss Leaders à Priced less than cost, attracts customers to location

 

Price Points à Selling products only at certain predetermined prices

Price and Quality Interaction

  • “You get what you pay for”
  • Price to quality relationship
  • Superior quality products à higher prices
  • Prestige/Premium Pricing à pricing strategy where a high price is charged to give the product an aura of quality and status. Price never decreases

Promotion

Elements of the Promotion Mix

Advertising

  • Any form of paid-for promotional technique through independent consumer media
  • g. TV, radio, cinema, magazines, billboards, newspapers, internet
  • Potentially large audience number, advertising can reach a huge number of consumers
  • Strengths à wide coverage, control the message, repetition, builds loyalty
  • Weaknesses à expensive, impersonal, one way communication, lacks flexibility, little opportunity to close the sale

Personal Selling and Relationship Marketing

  • Personal Selling à The activities of a sales representative directed to a customer in an attempt to make a sale
  • Strengths à customer attention, customised message, interactive, customer relationship, opportunity to close
  • Weaknesses à labour intensive, expensive, limited reach
  • Relationship Marketing à The development of long-term, cost-effective, and strong relationships with individual customers

Sales Promotions

  • The use of activities or materials as direct inducements to customers
  • Coupons à offer discounts on certain items at the time of purchase
  • Premiums à A gift a business offers the customer in return for using the product
  • Refunds à Part of the purchase price is returned to the customer with a voucher with a proof of purchase
  • Samples à Free item
  • Point-of-purchase displays à Special signs, displays and racks used to gain consumer attention and make more efficient use of floor space

Publicity and Public Relations

  • Activities aimed at creating a favourable relation between a business and its customers e.g. MLC newsletter
  • Publicity is any free news story about a business’ products. Its timing is not controlled by the business

 

The Communication Process

Opinion Leaders

  • A person who influences others whose opinion is respected
  • Use opinion leaders as information outlets for new products or endorse new products
  • Can be actors, athletes, musicians, models

Word of Mouth

  • Occurs when people influence each other during conversations

Place/distribution

  • Activities that make products available to customers when/where they want to purchase them

 

Distribution Channels/Marketing Channels

  • The routes taken to get the product from the factory to the customer

 

Traditional Distribution Channels

  • Producer to Customer à Simplest method – involves no intermediaries. All services use this method
  • Producer to Retailer to Customer à Retailer is an intermediary who buys from producers and resells to customers. Used for bulky/perishable products such as furniture & fruit
  • Producer to Wholesaler to Retailer to Customer à Most common method used for the distribution of consumer goods. A wholesaler is an intermediary who buys in bulk from the producer, and resells in smaller quantities to retailers
  • Producer to Agent to Wholesaler to Retailer to Customer à An agent distributes the product to wholesalers but never owns the product. The producer for this work pays agents a commission.

Innovative Distribution Channels

  • Telemarketing à extension of telemarketing is the area of interactive technology, which will allow customers to purchase via their television or personal computer
  • Internet Marketing à Use of the internet as a promotional tool

Channel Choice

Intensive

  • Occurs when the business wishes to saturate the market with its product. Customers can shop at local outlets and be able to purchase the product. Many convenience goods such as milk, lollies and newspapers are distributed this way

 

Selective

  • Involves using only a moderate proportion of all possible outlets. Clothing, furniture and electrical appliances are often distributed using this method. The customer is prepared to travel and seek out a specific retail outlet that stocks a certain brand.

Exclusive

  • Use of only one retail outlet for a product in a large geographic area. This method of distribution is commonly used for exclusive, expensive products.

Physical Distribution Issues

Transport

  • The method of transportation a business uses will largely depend on the type of product and the degree of service the business wishes to provide. The four most common methods of transportation are rail, road, sea and air.

 

Warehousing

  • Warehousing = set of activities involved in receiving, storing & dispatching goods. A warehouse acts as a central organizing point for efficient delivery of products.

Inventory

  • System to maintains quantities & varieties of products appropriate for target market.

If a business carries too much stock on its inventory, it will experience high storage costs. Too little stock results in lost sales or ‘stock-out costs’. The goal of inventory is to find the

People, processes and physical evidence

People

  • Refers to the quality of interaction between the customer and those within the business that will deliver the service
  • Crucial to use qualified & trained employees to correctly perform the service and leave a good impression
  • Consumers base their perceptions and make judgements about a business based on how their employees treat them.

 

Processes

  • Refers to the flow of activities that a business will follow in its delivery of a service
  • Businesses needs to ensure that their processes and procedures are customer friendly and that they satisfy customer needs
  • Processes must be highly efficient to achieve customer satisfaction
  • g. confirmation emails will be sent out to finalise the process and ensure all information is correct, for the customers convenience

 

Physical Evidence

  • Refers to the environment in which the service will be delivered
  • Includes the location of where the service is being provided and the materials needed to carry out the service such as signage, brochures, business cards, business logo and website
  • A business should provide high quality evidence to create images of value

E-marketing

  • Practice of using the internet to perform marketing activities
  • Advances and increases in the usage of modern technology has pushed and opened up this new perspective of marketing

 

E-Marketing Technologies

Web Pages – Makes use of the Internet to convey information using combination n of text, graphics, animation and video. Web Pages together form a website. Well-designed web pages are a powerful marketing tool to intrigue and inform customers.

Podcasts – Involves the distribution of digital audio/audio files over the Internet.

SMS – Text messages exchanged between phones.

Blogs

Web 2.0

Global marketing

Global Branding

  • Worldwide use of a name, term, symbol or logo to identify the sellers products
  • Businesses are increasing global branding because;
    • Cost effective as one advertisement can be used in a number of locations
    • It provides a uniform worldwide image
    • Successful brand name is linked to new products introduced into the market
  • Global Branding = Global recognition for a business
  • A business may alter their products to suit local conditions

 

Standardisation

  • A standardised approach is a global marketing strategy that assumes the way the product is used and the needs it satisfies are the same all over the world
  • This means that the marketing mix will be the same in all markets
  • This strategy has cost savings for businesses; Production runs can be longer, thereby achieving economies of scale; research and development costs are reduced; spare parts and after-sales service are simplified; promotion strategies can be standardized; and any evaluation and modification of the plan is a simpler task.

 

Customisation

  • A customised approach is a global marketing strategy that assumes the way the product is used and the needs it satisfies are different between countries.
  • It is possible for a business to adopt a middle path — that is, a combination of the two approaches.

Global Pricing

  • Global Pricing is how businesses coordinate their pricing policy across different countries
  • It is one of the most critical but complex issues that businesses have to deal with because price is the only element of the marketing mix that generate revenue
  • Customised pricing occurs whenever consumers in different countries are charged different prices for the same product.
  • Market-customised pricing sets prices according to local market conditions. This strategy allows for even more flexibility than the customised pricing strategy.
  • Standardised pricing is the practice of charging customers the same price for a product anywhere in the world. It will succeed only if the foreign marketing costs remain low enough not to affect overall costs.

Competitive Positioning

  • Competitive positioning relates to how a business will differentiate its products. It centres on how a business will carve out a place in the competitive marketing environment.

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